Amazon’s big challenge in South Africa 

Amazon will face significant difficulties in grappling with the intricacies of the South African eCommerce market, particularly its use of third-party logistics providers, which it largely avoids in its other markets. 

This is feedback from Bob Group managing director Andy Higgins, who told Daily Investor that Amazon’s success in South Africa is far from guaranteed. 

Amazon launched its South African marketplace earlier this week, with many expecting the American giant to dominate the local eCommerce industry in no time. 

However, Higgins said that Amazon’s dominance will take longer than many expect to become the industry leader. 

Compared to other American tech giants, such as Google and Facebook, Amazon will have a much harder time operating in South Africa. 

“There is a big difference with eCommerce that makes it more challenging, and that is the logistics component.”  

Amazon has to handle physical products within the country, whereas Google and Facebook’s services are, for the most part, entirely digital. 

This logistics element is arguably the most critical part of the eCommerce value chain and can be the hardest to get right. 

“While Amazon is still entirely using third-party logistics providers, as good as some of them are, local eCommerce players have an opportunity to compete by owning and therefore controlling their own logistics,” Higgins said. 

Amazon typically likes to control and own its own logistics in the countries in which it operates but is unlikely to do so in South Africa. 

Ultimately, Higgins said there is space for multiple platforms to co-exist, and Amazon’s arrival will uplift the entire eCommerce industry and force competitors to improve their customer experience. 

Higgins’ comments echo those he has made previously about Amazon launching in South Africa, saying it would be far tougher for the American giant than most people expect.

Takealot’s strong local presence, understanding of the South African market, and established infrastructure give it a strong advantage over Amazon, which will struggle with the intricacies of the South African eCommerce market.

Once Amazon adapts to that challenge, it will have to adjust to the local market, which has distinct features and nuances.

“They will need to find ways to adapt how they do things normally for the local market, which will be a challenge,” Higgins said.

This gives Takealot a big advantage in that it has a strong local presence and has adapted to the local market over time.

“Takealot would face the most competition from Amazon, but they are also the best positioned to take them on,” Higgins said.

The competition between Amazon and Takealot will fundamentally come down to the experience they offer consumers.

Amazon’s publicly published pricing model is similar to Takealot’s, with negligible price differences for being a third-party seller on each platform.

“Essentially, they are going to have the same sellers who have the same cost base and will charge essentially the same price,” he said.

This will bring the competition down to a battle over the experience South Africans have engaging with the platforms, the services offered, and delivery times.

Here, Higgins said, lies Takealot’s massive advantage as the local presence and infrastructure they have built over the last decade will enable it to provide a better consumer experience.

Amazon will take time to develop its presence and infrastructure, potentially resulting in a less pleasing initial experience.