Industry gurus have a good appreciation of the impact Amazon’s much-anticipated arrival on South African shores will have on local e-commerce stores and the subsequent shift in online behaviour and inevitable (re)shaping of the retail landscape.
In recent years (especially during and after COVID-19), e-commerce marketplaces have witnessed global transformation. On the local front, South African e-commerce has experienced a steady rise, with more consumers turning to online platforms for their shopping needs. (Convenience, variety, and competitive pricing offered by e-commerce sites have fueled this growth). Techcentral reported that online retail sales in South Africa grew 30% to R55 billion last year, according to a study by World Wide Worx.
There’s no doubt that the impending entry of e-commerce giant, Amazon, into South Africa will further modify consumer behaviours and current e-commerce business operations.
It’s unlikely to be ‘business as usual’ as a new chapter unfolds and the implications of Amazon’s arrival in South Africa on the existing e-commerce ecosystem become evident.
Here are a few big-picture brush strokes of what we know as we analyse the ‘Amazon effect’ on local e-commerce and digital marketing efforts:
Amazon’s market entry strategy
Amazon’s trajectory on the world’s e-commerce stage is remarkable. South African sellers can now register to get started as Amazon plans to launch in 2024. As we wait in the wings, this is what we know: Amazon is known for its strategic market entry approach. It often starts with a limited product range, gradually expanding to include more categories. Understanding Amazon’s strategy is crucial in predicting its impact on South African e-commerce marketplaces.
Competitive pressure on local e-commerce stores
Amazon is renowned for its vast product selection and fast delivery. Local e-commerce businesses who have played in their own niche with a large market share in the e-commerce space will face intense competition; forcing these players to innovate and improve their services. What Amazon brings to the party is that it will raise the standard of delivery, payments and seller onboarding to better than what is currently prevalent in South Africa.
Price wars and consumer benefits
Amazon’s entry into South Africa may trigger price wars, benefiting consumers with lower prices and better deals and likely converting even more to online shopping. However, local businesses must be prepared to adapt their offering to this new pricing landscape to stay in the game.
A (potential) positive economic boost
Amazon’s entry into the South African market will likely have a positive impact on employment – creating a range of job opportunities – particularly in areas such as logistics, warehousing, and customer support. The company will look to establish distribution centres, hire local staff to manage these facilities and provide customer service in multiple languages. This expansion could provide a significant boost to the local job market, offering employment options for a diverse range of skill sets.
A (potential) negative blow to retailers
The influx of Amazon and the growth of e-commerce in SA, however, might also raise concerns about the future of traditional retail jobs. As consumers shift their shopping habits online, brick-and-mortar stores may experience reduced foot traffic, potentially leading to layoffs or closures. South African businesses operating in the traditional retail sector will need to creatively and proactively adapt to these changing market dynamics to retain their customer base and their workforce and remain competitive.
Logistics and delivery revolution
If there is one hero in Amazon’s service arsenal, it is its logistics expertise. For local e-commerce sellers, this is likely to lead to much-needed improvements in delivery efficiency across the industry, setting higher standards for fast and reliable shipping. Takealot – South Africa’s current leading online retailer – has already been incredibly proactive in this area with significant and measurable results. And although only in the testing phase, they are looking to introduce “delivery within an hour for items ranging from phone chargers to toys as it braces for Amazon.com to enter the country’s e-commerce sector.”
Surprising opportunities for local e-commerce sellers
Amazon Marketplace provides a wonderful opportunity for local sellers to reach a global audience. Here’s where South African e-commerce businesses can have the edge:
Regulatory challenges
Amazon’s global expansion comes with complex regulatory challenges, especially when entering a new country like South Africa. Navigating South Africa’s local regulations -including labour laws, import/export regulations, and consumer protection laws – will be crucial for Amazon’s success.
Compliance with these regulations is essential to avoid legal issues and maintain a positive reputation in the market. Understanding and adhering to South Africa’s tax structures is another significant challenge. This includes corporate taxes, customs duties, and value-added tax (VAT). Amazon will need to work closely with local tax authorities to ensure full compliance while also optimising its tax strategy within legal boundaries.
Innovation and customer experience
To thrive on the Amazon Marketplace in South Africa, local businesses will need to focus on innovation and customer-centric strategies. Staying competitive on Amazon requires businesses to constantly innovate. This can involve improving product offerings, adopting efficient supply chain practices and owning this to maximise profits, building a strong brand across multiple platforms, having your own online store, and efficient inventory management.
The customer’s online shopping experience is a critical factor in e-commerce success. South African businesses must prioritise customer service communication, fast and reliable delivery, and seamless online shopping experiences.
Sustainability initiatives
When it comes to meeting the demands of conscious consumerism and eco-friendly trends, South African e-commerce stores will have to up their game. Amazon’s high-profile commitment to sustainability initiatives has the potential to significantly impact South African e-commerce sellers.
These initiatives reflect a broader global trend towards environmentally conscious business practices and are likely to influence both consumer behaviour and the competitive landscape in South Africa’s e-commerce sector.
Consumer awareness and demand:
Amazon’s pledge to become net-zero carbon by 2040 has raised awareness among consumers about the environmental impact of e-commerce. South African consumers, inspired by Amazon’s initiatives, may become more conscious of their own carbon footprint when shopping online. This increased awareness is likely to drive demand for eco-friendly products and packaging, pushing local e-commerce stores to adopt greener practices to cater to this changing consumer sentiment.
Supply chain efficiency:
Amazon has been investing in optimising its supply chain to reduce emissions. These efficiency improvements, such as using electric delivery vans and optimising delivery routes, can serve as models for South African e-commerce stores. By adopting similar strategies, local businesses can reduce their operational costs and minimise their environmental impact, which may be essential to remain competitive.
Global regulatory pressure:
As Amazon expands its global reach, it often becomes subject to various regulations aimed at reducing environmental harm. South African authorities may take cues from international standards and regulations imposed on Amazon, leading to stricter environmental requirements for e-commerce businesses in the country. Local e-commerce stores will need to adapt to these regulations or risk facing penalties and losing consumer trust.
Supplier expectations:
Amazon’s sustainability efforts extend to its relationships with suppliers, encouraging them to adopt more eco-friendly practices. As South African e-commerce stores source products internationally, they may face pressure from their suppliers to adhere to sustainable standards and practices to align with global supply chain expectations set by giants like Amazon.
Competitive advantage:
E-commerce businesses in South Africa can leverage their commitment to sustainability as a unique selling proposition (USP) to differentiate themselves in a competitive market. By showcasing eco-friendly practices -such as using recyclable materials and reducing waste – these online businesses can attract environmentally conscious consumers and gain a competitive edge.
Investor and stakeholder relations:
Investors and stakeholders are increasingly prioritising sustainability in their decisions. South African e-commerce stores looking for funding or partnerships may find that aligning with Amazon’s sustainability initiatives will help them attract investors and forge strategic alliances.
Innovation and collaboration:
Amazon often invests in and collaborates with startups and businesses focused on sustainable technologies and practices. Local e-commerce entrepreneurs and innovators working on green solutions may find opportunities for collaboration or investment from Amazon, fostering innovation in the local industry.
The ‘Amazon effect’ is real. Amazon’s entry into the South African market offers both opportunities and challenges for local e-commerce stores that are looking to sell on this marketplace or compete with it.
Undoubtedly, Amazon touching down in South Africa will usher in an exciting era of innovation, competition and progress.