Though the company hasn’t confirmed it, everything points to the world’s biggest online retailer, Amazon.com, launching retail operations in SA early next year. That would shake retail here to the core.
The rumours started in June, when US publication Insider, citing leaked documents, said Amazon plans to launch retail operations in two African markets in 2023: SA in February, followed by Nigeria in April. Amazon would also launch its popular Prime service in SA, offering expedited free shipping as well as access to Prime Video (a Netflix rival) and other services, it said.
Amazon’s African e-retail launch plans, reportedly codenamed Project Fela, would come on top of increased investment by the US online giant in SA in recent years. The company, which is the world leader in cloud computing through its Amazon Web Services subsidiary, has invested hundreds of millions of dollars in cloud data centres in Cape Town.
It’s also planning to move into a sprawling new Africa head office campus in the Mother City, though those plans have been interrupted by legal action brought against the site’s property developer by groupings that claim the land being developed is sacred to indigenous peoples of the area. That’s a sideshow, though: whatever the outcome, it’s unlikely to threaten Amazon’s long-term investment plans.
Since Insider’s report in June, further apparent evidence has emerged that Amazon is working behind the scenes to launch a local marketplace operation, including unconfirmed reports that it has been shopping around for warehousing space. February is only five months away, so the company doesn’t have much time left to get its logistics operation in place. Of course, Amazon could choose to start small and grow from there rather than try to go big from day one. It’s the less risky approach.
For years, many South Africans — this writer included — had assumed that Amazon, if it ever launched online retail operations in SA, would make an offer to acquire the country’s market leader in e-commerce, Naspers-controlled Takealot Group. Yet there have been no rumours about a potential deal. It’s possible the parties are engaging one another quietly behind the scenes — or perhaps Amazon figures it’s not worth the hassle of trying to get a Takealot acquisition past the Competition Commission, which has signalled a desire to crack down on online markets.
I asked Naspers CEO Bob van Dijk in late June what he thought of Amazon’s potential entry. He pointed out that Takealot’s go-to-market proposition had been honed for over a decade and that consumers were “enthusiastic about the quality of service, the pricing, the logistics and the predictability of it”, which, he said, is “not very easy to replicate”. He has a point: Takealot is very good. But if anyone is the king of pricing and logistics, it’s Amazon.
So, Van Dijk has signalled that the deep-pocketed Naspers is ready to protect Takealot’s turf. That’s good news for consumers, who are likely to enjoy the benefits as these two giants engage in battle.
But there’s a third global player — Amazon’s biggest rival — that’s also intent on muscling its way into the local e-commerce market: US retail giant Walmart, which last week surprised local investors with a plan to buy the minorities in troubled Makro and Game parent Massmart that it doesn’t already own.
Massmart, which also owns DIY chain Builders, has been loss-making for years. But instead of cutting and running, as some analysts had expected, Walmart appears intent on doubling down on the local operation. Like rival Amazon, it clearly sees opportunity at Africa’s southern tip. As a private entity, no longer answerable to local shareholders, Massmart, with its parent’s financial muscle, will have the runway to invest significantly more in logistics and systems.
The prospect of a three-way tussle for online supremacy between Takealot⁄Naspers, Amazon and Walmart⁄Massmart has the potential to change SA retail dynamics significantly in the years ahead, especially as online shopping as a percentage of total retail — already climbing fast and given a huge leg-up by the Covid lockdowns — continues to surge higher. Local grocery retailers such as Shoprite Group, with Checkers Sixty60, Pick n Pay (asap!), and Woolworths (Woolies Dash) are already battling for supremacy in fast grocery deliveries.
Sylvester John, senior vice-president for e-commerce in Africa for Walmart, told me last year that the company expects that e-commerce in SA as a proportion of overall sales would more that treble in size by the end of this decade, to between 11% and 12%. That’s impressive growth, but will still trail the global figures; according to estimates by data journal Statistica, an astonishing 24.5% of total retail sales by 2025 will be through e-commerce. So the potential for huge growth in SA is there.
Even more importantly for global giants like Walmart and Amazon, SA could be a staging ground for the rest of Africa, a continent of 1.4-billion people, most of them young and primed for the online revolution and everything it will bring.
* McLeod is editor of TechCentral.co.za
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