KATE THOMPSON DAVY: Amazon arrives — and it can afford to play the waiting game

The number one tech news story in SA this week is the launch of Amazon’s local portal, amazon.co.za, an e-commerce prophesy that’s been foretold for aeons and delayed repeatedly. Without so much as a press release to announce itself, Amazon SA’s site resolved into a whole new realm on May 7 — the first Amazon marketplace on the African continent. 

The site is intended to be a shiny portal of enticement for SA consumers, one that established e-commerce players such as Takealot and Bidorbuy, bricks and mortar retailers and hybrid types such as Makro have been preparing for. Now the real test has arrived. Will Amazon land like a juggernaut and forever change the scene, or will the same small buying market and dubious delivery conditions confound the giant?

Writing on the first African Amazon launch, TechCrunch reports that the SA e-commerce revenue pool is worth something like $3bn annually (alternative estimates vary wildly, to be honest). But this market appears to be a tough nut to crack, or at least to turn a profit in, as illustrated by the number of platforms that have come and gone over the years.

The financials of dominant and long-running Takealot (reported within majority shareholder Naspers’ own) show that despite revenue and volume improvements last year, net losses have been a recurring theme. It seems the dual burdens of pinched consumer pockets and heavy operational (including load-shedding) costs have been a drag on profit aspirations. 

Over the past few years Takealot has invested aggressively in nurturing (and installing) the inputs, sellers and fulfilment infrastructure needed to develop the market. You can imagine they’re not thrilled to see Amazon sweep in just in time to benefit from those efforts. Then again, Takealot has emulated many of the firsts Amazon introduced to the global market.

Now it’s here, promising same-day and next-day delivery, as well as thousands of designated pickup locations around the country, made all the easier by those who forged those paths in the first place. 

Then there’s the trust legacy aspect to overcome as Amazon arrives years and even decades after others. Takealot, for example, has reportedly grown its sellers pool to 10,600 (at end-2023). Amazon will be looking to take a big chunk out of that and its buyer-users. Takealot will have to prove its trustworthiness and security to both sellers and buyers if it wants to keep them from straying to the orange side. 

Based on a small sample of product prices across both platforms, they’re certainly “price aware” of each other. This can be done programmatically, and should in theory help keep prices competitive. But it definitely favours sizeable outlets, which means even if Takealot can stomach the squeeze other local players probably can’t.

Advantage

Right now Takealot still has a “depth of product” advantage. If you visit amazon.com, amazon.co.uk or similar, the front page is typically bursting with product imagery, detailed, specific, brand-heavy and crowded. On the co.za iteration, that was not the case at the time of writing, with the page filled with big, bright, colourful “category” images and not the endless array of actual products we see elsewhere. No doubt that will swiftly change. 

Not available yet are some key features consumers associate with Amazon, such as the Prime membership programme and Prime streaming media service — the exact things that right now would sway high-spending, high-frequency e-commerce users. Without them, one wonders whether it is worth swapping from Checkers 60 XPlus with its monthly bundled deliveries, for example. 

The size of the local market with money to spare has always been the stumbling block for me when I write about e-commerce in SA. Can the small-batch-Woolies-double-cream-yoghurt consumer really order enough home décor and branded clothing to keep the cogs of multiple mega online retailers turning? 

As a deeply unequal society, we don’t just have an internet access divide to overcome, we have a lack of disposable income problem. “Feeling the pinch” in richer economies means fewer takeaways or using the bus instead of an Uber, rather than eating less (full stop) and having no job to take a never arriving bus to. That’s the reality here.

The vast majority of South Africans are shopping locally out of budget necessity, and “local” here means corner shop or staples wholesaler. If you’ve got anything spare as you fight your way from pay cheque to pay cheque, it’s legitimate bargains that will appeal. That’s where Shein and Temu have stepped in so well, even undercutting Amazon in developed markets. According to a recent Marketing All Product Survey (MAPS) survey, more than 250,000 South Africans are already shopping on Shein. The survey predates Temu’s current big push for local buyers. 

In the end, the huge advantage Amazon has is being huge. Unlike a scrappy upstart that needs to carve out that niche immediately (or die trying), Amazon can sit and wait as the immense young population of Africa comes online — even if that is in fits and starts. And it can throw its weight into sourcing too, competing for bargain shoppers with Shein and Temu. 

You can critique the quality, the delivery timelines, the manufacturing ethics and the aesthetics if you want, but 76% off an already cut-price designer “dupe” is a helluva alluring carrot. What we see already on the local online market is resellers of those knock-off imports now on local portals, adding just enough padding to cover the import and platform fees.

Amazon’s arrival will be felt there first, if you ask me. Everything else is gravy for the groceries, and a topic for future columns.

• Thompson Davy, a freelance journalist, is an impactAFRICA fellow and WanaData member.