That’s “good morning” in Venda
EC2 is a cornerstone product of AWS, it was first developed in 2006 in South Africa by South Africans. (Full story
EC2 stands for elastic compute cloud, it’s a product that allows users to rent computers inside Amazon’s datacenters. AWS stands for Amazon Web Services, it’s a suite of products that allow users to rent other compute resources as well.
Renting resources has numerous advantages over buying them. And as more businesses discovered this, Jeff Bezos became an even wealthier man.
Last year, Amazon set up its first datacenters in Africa in Cape Town and Johannesburg. Having had such a rich history with web services, the company’s continued absence from the local e-commerce space has become more and more conspicuous.
Has Takealot already taken a lot?
Takealot is the clear market leader in South African e-commerce. Or e-tailing, to be more precise.
The company was launched in 2011. In April 2014, it raised $100 million from Tiger Global, and in October of the same year, announced an investment from Naspers along with a merger with the then market leader Kalahari.
The merger created a giant, similar to if Jumia and Konga came together in Nigeria. This is when allegations of market dominance started to come up.
In 2020, Takealot was explicitly mentioned in the Competition Commission’s draft paper on Competition in the Digital Economy. (Full story
The company maintains that its competitive advantage was gained through years of painstakingly building a business rather than a market grab.
Naspers now has a 53% stake in Takealot, while Tiger Global owns 38%.
Recently, when asked about the elephant that is Amazon moving from a cross-border threat to a domestic threat, Naspers CEO Bob van Dijk sounded bullish, commenting that there’s “limited room”
for them to come in.
But is this confidence misguided?
Currently, e-commerce penetration in South Africa sits at less than 2%
of total retail, or roughly $1.6bn. Which, on the one hand, is lower than a country like Kenya but, on the other hand, suggests that there is
room to grow.
That growth is being driven by 4 factors:
- Internet penetration influenced by cheaper data
- Changing user behavior
- Online payment methods
- Logistical infrastructure
While challenges persist, this 2019 report
suggests that those factors are trending upwards. It also suggests that once the growth hits an inflection point, the acceleration will be sharp, just like it was in India and China. (See graph below)
This could explain why the aforementioned Jumia quietly entered the South African market last year.
Speaking of 2020, Covid-19 restrictions have also become a major factor. This article
highlights how the lockdowns have been an accelerant for e-commerce and makes the case that Takealot could actually face bigger problems from local competitors.
All these factors could come together to bring the inflection point forward. So, in the mid to long-term, if Amazon or any other e-commerce giant continues to stay away from the South Africa market, it wouldn’t be because of “limited space”.
That’s why I prefer Takealot CEO Kim Reid’s position on Amazon’s possible entry because, while it’s equally defiant, it isn’t as cocksure as van Dijk’s.
“It does not scare us, but it would concern us”.