Here comes Amazon

As September approaches and there’s no sign of the Amazon.com e-commerce launch initially set down for February, can we still expect the retail giant on our shores this year? And if – or, more likely, when – it does launch, how will it affect established players such Walmart-owned Massmart and Naspers-owned Takealot?

Amazon has had a presence in South Africa since 2004, mainly via its Amazon Web Services cloud computing unit which was partially built in Cape Town, but customers had to shop online on the US or UK Amazon platforms, incur shipping and customs costs, and often wait long periods for delivery.

But Amazon has secured warehouse space in South Africa and is said to be working with local courier companies, although it has not yet confirmed when South Africans can actually expect its arrival. It was initially expected to launch in February, but that was postponed until “later in the year”. That it’s still coming, though, does not seem to be in question.

Indeed, Amazon is hiring aggressively ahead of a marketplace launch. “We’ve been growing our presence in the city (Cape Town), with plans to bring further jobs to the economy over the coming years,” it says on its careers portal. Twenty-four positions are still open, ranging from a head of PR (also Cape Town, posted in July) to a workforce customer manager, posted this month.

Gryphon Asset Management research analyst Casparus Treurnicht believes the whole retail sector is going through an incredibly difficult period now.

“All numbers point to the fact that the past 12 months have been the harshest that South African retail has experienced since democracy,” he said. “Having said that, it does not mean our retailers are bound for closures and that sort of thing. We have really brilliant operators in South Africa, and we’ve seen that offshore talent is not always the answer.

“Also, the market is expecting the environment to improve. Although we do agree that the base have been set low, we do not necessarily agree that the consumer will recover, and if so it will take a very long time. Our wage inflation and unemployment levels simply have not kept up with prices and affordability levels.”

Amazon ‘way ahead’

Treurnicht thinks “Takealot was new and has made plenty of mistakes up till now. Amazon is way ahead in terms of automation and integrating it into logistics and distribution. I am sure they will implement this in South Africa aggressively – I’d be very concerned if I was Takealot or any of the other online retailers.

“Price will be the key as consumers can compare with the press of a button. Thereafter, speed of delivery will be important. We can see Takealot taking note of this already, as same-day – or next-day – delivery is getting considerably more attention in their business model as of late,” Treurnicht said.

“If you have to ask me where we will be in 10 years’ time, I’d probably say global shopping with 2-3 day delivery turnaround will be the norm. Lots of changes are coming, and if our local online stores want to be part of that world then they are going to have to rethink their strategy and positioning.

Read: Takealot testing one-hour deliveries as Amazon launch nears

“We could see consolidation as the Amazon model is probably already geared for the future. The time is ticking only to have a local online store. Although de-globalisation is happening, online global shopping has only started. Nevertheless, despite its brand power, Amazon is going to have its work cut out competing with Takealot. Takealot has built up a world-class delivery service and its customer base is fairly loyal,” Treurnicht said.

In response to a question about the implications of Amazon’s arrival in South Africa, Takealot said it “welcomes competition to the category and sector, and believes this is good for the economy”.

“Our primary goal is to focus on continued innovation and to provide the best service possible to our customers. We will continue to build our business and work to grow e-commerce as a category for the benefit of South African customers. We trust and hope, however, that the department of trade & industry and the Competition Commission are looking to ensure that all international players are in compliance with South Africa’s laws and protocols,” Takealot said.

Andrea du Plessis of the consumer retail research organisation Trade Intelligence said: “We’ve observed a growing interest by South African shoppers and increased engagement with online shopping locally, supported by sales growth reported by local players, as well as results from shopper surveys.

Read: Amazon surges on ‘game-changing’ quarter

“Amazon could be a big disrupter if they manage to leverage their global buying power from the big brands that they are aligned with and enable economies of scale. Negotiating favourable trading terms for local suppliers may be a challenge.”

Du Plessis said that considering a decline in loyalty of South African shoppers to brands and retailers over the past three years, they are likely to welcome competitively priced products. “Local online retailers are already upping their game as a pre-emptive response to Amazon’s arrival,” she said.  – © 2023 NewsCentral Media

Get TechCentral’s free daily newsletter