Amazon’s big edge over Takealot in South Africa 

Amazon’s ability to offer a vastly superior range of products to its competitors has made it the dominant player in many of the markets it operates, and South Africa will be no different.

This is feedback from equity analyst at M&G Investments Damon Buss, who 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 and, in particular, 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. 

In October 2023, Amazon announced that it would launch Amazon.co.za in 2024, providing South African-based sellers the ability to reach customers nationwide.

Robert Koen, general manager of Amazon’s Sub-Saharan Africa region, said they look forward to launching Amazon.co.za.

The platform will allow local sellers, brand owners, and entrepreneurs to grow their businesses in South Africa.

There has been great excitement around Amazon’s South African launch, with many expecting the world-class service levels that make it the world’s largest eCommerce company.

Buss said this excitement is warranted but that Amazon tends to move slowly and cautiously into a new market, so it is unlikely to be the same service offered in the US overnight. 

Moreover, it will not be vastly different from Takelot regarding pricing and distribution. Here, Buss’ comments are very similar to those of Bob Group managing director Andy Higgins. 

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 is where Higgins and Buss begin to disagree, with Higgins saying that Takealot will win this battle due to their local presence and the infrastructure they have built over the last decade. 

On the other hand, Buss thinks Amazon will dominate in this space as they will simply be able to offer more products than Takealot and tailor their services to individual consumers more effectively. 

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