Amazon knocking on the door — but the biggest threats to local stores are already here

The imminent entry of Amazon’s online marketplace in South Africa has spooked the e-commerce industry. However, China’s Shein and Temu may pose the biggest risk to online stores.

Official confirmation of Amazon.co.za’s launch sometime this year has several local retailers on edge, who are preparing for increased competition from the world’s biggest e-commerce company.

Takealot’s parent company, Naspers, recently said it was investing more heavily into Takealot in preparation for Amazon’s South African debut.

The increased investment and concern over Amazon’s entry into the country is well founded, given Amazon’s formidable reputation.

Discovery Bank and Visa’s SpendTrend24 report showed that Amazon’s US marketplace was already the third most visited e-commerce platform in South Africa.

It was also among the most popular shopping destinations for affluent South Africans.

It remains to be seen whether it can expand its popularity among middle-class shoppers. Offering competitive pricing will be key.

Although many of MyBroadband’s previous comparisons have shown that some products can be cheaper from Amazon than at competing local online stores, the differences can sometimes be negligible.

Many people will pay a bit more to get a product faster and enjoy local warranty support. A local Amazon launch would mean the retailer can also offer those benefits.

E-commerce experts have told MyBroadband that they do not expect Amazon to compete heavily on price, at least initially.

uAfrica.com co-founder Jaco Roux believes Amazon will not begin a price war in South Africa but rather focus its strategy on offering the most extensive product range.

Bob Group managing director Andy Higgins said that Amazon would have an uphill battle against established local online marketplaces like Takealot, Bob Shop, and Bash.

He explained Amazon is unlikely to make a big bang of its launch. Instead, it would gradually gain momentum over time.

The primary challenge will be whether Amazon can use the tech it employs in other markets as effectively in South Africa.

Amazon did not have success in every country where it launched. In Poland, for example, it failed to unseat incumbent Allegro.

Local players have experience in the South African market, which could make them more agile in adapting and providing services specific to South Africa.

What is already proving to be a headache for local retailers — and could be a big challenge for Amazon.co.za’s launch — is the surge in popularity of Shein and Temu.

These platforms have launched in South Africa with aggressive pricing. Temu has also embarked on a huge online marketing drive.

Temu, in particular, enjoyed an impressive uptake in 2024. Similarweb data showed it was the most downloaded app in South Africa, ranking higher than heavyweights like WhatsApp, Facebook, and TikTok.

Despite customers waiting longer for orders than when shopping locally, generally reliable delivery by local partner Buffalo Logistics has helped ally fears about their legitimacy.

Shein and Temu source their products directly from Chinese factories and suppliers, which local merchants don’t currently do.

While some of the products might not be of the highest quality, many are the same as those a consumer would buy from third-party resellers on Amazon or Takealot, but at a fraction of the price.

In addition to best-in-market pricing, Shein and Temu spend a lot on digital advertising. From TikTok to Google, you can’t be online and in South Africa without seeing a Temu ad.

In the US, Temu’s parent company Pinduoduo Holdings (PDD Holdings) spent nearly $2 billion (R38 billion) on ads across Meta Platforms’ products in 2023. It was also in the top five biggest spenders on Google advertising.

Overall, PDD Holdings has spent over $5.17 billion on online marketing in the US since Temu’s debut in September 2022. It even spent millions of dollars on sought-after advertising slots in the 2024 Super Bowl.

Shein has not been resting on its laurels, increasing its US marketing spend in the last quarter of 2024 by 160%, according to data from digital intelligence firm SensorTower. In January, this increased by another 80%.

Based on its prominence in online ads in South Africa, Temu is also spending millions of rands to grow its local recognition and market share.

The impact of Temu and Shein’s big advertising drives is evident when looking at Google Trends data.

This showed that many more people are searching for these two companies in South Africa than for local rivals like Superbalist.