Amazon already starting to eat Takealot’s lunch

Amazon’s US website is the third most visited eCommerce platform in South Africa and is among the most popular places for wealthy South Africans to spend their money.

This was revealed in Discovery Bank’s SpendTrend24 report, compiled in collaboration with Visa.

The report compiled data from Discovery Bank’s clients in South Africa and data from over 60 million Visa cards worldwide and over 3 billion transactions.

Discovery Bank CEO Hylton Kallner told a media briefing that the research aimed to understand where and how South Africans spend their money.

Despite a challenging macroeconomic environment, South Africans proved resilient in 2023 compared to their global peers, with spending growing slightly.

Another trend was the rapid shift towards online shopping in South Africa, with online spending growth outpacing in-store by five times.

The pace of this growth even surpassed other emerging market cities and was on par with cities in developed economies.

Social commerce is also growing, with 25% of local consumers reporting they recently made a purchase through social media.

South Africans are also increasing their shopping from international platforms while spending in-store at international destinations is growing at a slower pace.

Discovery Bank said this can be attributed to emerging streaming, gaming, and international eCommerce growth.

There has been a rise in global online eCommerce platforms delivering to South Africa, with improved logistics and delivery times.

The report revealed that despite Amazon only launching its South African website later this year, the American giant is already very popular among consumers.

Data from the International Trade Administration showed that Amazon’s US website is the third most visited eCommerce site in South Africa.

Among Discovery Bank clients, AliExpress, Shein, Wish, and eBay rank alongside Amazon as the most popular global eCommerce sites.

Amazon’s edge over Takealot

Amazon’s vastly superior range of products to its competitors gives it a competitive advantage over local eCommerce platforms, such as Takealot.

Equity analyst at M&G Investments Damon Buss said that Amazon usually takes a slow and measured approach to launch in new markets.

From its initial soft launch, Amazon gradually ramps up its services, particularly the range of products it offers to use its global size to outcompete local rivals.

This ability will be vital to the company’s potential success in South Africa, as Takealot’s pricing and distribution will be roughly on par with the American giant’s.

Buss expects Amazon to slowly come to dominate in this space. It will simply be able to offer more products than Takealot and tailor its services to individual consumers more effectively.

Due to its global presence and highly efficient supply chain, Amazon is able to offer significantly more products than any of its local competitors in the markets in which it operates.

Buss gave the example of its expansion into Australia in 2017, where it gradually ramped up its operations to a point where nothing could compete with it.

At its launch in Australia, Amazon offered 7.5 million products on its platform, and within five years, this had increased to over 200 million. In the process, it became the dominant eCommerce player in the country.

“That will be the biggest reason why it is hard to compete with them, and also, their logistical efficiency is hard to challenge,” Buss said.

When this is combined with Amazon’s unrivalled customer analytics and value-added services, it is very likely the company will dominate the eCommerce space in South Africa within five years.

“This creates a flywheel of dragging more people in through new products, learning more about them and then being able to tailor your services to their wants and needs,” he explained.

This article was first published by Daily Investor and is reproduced with permission.