ERNST VAN BILJON: Click, ship, conquer — SA’s evolving e-commerce supply chains
26 July 2024 - 05:00
byErnst van Biljon
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Purchases from Shein will not be as cheap in future as Sars starts to levy VAT and a higher import duty on low value shipments. Picture: DADO RUVIC/REUTERS
In SA’s e-commerce landscape companies such as Shein, Wish, Temu and Takealot have set themselves apart through their efficient, innovative supply chain strategies. Meanwhile, US giant Amazon has entered the local market.
The supply chain tactics of these e-commerce giants serve to improve consumer satisfaction and corporate success in addition to ensuring effective operations, and are worthy of close study.
For instance, Shein’s supply chain agility is a cornerstone of its success. The company uses a flexible production system, close supplier co-ordination and real-time data analytics to swiftly respond to changing consumer demands. This model allows for fast turnaround times for new designs and quick restocking of popular items.
By maintaining strong relationships with a vast network of suppliers, Shein minimises lead times and reduces the risk of overproduction. This strategy ensures it can offer a wide range of fashionable products to its global customer base while enhancing operational efficiency.
Wish leverages a data-driven strategy to optimise its supply chain, using extensive customer data to enhance operational efficiency and decision-making. By analysing user behaviour, preferences and purchase trends, the company can accurately predict demand and adjust its inventory accordingly.
This approach personalises product recommendations and streamlines the consumer experience, ensuring high customer satisfaction. Advanced algorithms help optimise distribution and logistics, reducing delivery costs and delays. These data-driven insights also help determine the best routes and methods for product delivery, enhancing overall supply chain performance.
Temu, a rising star in the online retail world, has implemented a robust international supply chain strategy to ensure efficient global delivery. By forming strategic alliances with global logistics and supplier companies, Temu manages the complexities of international shipping, customs and regulations.
The company operates sophisticated logistical networks with regional distribution centres, reducing shipping times and costs. Technology plays a key role in inventory management and real-time tracking, improving visibility and collaboration across the supply chain.
Takealot is a well-known SA brand sourcing goods from a diverse range of vendors, including manufacturers, retailers and wholesalers, ensuring competitive pricing, while inventory levels are continuously monitored to maintain optimal stock levels. It partners with logistics firms to manage the delivery of goods via air, sea, and road transport. Customers can track their orders online.
These companies’ systems have evolved over time, including various instances of failure in product and supply chain over the years. Not all their e-commerce and logistics systems can yet be classified as world-leading, despite their notable successes.
Amazon’s “soft” launch in SA offers valuable insights for local and international retailers. The initial reception was muted, with many SA consumers finding the product offerings undifferentiated from existing options. Despite leveraging local partnerships for customer service and logistics, Amazon faced big challenges, including a limited product selection and the absence of Amazon Prime.
This highlights the importance of understanding local market needs and establishing a robust logistical framework for seamless operations. Yet, Amazon is poised to become a dominant force in SA. Its regional and global e-commerce strategies are rooted in superior e-commerce and logistics technologies and continuous innovation.
Therefore, despite its underwhelming launch Amazon has the potential to reshape SA’s e-commerce landscape, leveraging its global expertise and resources and will doubtless make a big impact in the coming years. It aims in time to introduce Amazon Prime, potentially reshaping customer expectations with features such as free delivery and Prime Video.
Africa gateway
The strong online market in SA reflects that these e-commerce offerings take a long-term strategy, viewing this country as a gateway to the broader African market. We may also see some consolidation of players in the domestic market. Amazon, for instance, plans significant investments, including local vehicle manufacturing in Cape Town, indicating its serious commitment to establishing a robust presence.
That some of the newer entrants to the e-commerce market have already shaken up local competition is reflected in the successful push by TFG for the SA Revenue Service to levy a new import tax. Starting next month, low-value and small-volume clothing orders from Temu and Shein will face higher taxes in SA. Sars will impose a 45% import duty plus VAT on all clothing parcels.
Low-value and small-volume orders of clothing from Temu and Shein had previously not attracted full import duty and no VAT. This had allowed Shein and Temu to get clothing parcels of less than R500 through customs with a 20% import duty and 0% VAT.
This change aims to support and protect local industry by addressing the tax loophole previously exploited by these Chinese companies that allowed them to import at lower costs than local operations.
Economically, protectionist strategies have not proven successful globally or in the SA market. It often results in local companies falling behind in competitiveness and lacking incentives to innovate. Additionally, such strategies are rarely sustainable in the long term and are often overridden by trading agreements. The fashion and textile industries have generally not demonstrated the effectiveness of protectionism.
The supply chain strategies of Shein, Wish, Temu and Takealot not only ensure efficient operations but also enhance customer satisfaction and business success. Understanding and implementing these advanced supply chain techniques can provide a competitive edge in the market.
• Van Biljon is head lecturer and programme co-ordinator: MCom in Supply Chain Management, at IMM Graduate School.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
ERNST VAN BILJON: Click, ship, conquer — SA’s evolving e-commerce supply chains
In SA’s e-commerce landscape companies such as Shein, Wish, Temu and Takealot have set themselves apart through their efficient, innovative supply chain strategies. Meanwhile, US giant Amazon has entered the local market.
The supply chain tactics of these e-commerce giants serve to improve consumer satisfaction and corporate success in addition to ensuring effective operations, and are worthy of close study.
For instance, Shein’s supply chain agility is a cornerstone of its success. The company uses a flexible production system, close supplier co-ordination and real-time data analytics to swiftly respond to changing consumer demands. This model allows for fast turnaround times for new designs and quick restocking of popular items.
By maintaining strong relationships with a vast network of suppliers, Shein minimises lead times and reduces the risk of overproduction. This strategy ensures it can offer a wide range of fashionable products to its global customer base while enhancing operational efficiency.
Wish leverages a data-driven strategy to optimise its supply chain, using extensive customer data to enhance operational efficiency and decision-making. By analysing user behaviour, preferences and purchase trends, the company can accurately predict demand and adjust its inventory accordingly.
This approach personalises product recommendations and streamlines the consumer experience, ensuring high customer satisfaction. Advanced algorithms help optimise distribution and logistics, reducing delivery costs and delays. These data-driven insights also help determine the best routes and methods for product delivery, enhancing overall supply chain performance.
Takealot slams Shein, Temu for harming SA’s apparel sector
Temu, a rising star in the online retail world, has implemented a robust international supply chain strategy to ensure efficient global delivery. By forming strategic alliances with global logistics and supplier companies, Temu manages the complexities of international shipping, customs and regulations.
The company operates sophisticated logistical networks with regional distribution centres, reducing shipping times and costs. Technology plays a key role in inventory management and real-time tracking, improving visibility and collaboration across the supply chain.
Takealot is a well-known SA brand sourcing goods from a diverse range of vendors, including manufacturers, retailers and wholesalers, ensuring competitive pricing, while inventory levels are continuously monitored to maintain optimal stock levels. It partners with logistics firms to manage the delivery of goods via air, sea, and road transport. Customers can track their orders online.
These companies’ systems have evolved over time, including various instances of failure in product and supply chain over the years. Not all their e-commerce and logistics systems can yet be classified as world-leading, despite their notable successes.
Amazon’s “soft” launch in SA offers valuable insights for local and international retailers. The initial reception was muted, with many SA consumers finding the product offerings undifferentiated from existing options. Despite leveraging local partnerships for customer service and logistics, Amazon faced big challenges, including a limited product selection and the absence of Amazon Prime.
This highlights the importance of understanding local market needs and establishing a robust logistical framework for seamless operations. Yet, Amazon is poised to become a dominant force in SA. Its regional and global e-commerce strategies are rooted in superior e-commerce and logistics technologies and continuous innovation.
Therefore, despite its underwhelming launch Amazon has the potential to reshape SA’s e-commerce landscape, leveraging its global expertise and resources and will doubtless make a big impact in the coming years. It aims in time to introduce Amazon Prime, potentially reshaping customer expectations with features such as free delivery and Prime Video.
Africa gateway
The strong online market in SA reflects that these e-commerce offerings take a long-term strategy, viewing this country as a gateway to the broader African market. We may also see some consolidation of players in the domestic market. Amazon, for instance, plans significant investments, including local vehicle manufacturing in Cape Town, indicating its serious commitment to establishing a robust presence.
That some of the newer entrants to the e-commerce market have already shaken up local competition is reflected in the successful push by TFG for the SA Revenue Service to levy a new import tax. Starting next month, low-value and small-volume clothing orders from Temu and Shein will face higher taxes in SA. Sars will impose a 45% import duty plus VAT on all clothing parcels.
Low-value and small-volume orders of clothing from Temu and Shein had previously not attracted full import duty and no VAT. This had allowed Shein and Temu to get clothing parcels of less than R500 through customs with a 20% import duty and 0% VAT.
This change aims to support and protect local industry by addressing the tax loophole previously exploited by these Chinese companies that allowed them to import at lower costs than local operations.
Economically, protectionist strategies have not proven successful globally or in the SA market. It often results in local companies falling behind in competitiveness and lacking incentives to innovate. Additionally, such strategies are rarely sustainable in the long term and are often overridden by trading agreements. The fashion and textile industries have generally not demonstrated the effectiveness of protectionism.
The supply chain strategies of Shein, Wish, Temu and Takealot not only ensure efficient operations but also enhance customer satisfaction and business success. Understanding and implementing these advanced supply chain techniques can provide a competitive edge in the market.
• Van Biljon is head lecturer and programme co-ordinator: MCom in Supply Chain Management, at IMM Graduate School.
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