Risks and opportunities with Amazon’s SA launch in 2024

Local businesses now have the chance to sell their products on Amazon.com as the e-commerce giant has announced it will launch an SA store in 2024 and that local sellers can now register ahead of the launch.

Jeff Bezos’ firm will pose the biggest threat to the dominance of SA’s largest e-commerce player, Naspers-owned Takealot, and will challenge traditional retailers as more South Africans learn to shop online.  

The e-commerce giant had previously been expected to start operating in SA in 2023, but those plans appear to have been pushed out.

According to the company’s statement, more than 60% of its sales are from independent sellers, including small and medium-sized businesses.

“We look forward to launching Amazon.co.za in SA, providing local sellers, brand owners and entrepreneurs — small and large — the opportunity to grow their business with Amazon, and delivering great value and a convenient shopping experience for customers across SA,” Robert Koen, Amazon’s GM for Sub-Saharan Africa, said on Tuesday.

As part of the launch, Amazon.com is providing prospective sellers with articles, videos, webinars and case studies to help them.

The US company’s entry in the local market and deep pockets look set to bring major shifts to SA’s retail and e-commerce landscape.

The outgoing CEO at Naspers, Bob van Dijk, recently warned that new competition regulations could give Amazon an edge over local e-commerce firms in a growing retail sector.

At the beginning of August, the Competition Commission, which launched an inquiry into the digital economy in May 2021, called for Takealot to split its marketplace and retail businesses. The watchdog said the separation is necessary to prevent Takealot from favouring its own products over those of third-party sellers and to create a level playing field for small and black-owned businesses.

Like Amazon, Takealot has positioned itself as a champion of small business.

The Free Market Foundation think-tank has also taken issue with the commission’s assertions.

“A big company that is voluntarily patronised is not inherently bad for the economy. The ability of new entrants to enter and compete, be it successfully or unsuccessfully, is what the commission should concern itself with, and nothing more,” says the foundation’s Zakhele Mthembu.

In addition to the e-commerce threat, Amazon will be in direct competition in SA with traditional retailers such as Walmart, the world’s biggest grocer.

Massmart, which is owned by Walmart, has spent significant money and effort on improving its online sales and designing its Makro website to allow third-party sellers to sell goods online.

In 2022, Reuters reported that Massmart was considering expanding into Africa using e-commerce. Reuters interviewed nine analysts, investors and sources with direct knowledge of Walmart’s plans and said they were in a battle with Amazon over online sales in Africa, a continent of a billion people. 

Amazon’s decision to enter SA when Takealot, the leading online retailer, is still making a loss after 11 years, may mean it is also looking beyond its borders and not focusing solely on SA, which has a weak economy and shrinking middle class.

Massmart has invested in its e-commerce capabilities even as the group has been loss-making and closing stores. In 2020 it hired Sylvester John, who had been senior in Walmart online delivery and was instrumental in leading online delivery from more than 3,000 stores in the US to consumers. In 2021, Massmart bought One Cart, the online delivery service that shops at multiple stores and delivers goods to consumers. 

Massmart also revamped its logistics capabilities to ensure its distribution centres are equipped to handle smaller or individual e-commerce orders, which require moving a few items from shelves, as well as large orders to stores, which require different equipment to move huge pallets of goods. 

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