Amazon won’t eat Takealot’s lunch — analyst

During a recent panel discussion hosted by World Wide Worx, experts said Amazon would grow South Africa’s e-commerce pie rather than split it.

Ever since Amazon announced it was launching in the South African market, there has been speculation about how it would compete with local e-retailers, especially Takealot.

Ask Afrika founder and executive chair Andrea Rademeyer believes it will grow the whole industry rather than absorbing sales from one or more existing platforms.

Rademeyer said trust is a significant factor affecting South Africa’s e-commerce market size, citing the results of a recent study they had conducted.

As of 2024, e-commerce only makes up 6.15% of all retail in the country and is valued at R71 billion. This is expected to grow to 10% by the end of 2025.

However, Amazon’s legacy in the online shopping space may draw in consumers who were once hesitant due to a lack of trust in local platforms.

Ask Afrika and World Wide Worx’s report shows that just over a quarter of the time, shoppers abandoned their cart at checkout because they did not trust the platform with their banking information.

This was the second most common reason after customer’s credit cards declining.

The report found online payment scepticism is very prominent in South Africa, which is why e-commerce’s share of retail is still relatively small.

Rademeyer believes Amazon can provide more conservative and sceptical shoppers with the confidence to shop online due to its legacy of trust and security.

If the trust barrier can be broken, she believes this will grow the market rather than intensify competition.

For example, only a quarter of people over the age of 65 shop online, which is a very conservative market, but would benefit most from a trustworthy shopping experience.

Amazon will then compete within this enlarged market, according to Rademeyer, by utilising its membership loyalty system.

Whether Amazon Prime is a loyalty programme is debatable; however, it ticks all the boxes as it aims to foster long-term loyalty and offers personalised rewards and experiences.

It is a paid loyalty programme, though.

By subscribing to Amazon Prime, customers receive several benefits, such as included one-day shipping, exclusive deals, and streaming services.

This specifically targets customer pain points like shipping and has been highly successful for the company in other countries.

Prime Day, Amazon’s annual deal event, generated just under $13 billion (R234 billion) in revenue globally in 2023 in two days.

Amazon Prime has not yet been announced for South Africa, and Amazon declined to comment when asked about it.

If Amazon plans to launch the Prime membership, they may still be evaluating pain points specific to the South African consumer.

Pricing is a significant pain point; thus, exclusive deals and cheaper shipping could be desirable to South African consumers.