What to expect from Amazon in South Africa

Amazon’s South African marketplace launched without the company’s Prime subscription service or its extensive portfolio of Kindle, Echo, and Fire devices.

Although this put a dampener on what was otherwise a formidable launch, e-commerce industry heavyweights have told MyBroadband that shoppers should expect much from Amazon.

When Amazon launched its Australian marketplace in December 2017, for example, it also didn’t live up to the hype.

However, six months later, Amazon launched its Prime subscription service in Australia — in time for Prime Day in July.

Amazon Prime offers subscribers free delivery on certain orders, early access to lightning deals, shopping discounts, and several other bundled benefits.

These include a subscription to Amazon Prime Video, Amazon Music, (Twitch) Prime Gaming, and Prime Reading.

By December 2018, after a year in Australia, the number of products on Amazon had grown from 7.5 million to almost 100 million in the country.

The number of marketplace sellers reportedly also grew from 2,000 to 25,000.

Interestingly, Marketplace Pulse’s research at the time showed that 40% of sellers were Australian locals. The other 60% were mostly from China.

Whether South Africa’s online marketplaces will evolve in the same way remains to be seen.

One industry source with over 15 years of international shipping experience said South Africa’s market is tiny, and the administrative burden might be too high to attract many international sellers.

“If you’re a marketplace seller and you want to leave stuff at an Amazon warehouse here for Fulfilment by Amazon, you have to get VAT registered,” they said.

This requires sellers to have decent cashflow because they will have to pay tax on stock before they’ve sold it.

One option is for these sellers to use Amazon Easy Ship or Self Ship instead of Fulfilment by Amazon (FBA) to deliver orders and only send a product (and pay tax) when it’s been sold.

Amazon Easy Ship lets sellers store and pack their own products, while Amazon handles delivery.

With Self Ship, sellers can handle their own warehousing, packing, and delivery.

However, poor experiences with non-FBA merchants in Australia resulted in them getting a reputation for bad customer service.

If the same thing happens in South Africa, shoppers may end up avoiding merchants who aren’t on the Fulfilment by Amazon programme.

Andy Higgins, Bob Group managing director

Bob Group managing director Andy Higgins told MyBroadband he thinks shoppers expected more fanfare from Amazon and a more orchestrated launch with special offers.

At the very least, people hoped for deals on Amazon-specific products like Kindle e-book readers, Echo smart speakers and displays, and Fire tablets and TVs.

“If Amazon has chosen not to go that route, which seems to be the case, I think they should have at least communicated this upfront to better manage consumers’ expectations,” said Higgins.

He said Amazon likely ran into legal hurdles and other red tape that made it challenging to launch its Prime subscription service and devices in South Africa.

If it were easy to offer these products at launch, Amazon would have done so.

“My only guess is that due to internal and external obstacles, this is more challenging to get right than most of us as outsiders would think,” Higgins said.

Electronics importers in South Africa have previously complained about the time it takes to obtain the necessary letters of authority (LOAs) from the National Regulator for Compulsory Specifications.

These LOAs ensure compliance with South Africa’s minimum standards for compatibility, energy efficiency, and other issues.

Higgins said considerations around customs, import duties, SARS, international logistic chains, and other regulatory and legal hurdles may have hindered Amazon from launching Prime and its devices in South Africa.

There is no lack of desire or willpower to provide these services, rather real-world challenges that make execution difficult.

“I am sure in time they will overcome these challenges and offer these products in due course,” he said.

“However, I think a full Prime offering will take longer due to the complexities involved in the model.”

Higgins also cautioned merchants to temper their expectations of Amazon.

While many sellers have privately hailed Amazon as their saviour from the tyranny of Takealot, it is important to remember that the e-commerce giant is also a business looking out for its interests.

Regardless, Higgins advised that merchants should seize the day.

“I think they should embrace the new platform and load their products,” Higgins said.

“But I also think merchants should not overhype the Amazon launch.”

He said merchants must understand that any new platform will take time to ramp up and work through its inevitable teething issues.