SA’s biggest bank by customer numbers, Capitec, says more of its customers are buying their clothes with Chinese fashion retail giant Shein, underlining the retailer’s capacity to steal market share from domestic players.
The February year end results presentation of Capitec, which has 22-million customers, or a third of SA’s population, shows that Shein was the preferred online retailer in the year under review.
It shared the top spot with Naspers’ Takealot, which is also facing competition from US e-commerce giant Amazon.
Shein’s growth in SA, on the back of low prices, saw local rival Zando this month launch an international e-commerce division called Zando Global. Shein posts goods directly to SA consumers and sells shoes, accessories, clothing and makeup at low prices.
Independent analyst Chris Gilmour said Shein and rival Temu, also from China, have been successful at undercutting the local brick-and-mortar retailers.
“Shein, Temu and others have taken SA clothing, footwear, textiles & leather (CFTL) retailing by storm, as they have in the rest of the world. The concept is simple: sell cheap fashion online by direct delivery and undercut the local brick-and-mortar retailers,” Gilmour said.
“It’s especially relevant in SA, where the high interest rate environment, coupled with the high unemployment and stagnant economy, has resulted in traditional CFTL retailers often being unaffordable,
“It has also been suggested that Shein is using quasi-legal practices to avoid paying import duty on these purchases, which makes their value proposition even more attractive at the final price point.”
Standard Bank said online shopping was on the rise in SA. The lender, however, said while its data suggested consumers continue to embrace online shopping, particularly in the fashion and apparel category, this did not necessarily spell doom and gloom.
It said its credit card data showed local fashion e-tailers and international fashion e-commerce giants were capturing an increasing amount of consumer spend.
Tumelo Ramugondo, head of credit card at Standard Bank, said more shoppers were spending online as they became more comfortable.
“Standard Bank’s data shows South Africans have been making the most transactions with their Standard Bank Mastercard credit cards at local fashion e-tailers, which accounted for the lion’s share of spend in 2023. Asian e-commerce giant Shein is, however, growing aggressively,” Ramugondo said.
“While SA consumers are not giving up the brick-and-mortar or physical shopping experience any time soon, more shoppers are exercising their spend online as they become more comfortable in the online environment and more options become available, offering even deeper value and greater variety.”
Shein has rapidly grown to be one of the world’s most profitable companies. It recently reported profit to more than $2bn and is eyeing a listing in New York or London. Originally a portal to buy wedding dresses, it branched into womenswear in the early 2010s and into all types of fashion by the mid-2010s.
Steven Heilbron, CEO of fintech group Capital Connect, said clothing and shoe sales were generating about a quarter of online retail sales value, with Temu and Shein turning up the heat on local retailers.
“With the local launch of Amazon still on the cards, growing competition from Asian drop-shipping firms and the rapid growth of home delivery services, the e-commerce market is heating up. Most retailers will need a strategic response,” Heilbron said.
“They have several options. For some, it might make business sense to double down on their in-store experience. By offering product demonstrations or workshops, a comfortable bistro or coffee shop, and great advice and service, they can offer customers a reason to shop in person rather than online.
“Others might want to invest in an omnichannel environment. They can offer their clients options such as click-and-collect and home delivery, in addition to their brick-and-mortar store. Going online can offer them a way to reach new customers or even the possibility of diversifying their offering.”
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