Amazon’s arrival in SA is likely to shake up the burgeoning e-commerce market. With the promise of hassle-free shopping, fast delivery and an extensive network of pickup points, Amazon’s entry into the market will undoubtedly raise customer expectations.
The US e-commerce giant is poised to challenge established local players, especially leading online retailer Takealot. However, Amazon needs to be careful. SA is a difficult market to conquer. Its vast geography and varied terrain pose logistical challenges, including transport, warehousing and last-mile delivery.
It would be wise for Amazon to learn from Walmart — the largest retailer in the world — about its experience in SA. Over a decade ago, the US retail giant acquired a 51% stake in Massmart. In November 2022, Walmart finalised a R6.4bn deal to acquire all of Massmart in SA. The decision to buy more shares came after years of dwindling profitability, particularly in the Game brand, which consistently underperformed.
Even after Walmart’s takeover, the business has failed miserably. Consumers are yet to benefit from expected lower prices. Instead, Massmart is closing some Game shops.
When it comes to the local e-commerce market, Takealot is not a tiny retailer. Yes, Amazon’s market capitalisation is $1.96-trillion (R36.1-trillion), making it one of the biggest companies in the world. But let us not forget the old saying, “sometimes money can’t buy you love”.
With the backing of JSE-listed Naspers, Takealot has its firepower to defend its territory.
Takealot executives have likely studied how Shoprite, Africa’s largest retailer, has defended and expanded its market share in SA to the detriment of Walmart subsidiary Massmart. Walmart's arrival in SA seems to have turned Shoprite into a well-oiled machine.
Shoprite continues to dominate the market and win the hearts of its customers. Similarly, 13-year-old Takealot controls the lion’s share of the SA e-commerce market.
In January, the local online retailer promoted Frederik Zietsman, previously head of takealot.com, to group CEO, replacing Mamongae Mahlare, who moved up to the board chair position. Zietsman, who has been with Takealot since 2015, prefers to keep his strategy a secret.
Takealot’s strong local presence, understanding of the SA market, and established infrastructure give it a big advantage over Amazon.
Nonetheless, Amazon promises a stress-free shopping experience, fast and reliable delivery, access to 3,000 pickup points, 24/7 customer support and easy returns. Amazon has partnered with Pargo and The Courier Guy (including Pudo), which stand to be beneficiaries of this growth.
For Pudo, the partnership could be a boon. It is a smart locker service that enables e-commerce businesses and individuals to deliver parcels from locker to locker or door to door.
The growing demand for delivery services could lead to job creation in the scooter and Pudo industries. Drivers, warehouse packers and other staff may be needed to handle the increased volume of deliveries, creating more employment opportunities. With more deliveries, companies may need to purchase more scooters to keep up with demand. This could lead to increased sales for scooter manufacturers and retailers. It could also be an opportunity for scooter mechanics.
Interesting times lie ahead in SA’s online digital commerce. The booming sales in SA of Chinese online retailers Temu and Shein are proof enough that the market is ready for more competition.
To meet the demands of Amazon and local online retailers, delivery companies may invest in technological advances to optimise their delivery processes. This could include the implementation of advanced routing algorithms, real-time tracking systems and improved communication tools.
In essence, Amazon’s arrival in the local market could herald a complete overhaul of the delivery system and value chain, opening up a wealth of new opportunities.
The “Amazon effect”, a transformative phenomenon seen in retail and e-commerce globally, is eagerly anticipated and may reshape customer expectations and industry dynamics in SA. Hopes are high that the Amazon effect will deliver the epitome of convenience, ease of use and affordability. It is hoped that this effect will force local competitors, particularly Takealot and online marketplace Makro, to improve their offerings.
Both Amazon and Takealot are in favour of supporting local independent sellers, which could lead to more job creation and potential export opportunities for their products.
With online shopping gaining traction in SA, Amazon might encounter challenges in the country where indoor mall shopping is a cherished pastime. As Amazon makes its entrance, it must also grapple with the reality that SA is a profoundly unequal society. Closing the internet access gap is merely one of the hurdles; there is also the substantial issue of insufficient disposable income. Amazon will also swiftly grasp our preference for spending discretionary income on authentic bargains.
• Lourie is founder and editor of TechFinancials.
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