Recessions have the ability to accelerate trends that were already there before a recession. This has proven no different in 2020, with people moving to online retailing at an unprecedented speed, heavily influenced by the recent worldwide lockdowns.

 

According to Equities Property Fund, e-commerce penetration rates have increased faster in the first quarter of 2020 than in the prior decade, fuelled by the Stay-at-Home economy. To give you an idea of the rapid change, US e-commerce penetration reached 25.00% in June 2020, while UK e-commerce penetration reached 33.00% of total sales by June 2020.

 

E-commerce Vs. Total Retail Sales in the UK: 

e-commerce vs retail sales in UK

Source: ONS

 

There are substantial growth opportunities for e-commerce in South Africa since e-commerce currently accounts for only 2.00% of total retail sales.  Thus, it is no surprise that South African retailers reported robust growth in e-commerce sales. 

 

  • Shoprite experienced 386.00% growth in online sales for the 2019 financial year-end.
  • The Foschini Group grew online turnover by 47.90% for the year ending 31 March 2020.
  • Pick ‘n Pay grew online sales by 17.00% for the 2020 financial year-end (200% during Covid-19). 
  • Mr. Price reported a 90.00% increase in online sales during the lockdown.
  • One Day Only recorded 40.00% growth in online sales. 

It is important to note that for every R1.00 billion growth in e-commerce, 7200 m² (one rugby field) of distribution space is required. This may not sound like much; however, it is huge if you consider that South Africa has R1.6 trillion in annual retail sales. Thus, huge upside potential exists with the current 2.00% e-commerce penetration in South Africa. 

 

Admittingly, ANVIL has in the past viewed logistics properties with a large degree of skepticism. However, considering South Africa’s low e-commerce penetration rate and the potential size of the market, ANVIL believes this segment of the market is in the early stages of growth and too attractive to ignore.

 

ANVIL would welcome the opportunity to assist investors in the screening, identification, analysis, and successful execution of logistics properties. We will love to talk to you.

 

Give us a call 27 (0) 87 234 8000, or contact Jeandré Pike at jeandrep@anvilproperty.co.za to discuss.

 

 

Bibliography:

 

  • Business Tech, 2020. Business Tech. [Online]
    Available at: https://businesstech.co.za/news/business/410695/mr-price-reveals-the-impact-of-lockdown-on-sales-as-it-looks-to-micro-small-and-medium-store-formats-post-covid-19/
    [Accessed 30 August 2020].
  • Claasen, L., 2019. Business Day. [Online]
    Available at: https://www.businesslive.co.za/bd/companies/retail-and-consumer/2019-05-23-surge-in-online-sales-boosts-tfg-group/
    [Accessed 30 August 2020].
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    Available at: https://www.itnewsafrica.com/2020/06/onedayonly-records-40-growth-during-lockdown/
    [Accessed 30 August 2020].
  • Equites Property Fund, 2020. Equites Property Fund. [Online]
    Available at: https://www.equites.co.za/uploads/6/6/2/7/66276795/equites_pre_close_fy21_interim.pdf
    [Accessed 27 August 2020].
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    Available at: https://www.youtube.com/results?search_query=2020+real+estate+winners+%26+losers
    [Accessed 14 August 2020].
  • Moyo, A., 2020. IT Web. [Online]
    Available at: itweb.co.za/content/dgp45qa6XEkvX9l8
    [Accessed 30 August 2020].
  • Shoprite Holdings Ltd, 2019. Shoprite Holdings. [Online]
    Available at: https://www.shopriteholdings.co.za/content/dam/MediaPortal/documents/shoprite-holdings/FinancialStatements/Shoprite_Holdings_AFS_2019.pdf
    [Accessed 30 August 2020].