Amazon drops A-bomb on SA retail
Launch of global giant’s online store expected to shake up local industry
● It has been termed the A-bomb of e-commerce. The arrival of Amazon.co.za in South Africa on Tuesday was one of the biggest moments in the history of online retail in the country, and is expected to make a massive impact on the sector in general.
In a statement released shortly after the Amazon.co.za website and app went live, the global e-commerce leader said a selection of local and international brands across 20 product categories would be available for same-day and next-day delivery, along with more than 3,000 pickup points, and an easy return system.
The product range did not seem as extensive as that available from Takealot, but the company made it clear it would continually add new product lines and categories. Robert Koen, MD of Amazon for subSaharan Africa, told Business Times in an exclusive interview on the launch day that the company’s strategy was focused on customer experience.
“What is going to be unique, what you see in Amazon in most countries where we operate, is that delivery promise. Before you even add something to your basket and start the checkout process, you can see when that item would be delivered. And that’s clearly very important for South African customers. You want to know when it’s going to be delivered, and you know what that promise is. That’s going to be a unique feature for the country.”
He said that the same-day and next-day delivery promise was premised on a network of fulfilment centres and delivery partners.
“Part of the network is two fulfilment centres, one in Johannesburg, one in Cape Town. We are using third parties — very, very experienced third parties — for the delivery. They’ve got a lot of experience of doing this for many years in South Africa and know the unique conditions within South Africa.”
The courier partners, DPD Laser and The Courier Guy, have already made significant inroads in logistics in the country, with the latter expanding rapidly in the past year after its acquisition by a global investor. However, the Amazon negotiations began long before the acquisition, said Koen, and the couriers were expected to invest heavily in ramping up capacity.
The wide selection of products available from Amazon.co.za might not be immediately obvious, he said.
“But, once you start browsing and start looking around or searching, there’s actually quite a bit to discover. But this is the beginning. It’s our first day in operation. You will see new products being added every single day.” More significantly, he expected the number of third party sellers to increase dramatically.
Globally, more than 60% of items sold in Amazon stores are supplied by independent sellers, mostly small- and medium-sized businesses. The same is likely to apply in South Africa. “We’ve had a great response from sellers. Thousands of sellers have completed their registration and are going through the process of listing their products. Quite a few of them were waiting for us to launch before they go through listing, so you’ll see a lot of those sellers starting to list their products. You’ll see new selection being added every day.”
The company’s third-party service, Fulfilment by Amazon, provides small businesses with the ability to send their inventory into the fulfilment centres, where it is stored, packed and fulfilled when an order is placed.
“It’s pretty compelling because, if you think of a business, you’re great at the product side, and you want to focus on the product, but don’t want to be on call, as soon as you get an order, to pick, pack, fulfil the order. We do that for them. So we do expect an influx of seller inventory.”
All eyes are on the impact Amazon will make on South Africa’s sector leader, Takealot.
It has about 20% of the online retail market, according to the “Online Retail in South Africa 2024” report released this week by World Wide Worx in partnership with Mastercard, Peach Payments and Ask Afrika. The report found that this share had declined from about 25% in the past three years, partly due to the rise of 60-minute grocery delivery services such as Checkers Sixty60 and Pick n Pay ASAP.
It is expected that Amazon will also dent this market share. However, in a rapidly growing market, it will carve its own space rather than take business from Takealot.
“We really don’t look at it as a share game,” said Koen.
“We are much more focused. Our primary objective is to be the most loved and trusted store in South Africa. That is the benchmark.
“We know we’ve been successful when you’ve got maybe someone who’s not used to shopping online, who’s living in a very rural area, who wants to buy something for a family member, who knows that Amazon is a trustworthy place, where your payment is safe, you’ve got easy returns if you’re not happy with the product. When we can start having them buy on the store, that’s when we’ll know that we’re really starting to resonate within the country.”
Koen said there were three key pillars that were important to customers.
“The first being product selection. The second is offering great value for money, good prices. We want customers to know that every time they come to the store. The third piece is just that customer experience: same-day or next-day delivery, easy, convenient pickup points, easy returns. And we know that formula works very well in every country where we operate.”
Rahul Jain, founder and CEO of Peach Payments, said the arrival of companies such as Amazon and the expansion this year of global online brand Temu into South Africa would have a positive impact.
“Global companies are creating opportunities for local businesses to engage with new digital marketplaces. Local suppliers and SMEs can sell their products on Amazon. These international entities are not only developing infrastructure, but enabling the ecosystem and helping develop the value chain, which opens up new economic prospects in South Africa.”
He was supported in this view by Gabriel Swanepoel, Mastercard country manager for Southern Africa.
“The more competition we have in the market the better it is,” said Swanepoel. “But the success of e-commerce is a function of how well logistics and distribution is taken care of.
“If Amazon can make a difference in making sure that we’ve got the plumbing, from a broader e-commerce perspective, that’s going to make a massive difference in the way that digitalisation will happen in general and will affect the payments industry in particular.
“All of those factors provide more choice to the broader population. And from that perspective it means that ultimately it benefits the end consumer, which is great for the economy. We’re going to see significant growth. It’s a good news story.”
Our primary objective is to be the most loved and trusted store in South Africa
Robert Koen
MD of Amazon for sub-Saharan Africa