SA’s Top E-Tailer Takealot Faces Biggest Test Yet As Amazon Muscles In

After a long period of leaks and speculation, Amazon officially confirmed its plans to launch its online marketplace in South Africa earlier this week, setting the stage for a competitive showdown with local giant Takealot. With its vast resources, efficient logistics network, and global reputation, Amazon’s entry is poised to reshape the online shopping experience for South African consumers.

“We look forward to launching amazon.co.za in South Africa, providing local sellers, brand owners and entrepreneurs – small and large –  the opportunity to grow their business with Amazon, and delivering great value and a convenient shopping experience for customers across South Africa,” said Amazon GM for sub-Saharan Africa Robert Koen in a statement.

South Africa’s e-commerce market, estimated to be worth USD 4.5 B as of 2021, has experienced consistent growth over the past decade, fueled by increasing internet penetration, digital literacy, and a growing middle class. Takealot, as the current market leader, has played a pivotal role in shaping online shopping habits. However, the market is far from saturation. A substantial portion of the population, especially in rural areas, for instance, remains untapped, presenting an expansive opportunity for e-commerce players to bridge the gap between urban and rural consumers. This is a possible new frontier in which fresh competition could ignite development.

Amazon’s delayed but imminent entry into South Africa in 2024 is marked by its focus on attracting local sellers to its platform. With more than 60 percent of its sales coming from independent sellers globally, Amazon plans to replicate this model in South Africa. The company’s emphasis on empowering local entrepreneurs and businesses aligns with its vision of providing a vast selection of products, competitive prices, and convenience for consumers.

“The launch of amazon.co.za in 2024 will provide independent sellers throughout the country an opportunity to rapidly launch, grow and scale their businesses while leveraging the innovative capabilities provided by Amazon,” the company said in a statement.

One of Amazon’s key strengths, which has enabled it to match and even overtake established players in other markets, lies in its robust logistics network, enabling fast and efficient delivery services. The company plans to offer South African sellers a range of warehousing and delivery options, and it appears to go beyond what Takealot currently provides. A recent survey by global logistics giant DHL, which studied 11,500 shoppers from 23 key e-commerce countries across Europe, the Americas, the Middle East, Africa, Asia Pacific, and China, suggests that flexible delivery options are top of mind for online shoppers in South Africa.

Additionally, Amazon’s pricing strategy, including lower monthly base fees and incentives for early sellers, might attract merchants looking for a cost-effective way to expand their businesses online.

Amazon’s seller plans, including the Individual and Professional options, offer flexibility for sellers of varying scales. The competitive pricing and comprehensive packages, such as Fulfilment by Amazon (FBA), where Amazon handles all logistics, present a compelling proposition for South African merchants. In contrast, Takealot offers a single plan and does not allow sellers to use their own storage facilities or delivery services, providing a contrast in business models.

Takealot, in response, has expressed optimism about healthy competition benefiting the economy and consumers, indicating a positive outlook amid the challenges. In response to Amazon’s announcement, South Africa’s biggest online retailer told MyBroadband it believed any competition was healthy for South Africa’s economy, the sector, and shoppers. Naspers-owned Takealot would however be looking to arrest the slump that saw it post a loss of ZAR 400 M (~USD 22 M) over the last financial year, per financials publicised in June.

While Amazon’s entry poses a significant challenge to Takealot’s market dominance, it also opens up opportunities for local sellers to reach a broader customer base. The competition is expected to drive innovation, improve customer service, and potentially lead to better deals for consumers.

Amazon’s entry into the South African e-commerce market signifies a new era for online shopping in the country. As the global giant gears up to compete with Takealot, consumers can anticipate a more diverse product range, competitive prices, and enhanced delivery services. The battle between these two industry titans will not only shape the future of e-commerce in South Africa but likely also pave the way for a more dynamic and customer-focused online shopping experience.

Featured Image Credits: Mybroadband