Amazon is reportedly planning to launch a marketplace in South Africa that will compete against Takealot, Makro, and other online retailers.
Citing leaked documents, Business Insider reported that Amazon plans to expand to five new countries in Africa, South America, and Europe.
Expanding into new territories makes sense for Amazon.
Amazon’s year-over-year growth in net sales slowed from 44% in Q1 2021 to only 7% in Q1 2022.
Compound Capital Advisors CEO Charlie Bilello said the 7% year-on-year growth was the slowest in the company’s history.
As a result, Amazon is looking for new growth opportunities, and launching ecommerce operations in additional countries is a logical option.
South Africa is a good choice for Amazon. It is Africa’s most advanced economy, and the company already has a strong presence here through its Amazon Web Services (AWS) offices.
According to Business Insider’s report (link unavailable from South Africa — alternative source), Amazon expects to launch its marketplace in South Africa in February 2023. The plan is codenamed “Project Fela”.
Amazon will have its own marketplace in the country and plans to launch its Fulfillment by Amazon service for third-party sellers.
Amazon’s Prime membership programme will also reportedly be available to South Africans shortly after launch.
Nigeria will follow shortly after South Africa in April 2023 under the same project codename, the report stated.
This is not the first time information emerged that Amazon has plans to launch ecommerce operations in South Africa.
In January, MyBroadband reported that Amazon was shopping around for warehouse space in South Africa.
Amazon did not comment about its plans for the warehouses, but industry speculation suggested that it was looking to launch online shopping services.
MyBroadband has learned that Amazon has secured warehouse space in South Africa and is now in discussions with courier companies and local fast-moving consumer goods (FMCG) retailers.
It substantiates the report that Amazon plans to launch online shopping operations in South Africa.
MyBroadband asked Amazon for comment, but the company did not respond by the time of publication.
Threat to Takealot and others
Should Amazon launch local ecommerce operations, it would significantly impact local online retailers like Takealot, Everyshop, and Massmart (Makro, Game).
Takealot, which includes Takealot.com, Superbalist, and Mr D Food, has shown exceptional growth.
Naspers’ results for the year ended 31 March 2021 revealed that Takealot Group increased revenues by 65% to US$606 million (R8.7 billion).
Gross Merchandise Value increased from US$603 million (R8.65 billion) to US$1.022 billion (R14.66 billion).
Mergence head of equities Peter Takaendesa said Takealot’s current growth rate could see it double in size in two years if it can maintain its trajectory.
However, if Amazon.com launches in South Africa, it will put pressure on Takealot’s margins and steal market share from local online retailers.
Jumia, an online marketplace provider with a presence in Nigeria, Morocco, South Africa, and Egypt, saw its share price drop by 10% following the news that Amazon.com will enter Africa.
It is clear that Amazon poses a significant threat to ecommerce companies, and South Africa’s Takealot and others are no exception.