E-commerce in South Africa is slowly becoming a red ocean market. In October, B2B e-commerce giant Jumia announced it would leave South Africa by the end of 2024, citing macro-economic conditions and intense competition.
Takealot Group, another homegrown e-commerce mammoth, has complained about the competition. Its parent company, Naspers, admitted the company is under pressure from new entrants like Amazon and China’s Temu, whose aggressively low pricing has made them popular in the market.
Takealot is battling a slow macroeconomic environment and shifting customer behaviour while trying to defend its market share.
E-commerce is a volume game. If the gross merchandise value (GMV) and average order sizes are not increasing, then the e-commerce business is likely not growing too.
In 2024, the South African Rand showed moderate stability in terms of currency volatility. However, e-commerce giants like Takealot are struggling with the effects of a sluggish economy, which has led to a decline in consumer disposable income.
With consumers having less money to spend and e-commerce companies offering similar value propositions, businesses that stand out with unique offerings are more likely to attract customers.
When Amazon entered South Africa in May 2024, frequent shoppers on Reddit said they flocked to the Jeff Bezos-owned company because they could buy books that were hard to find in local bookstores. Amazon also offered next-day delivery service, which was far better than Takealot’s average 3-day delivery wait.
Chinese-owned Temu, after entering the market in January 2024, splurged on marketing and ran blitz adverts on Meta platforms. The company still has 420 active Meta ads running in this month alone.
In Nigeria where Temu entered recently, it is running 1,500 of those ads. Temu spends a lot on acquiring customers; in 2023, it spent $2 billion on Meta ads, which is only justifiable if it has retention strategies in place to attract customers to buy repeatedly.
Temu seems like it has found a home in Africa and it is likely because displacing Alibaba, which has China’s e-commerce market on lockdown, is a much harder task to undertake. It remains to be seen how its growing influence shakes up existing e-commerce players in Africa.
