SA’s retail sector is facing disruptions as global e-commerce giants Shein, Temu and Amazon make their presence felt in the market, reads a report by the Boston Consulting Group (BCG), “Foreign E-Tailers Are Here! Is SA E-Commerce Ready?”
The report reads that the entry of these global players is intensifying competition and transforming consumer expectations. It urges local retailers to strategise and invest in e-commerce to maintain relevance.
Though e-commerce in SA accounts for 5%-7% of the total retail market, the report reads it has been growing at more than 30% annually since 2019, driven by factors such as the Covid-19 pandemic and improved service offerings from local players such as Takealot and Checkers Sixty60. BCG predicts this growth will continue to accelerate, with the sector expected to expand at an annual rate exceeding 20% over the next five years.
BCG said one in three South Africans with internet access shopped online in the past year, a trend expected to increase as other global players such as Amazon set up shop locally. However, the market is still fragmented with no dominant players.
“As the market matures, it is expected to follow the consolidation pattern observed in more digitally mature markets globally, often stabilising with two major generalist retailers dominating about 50% of the market,” said BCG.
“Though some larger SA firms such as Takealot and Checkers have a head start, the market has yet to coalesce around dominant digital front-runners,” said Thomas Kingombe Kock, MD and partner at BCG.
BCG said that the entry of global e-commerce giants Shein, Temu, and Amazon was transforming SA’s retail market by introducing extensive product selections, advanced pricing strategies and substantial investment power.
The group said Amazon’s recent soft launch included 15 categories and 150,000 products, with plans to expand and improve its offerings over time. Its pricing model, which adjusts prices every 90 seconds, caters to the price sensitive SA market. Shein and Temu appeal to consumers with their wide product ranges and competitive prices, despite facing logistical challenges such as slower international deliveries and complex customs processes.
BCG said SA retailers should innovate and invest in key areas to remain competitive. These include dynamic pricing strategies, hyperpersonalised loyalty programmes and robust logistic networks to ensure fast, reliable deliveries.
“The ability to deliver efficiently to remote areas, where 75% of consumers live outside formal address systems, is crucial,” said Vishakha Chopra, project lead at BCG.
BCG said Takealot had already introduced a R39 subscription service offering free delivery, signalling its intent to remain competitive. Checkers continues to expand its one-hour delivery service through its Sixty60 app, setting a high standard for local logistics.
Despite the challenges posed by economic conditions including stagnant GDP growth, high unemployment and inflation, e-commerce offers a silver lining for SA retailers, the report reads. The postelection period has brought a slight boost in consumer optimism, but spending remains constrained, with many households reliant on credit.
“Those who can successfully adapt and innovate will be well-positioned to thrive in this evolving market. The success stories of local players in other markets, such as Mercado Libre in Brazil and Bol.com in the Netherlands, prove that it is possible to compete effectively against global giants by focusing on local strengths and customer needs,” BCG said.
“There is no doubt that the SA e-commerce market is dynamic and rapidly evolving. As it matures and merges, the winners will be those who can anticipate and meet the ever-increasing expectations of consumers,” Vishakha said.
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