BY SPECNO
JACQUES JORDAAN, CO-FOUNDER & CEO
With a USD 1.60 trillion market cap, the imminent intensification of Amazon’s operations in South Africa will come to shape the practices and standards that characterise and grow the domestic e-commerce landscape.
For consumers and smaller sellers alike, Bezos’ venture into South Africa’s online retail space is a boon, capable of promising lower prices, ease of use, and wider integration with its other services and existing digital infrastructure. The entity’s decision to join the South African market should not, however, be regarded as an inevitable death knell for its many competitors. Instead, it should be used as an effective pace car by local players in the e-commerce space.
Underdeveloped physical and logistical infrastructure, and an immature e-commerce market all give hope to competitors willing and able to keep pace with Amazon. According to data from Statista and ecommerce.co.za, South Africa’s online retail space is sizable (with an estimated 27–32 million users), but is projected to continue growing over the medium term by 6.5–10 million users. These are all users who have individual tastes to cater to and who have yet to sign on with Amazon’s ecosystem.
To effectively serve and capitalise on the South African e-commerce retail space, logistical and digital infrastructure still needs to be improved (to reach a greater number of potential customers). These efforts span from better payment options to the creation of viable distribution nodes to less-served communities and demographics.
These realities underline the fact that the e-commerce space is yet to reach maturity, thereby allowing current platforms and online retailers to consolidate their positions amidst the inevitable shakeout of major players.
In light of the reality facing Amazon.co.za in South Africa, its competitors would benefit from exploiting the gaps in its business model which do not account for the domestic context and which it may previously have benefited from in other markets; such measures include:
- Investing in software development: Amazon’s platform is a known entity, moulded and honed through years of real-world experience. By establishing enduring partnerships and collaborations with local digital innovation teams, local businesses attempting to compete with Amazon.co.za will need to—at the very least—match the platform’s existing strengths and overall ease of use. Without the aid of seasoned industry professionals from the outset, businesses will be ceding the head start afforded by the South African context.
- Promoting innovation: related to the previous point is the need to identify areas in which a company can compete with Amazon’s all-encompassing general approach—in terms of digital infrastructure, continued innovation will be crucial. The ability to evolve with customers’ preferences will require foresight from industry experts; however, identifying trends in retail and services will be meaningless unless a company can capitalise on their foresight with platforms and software ready-made for the market. Given the significant time required for development and implementation, innovation will be a necessity for competing in South Africa’s post-Amazon e-commerce space.
- Ensuring ease of use: innovation requires flexibility, and flexibility is empowered by ease of use. The overcomplicated implementation of digital solutions not only retards a business’ ability to respond to new opportunities and challenges promptly but similarly dampens any future innovation. Being required to operate within a strict and rigid system limits non-technical users, such as decision-makers, industry specialists, financial analysts, and other members of a team. Thus, digital transformation requires, from the outset, an intelligent and forward-looking design that can easily promote and facilitate changes when needed.
Employing these tactics, although not assured to ensure survival, will give businesses a greater chance at being among those who remain in South Africa’s post-Amazon online retail space. Failing to be proactive, however, is undoubtedly preparing for submission, being subsumed by Amazon, or exiting from the market entirely.
About Specno: Specno is a leading provider of world-class technical solutions that help businesses effectively address and manage their challenges to improve efficiency, profit margins, and growth. Specno is a pioneer in digital innovation and is committed to driving creative problem-solving for business success in South Africa and across the globe. https://www.specno.com/