Good news for people selling on Amazon in South Africa

Amazon.co.za’s unsaturated seller base offers a significant opportunity for South African businesses to grow with the platform, making it easier to enter foreign markets.

The American e-commerce giant has only been in South Africa for just over six months, with consumers and businesses still adjusting to the new player in the market.

However, the platform’s lack of popularity offers businesses a first-mover opportunity.

Amazon is seen as a pay-to-play platform, meaning sellers must invest to make sales.

Fritz Arndt, CEO of Fluid/sa, an Amazon consulting agency, said this is due to a causality dilemma.

Sellers need a sales history and reviews to appear higher in Amazon’s search results and make sales. This is known as algorithmic credibility.

However, if a seller’s products aren’t featured on the first page of search results, they are unlikely to make sales. This poses a problem for businesses that are starting in the marketplace.

Arndt says the solution is for sellers to bid on keywords that may appear in search results to improve their chances of being featured higher up.

The more competitive a specific product category is, the more expensive it is to bid on keywords.

Therefore, entering a competitive foreign Amazon market, like the US, would cost a lot to overcome the causality dilemma, as bidding for keywords would be more competitive.

On the other hand, Arndt points out that Amazon.co.za’s marketplace has so little traffic that keyword bidding is unnecessary, and if it were, the cost would be minuscule relative to other countries.

This allows businesses to affordably build up algorithmic credibility in the South African market.

These businesses can then enter foreign Amazon markets and use the algorithmic credibility earned in South Africa to feature higher up in search results.

However, the products must be the same as those sold in South Africa.

Arndt said building algorithmic credibility early on will also help businesses grow as Amazon does.

While the marketplace’s first several months may have seemed underwhelming, based on how Amazon has entered other emerging e-commerce markets, the best of the American shopping powerhouse is yet to come.

One such example is Brazil, where Amazon set up shop in 2012 only selling digital books and Kindles.

The sale of books was soon broadened to hard copies in 2014, and third-party sellers gained access to the marketplace in 2019 — seven years after launch.

“As in other markets, Amazon is in Brazil with a long-term vision. We are building an operation in a sustained way,” Amazon Brazil’s head of operations Ricardo Pagani said at the time.

“These are important investments made now, initially with a return of investment horizon of five to 10 years.”

These investments seem to have paid off, as Brazil, Mexico, and Australia have become Amazon’s fastest-growing markets worldwide.

In February 2023, Amazon in Brazil had 150 million visitors, three times the monthly visitors from three years prior.

Despite this surge in activity in recent years, Amazon has had its hands full with competition and is only the sixth-biggest online retailer in the country with R31 billion in goods sold, according to a 2022 report by consulting firm Varese Retail.

This includes third-party sales.

However, this is far off the top three, which are Mercado Libre (R211 billion), Lojas Americanas (R131 billion), and Magazine Luiza (R123 billion).

Although it did not make the top three by revenue, Amazon is the second most-visited e-commerce platform in Brazil, with 191 million visitors in September 2024, according to data by SemRush.

This is 15 times as many visitors as Shein had.

Mercado Livre had 222 million visitors in the same month, indicating evidence of sustained competition in the market.