Amazon’s big fight in South Africa
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Amazon might have a lot of money behind it to launch a South African marketplace, but winning local market share will not come easy for the global e-commerce titan.
This is the view of Iser-Expert CEO Jonny Aarons, who recently provided feedback about Amazon’s launch in South Africa from the perspective of one of their suppliers.
Iser-Expert is a purchasing organisation established in the 1990s to consolidate the buying power of independent resellers and prevent bigger competitors from trampling them.
Originally incorporated as Iser, the organisation’s founding members included Kloppers, Hirsch’s, and Tafelberg.
Hirsch’s eventually broke away from the Iser-Expert alliance and now handles its own buying.
In 2015, Iser became affiliated with Expert Group, a retail alliance founded in 1967 that provides support and services to retailers of consumer electronics and appliances.
The buying group targets product categories like small and large appliances, houseware, air conditioning, cellular, tablets, wearables, personal care, and outdoor.
Aarons said that on the day Amazon.co.za launched in May 2024, a supplier saw one of its premium brands discounted to 30% below cost.
This is an expensive small appliance brand, which is naturally very sticky about the perception of its value.
“Besides upsetting the market, Takealot did way more units at their normal price than Amazon did at discounting it at 30%,” Aarons said.
The Iser-Expert CEO said this shows that Amazon has an uphill battle ahead of them.
“I think Amazon has got a tough road ahead. They’re not just going to come in here and take market share,” he said.
Aarons’ views echo several e-commerce heavyweights in South Africa, including Bob Group managing director Andy Higgins.
Higgins is one of the pioneers of e-commerce in South Africa, having founded Bidorbuy in 1999 at the height of the dot-com boom.
They weathered the bust and came out on the other side — not unscathed, but wiser.
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Higgins said it would take Amazon longer than most people think to establish itself in South Africa’s e-commerce space.
However, Amazon is also happy to bide its time and gradually gain momentum and market share.
Higgins said their main challenge will be whether they can adapt tech that works for other markets to South Africa, which has its own nuances.
He highlighted that Amazon has not always been successful in entering new markets. For example, in Poland, the local incumbent, Allegro, still dominates.
In India, on the other hand, it ended up being a battle between Amazon India and Walmart through its subsidiary Flipkart, where Amazon is currently considered to have the lead after making substantial investments.
Local online marketplaces have the advantage of experience in the South African market, which Higgins believes makes them more agile in adapting and providing services specific to the country.
Higgins believes Amazon’s launch will positively impact all online marketplaces by encouraging potential buyers to shop online, leading to growth for all online marketplaces, including Takealot and Bob Shop.
While Higgins believes South Africa’s home-grown e-commerce companies have more than a fighting chance against Amazon, he acknowledges what they are up against.
“I don’t think anyone should discount Amazon. They are a behemoth with massive resources. I think purely through brand recognition, they have a huge advantage,” he said.
“But merchants are expecting Amazon to come and perform miracles. Perhaps they do, and if they do, I think it will be wonderful for the market.”
Higgins explained that South Africa only has around 5% retail e-commerce adoption.
“If you compare us to even our emerging market counterparts in Brazil or India — they are well over 10%,” he said.
“I still don’t have an answer for why we’re not there yet. We should be there. I would hope that someone like Amazon coming in will have a positive impact on that, which would uplift e-commerce for everyone within the market.”
Higgins said he believes there is room for multiple successful e-commerce players in South Africa.
“If you look at a market like Brazil, there’s a number of marketplaces there that are thriving and successful,” he said.
“But I think ultimately there will be one major winner, and it remains to be seen who that is.”
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