Business14.01.2025

Amazon slow burn in South Africa

Amazon.co.za’s “slow” launch in South Africa is nothing unusual and online shoppers and local e-commerce players should not be surprised if it ends up being a successful strategy in the long run.

That is according to experienced South African e-commerce executives Claude Hanan and Andy Higgins.

Hanan was one of the co-founders of Superbalist.com and served as co-CEO at the fast-fashion retailer until 2019.

He moved to The Foschini Group (TFG) to work as chief omni officer in 2021, where he co-founded Bash.com, which has reported strong growth in recent years.

Higgins is the co-founder of BidorBuy, now known as Bob Group, and is one of South Africa’s most respected e-commerce veterans. He has nearly two decades of experience

Given their knack for e-commerce, we asked for Hanan and Higgins’ insights on Amazon’s launch strategy in South Africa.

Many locals have been disappointed by Amazon.co.za’s rollout, including its small selection of sellers and products, and uncompelling prices compared to its US or UK marketplaces and established local platforms like Takealot.

However, Hanan said that Amazon’s South African launch was consistent with how it approached new markets — methodically and with a long-term view.

“I wouldn’t call it a ‘disappointing’ start yet, but rather a considered one,” Hanan said. “They seem focused on laying a foundation and understanding local dynamics before chasing growth.”

Higgins said that Amazon’s slow start should have been more expected. “This aligns with Amazon’s approach in other markets, where it has also taken time to establish itself,” he said.

“Amazon never set clear expectations for their rollout strategy from their side. Much of the anticipation and subsequent disappointment came from external speculation, including from the media.”

Hanan said that, despite Amazon’s focus on long-term positioning, analysis showed the retailer was growing its market share in South Africa, albeit off a low base.

Amazon.co.za’s onsite traffic and web search metrics showed that it saw big interest at its initial launch in May 2024, but this waned in the months that followed.

While its popularity on Google Search increased slightly over Black Friday, it was nowhere near as popular as Takealot in South Africa.

However, its search traffic has consistently trended above Temu and has recently stuck above Shein, as shown in the graph below.

Not a short-term fluke

Hanan said there were good examples where Amazon had cautious rollouts outside the US before achieving massive successes in those markets.

“If one looks at their international track record, it’s clear that early results don’t always predict long-term success,” he said.

“The United Kingdom and Germany are now significant in their portfolio, but it took three to four years of sustained investment and adaptation before Amazon gained real traction in those markets.”

However, the retailer has been less successful in Italy and Spain, despite having launched in those countries over a decade ago.

“Amazon seemingly only occupies a modest market position, competing against deeply entrenched local players,” Hanan said. “South Africa could go either way — but it’s too soon to tell.”

Hanan said that the most telling early indicators of Amazon’s performance and commitment to South Africa will not be sales figures but strategic investments in infrastructure, technology, talent, and any corporate growth activities.

Higgins believes that South Africa will ultimately have multiple online marketplaces, each excelling in different areas.

“However, there is typically one dominant player in most markets, and I think it will be a challenge for Amazon to unseat Takealot in this regard.”

Biggest challenges in logistics, selection, and talent

Amazon will have to overcome several challenges to be successful in South Africa in the long run.

Higgins does not believe that the company underestimated the local competition, but reckons it had not fully anticipated the growing influence of Chinese competitors like Temu and Shein.

Another issue the company may not have fully appreciated was the local complexities around logistics — including delivering to townships and regional areas.

“Formal addresses often do not exist in these areas and reliance on third-party logistics providers adds another layer of complexity,” Higgins said.

“I suspect this would have been made more difficult having to make the marketplace work with an existing platform that would not have been specifically designed to work for South Africa’s nuances.”

Higgins believes that relying on third-party logistics providers would continue to be Amazon’s biggest challenge and a cost driver.

Hanan said that Amazon’s biggest obstacles would be scaling its assortment of sellers and products and improving its talent density.

“Even with Amazon’s global expertise and resources, success requires a high-performing local team,” Hanan said.

“Building that team in South Africa’s competitive digital market will be critical. “

“A strong team attracts other top talent, creating the momentum needed to win in a challenging environment.”

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