DEVELOP & INVEST
Recently , the company has launched Amazon Fresh , a grocery delivery service that also has a chain of checkout-free grocery stores . At the time of writing there were 18 Fresh stores launched in the UK .
What makes South Africa an attractive proposition ?
Thomas Vollrath , head of 1-grid . com , advises : ‘ The best way for small businesses to differentiate themselves from the convenientbut-impersonal experience of Amazon is to offer a personalised service – and build personal connections . Use your website , social media , and delivery notes to tell the story of your business . This is the best way to really connect with consumers and make them feel good about buying from you .’
South Africa ’ s rapidly growing e-commerce market has clearly caught the eye of Amazon , which wants to capitalise on its growth .
Yaron Assabi , CEO of Johannesburg-based Digital Solutions Group , says : ‘ There is no doubt that the South African e-commerce market is booming – especially off the back of the pandemic – where , according to FNB , online sales jumped by 41 % in 2021 ( 55 % in 2020 ).
‘ Our e-commerce market is set to reach more than R400 billion by 2025 , which is double the market now . Therefore , it is no surprise that big global players such as Amazon are entering the market – a testament to the market growth .’
The benefits ?
This , believes Assabi , is a good thing for South Africa . He explains : ‘ From an economic perspective , such investment is very much needed in the country , and we can ’ t deny the benefit of this . We also require foreign direct investment and job creation opportunities to create local employment as the unemployment rate among the youth is so high .’
Assabi adds : ‘ For smaller players who focus on locally sourced , niche products and unique online offerings that go beyond product and focus strongly on personalised service offerings , the impact is likely to be less . It is here that consumer loyalty is likely to remain as products that aren ’ t available elsewhere will remain their bread and butter .’
Established players like Takealot may well engage in a price war . Assabi says : ‘ This will make the market a lot more agile in terms of pricing , sourcing , and marketing – and we are likely to see a strong shift in online shopping in South Africa .’
Will it work out ?
Not all of Amazon ’ s offerings may succeed in South Africa . Its Amazon Fresh checkout-free stores are unlikely to be popular .
‘ This type of retail model is in its infancy in South Africa . We have seen glimmers of the movement to this model with self-scanning in certain stores and , of course , with delivery apps – but not to this level . It will happen in the future , but it depends on the usage of digital / mobile payments and NFC , which is not yet adopted widely .
He adds : ‘ Amazon already has a contact centre in Cape Town that serves the German market , so by investing in a South African presence we will hopefully see more jobs being created .
‘ But this is not the only challenge . There are several local challenges that will be a barrier where the unions , within reason , will push back on this given the urgent need to stimulate job creation locally .
‘ For the consumer , this will certainly be a good thing as it will open much needed competition in the mainstream e-commerce space – forcing down pricing and creating access to a large range of products . Depending on their model , it could also present access to products that would traditionally not be locally available , again increasing competitiveness and choice .’
The business impact
The launch of Amazon may not , however , be such a welcome concept for businesses as it means increasing competition . According to local web hosting company 1-grid . com it could impact the margins and market share of small businesses when it comes to online sales .
‘ Secondly , government will likely not allow this until such a time that their employment agenda is seeing recovery .
‘ Lastly , the knock-on effect of unemployment is crime , and a model like this will need a lot of work locally to circumvent petty theft in store and ensure that this model can in fact be profitable ,’ says Assabi .
Angelique Ruzicka
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