Amazon South Africa had a poor start – but let’s not write it off

Andy Higgins, The managing director of e-commerce solutions company Bob Group said criticism of Amazon’s launch in South Africa in May was largely based on media hype and the exaggerated expectations of consumers who had already used Amazon’s services in other markets.

“As far as I know, Amazon South Africa has not created any buzz around this project anywhere; in fact, I think they have downplayed it,” Higgins said in an interview with TechCentral Show, set to be published this week.

“External parties have created this expectation. If you look at where Amazon has launched in other markets, I don’t think it has gone off without a hitch – there’s no reason why it would be any different in South Africa,” he said.

Amazon’s biggest challenge in South Africa, Higgins said, is likely to be the complexity of its logistics infrastructure. He said Amazon is competing with a sophisticated parent entity in Takealot Group, owned by Naspers, which has deep knowledge of the South African logistics landscape and also owns a fulfilment network through Mr D. Amazon South Africa, on the other hand, relies on third-party logistics services.

Another factor that Higgins said fuelled the buzz around the launch of Amazon South Africa was people’s experiences with other international digital businesses, such as Google and Netflix, which quickly dominated their local markets.

Higgins said the same can’t happen in e-commerce because it’s fundamentally different. “These services are purely digital, whereas here, when we’re talking about e-commerce – in most cases – we’re dealing with a physical product, which adds a lot of complexity to the process.”

Challenges

He added that he suspects the reason Amazon South Africa launched without any Amazon-branded products – you can’t buy Echo smart speakers or Kindle e-readers on amazon.co.za – is also because of the logistical challenges of delivering and servicing those devices to the standards the market expects.

“Those (products) will come over time, but it may take longer than people expect. I think one of the challenges Amazon will face is having to adapt to software and systems that have been built for other markets. It will be difficult to adapt the way the system works to RPA, which is a fraction of their business. I predict it will be difficult to do it well,” Higgins said.

Read: Amazon Prime is coming to South Africa – what to expect

Speculation about Amazon entering local retail operations began in 2022, but it wasn’t until October 2023 that the online shopping giant confirmed its intention to launch a marketplace operation in South Africa. In May 2024, amazon.co.za launched without much fanfare.

Much of the anticipation ahead of Amazon’s entry into the South African market was related to its Prime service, which the company announced it would launch in the country.

In the US, Prime membership – which costs $14.99/month or $139/year – includes shipping benefits, with free two-day shipping on eligible items coming standard. There’s no minimum purchase required, so even a single inexpensive item costing just a few dollars will ship for free.

“There are many aspects to operating profitably in the e-commerce space, but I think logistics is the most important. In other markets, Amazon has built its own logistics infrastructure, which could happen in South Africa. But I think there’s still a long way to go,” Higgins said. © 2024 NewsCentral Media

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