Amazon’s less than Prime time for SA launch will be significant challenge for e-commerce king

South Africans will have to wait a little longer for the holy grail of e-commerce to arrive. Amazon’s much-rumoured local launch was finally confirmed — but its launch has been delayed until next year.

“We look forward to launching amazon.co.za in South Africa, 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 South Africa,” says Amazon GM for sub-Saharan Africa Robert Koen.

“The launch of amazon.co.za in 2024 will provide independent sellers throughout the country an opportunity to rapidly launch, grow and scale their businesses while leveraging the innovative capabilities provided by Amazon,” it says.

Amazon’s marketplace, where it lets other sellers use its site and delivery infrastructure, is important to its business model. Amazon says 60% of what it sells through its store is from other sellers “providing a vast selection of products, competitive prices and great convenience for consumers”.

Obviously, Amazon will sell all of its own brands, and private labels, when it eventually launches. But how it enables — and frankly requires — these independent sellers for its strategy is telling. 

Takealot, the Naspers-owned e-commerce player, is the dominant service in the country — but it’s still not profitable. It lost R300-million last year, despite its decade-long operation. 

Like Amazon, it also provides a marketplace for other sellers — but the Competition Commission found this was a “conflict of interest” and it has ordered Takealot to create two separate companies.

https://youtu.be/QRWerI-g4ek

“Takealot faces a conflict of interest on its site as its retail division competes with marketplace sellers leading to behaviour that has disadvantaged sellers,” the commission’s Online Intermediation Platforms Market Inquiry (OIPMI) report found. It was released in August after two years of investigation. The US government recently sued Amazon for the same issue.

Amazon will ultimately face a similar problem in South Africa, but not immediately. It has other pressing problems to contend with — not least the depressed South African economy. The post-Covid recovery has been as weak as the poor state it was in pre-Covid. Runaway inflation, the Russian invasion of Ukraine, price increases for petrol and diesel as a result, as well as shortages of grain and fertiliser have already hammered our stuttering economy.

Economic storm

The ANC’s colossal mismanagement of the country’s infrastructure means the water system is now as decrepit as Eskom’s power — while Transnet has also gone off the rails. 

Economists have said the last year has been brutal on SA retailers — who must also fork out tens of millions of rands for diesel to keep food from going off in fridges.

Apart from Takealot, South Africa’s e-commerce successes have come from sweating physical assets in a new way, as it were.

Shoprite’s Sixty60 is able to do its 60-minute deliveries because it has enough stores to do that, Shoprite’s chief strategy officer Neil Schreuder told me.

Those delivery bikes in that lurid blue have spawned countless internet memes over the Springboks’ weird “hyper-jade” coloured alternative outfits, certainly helped by Sixty60’s sponsorship of the Rugby World Cup broadcasts on SuperSport.

After buying delivery app Bottles during Covid and rebranding it Asap, Pick n Pay has instead opted to use Takealot-owned Mr D for its deliveries — giving the delivery service an interesting pivot. 

Meanwhile, Sixty60 has launched its own Amazon Prime-like subscription service: For R100 a month you get free deliveries if you ordered over R350. I subscribed to it this month.

Prime time

Prime is another of Amazon’s great ideas. Originally it just offered next-day delivery in countries where Amazon operated. But it evolved to include an alternative to Netflix, a similar music streaming option and now does same-day deliveries, amongst others.

Amazon clearly knows how to compete in other markets and has a superb supply chain. It’s got its operating model honed but has it ever dealt with #loadshitting and its knock-on effects? DM