Currently operating in 20 different countries, Amazon’s expansion into South Africa will add a new revenue stream and opportunity for marketers outside of their existing local marketplaces, such as Takealot. Amazon is a chance for seasoned marketers to combine all their skills and services into one; their ecommerce platform (shopify, whoo commerce, adobe, etc), advertising platform with their CPC products and DSP, content management platform , customer service platform with client communication and review management.
That being said, it’s worth noting that Amazon starts up slowly, onboarding some of the biggest brands first and relying on Sellers, rather than Vendors, additionally certain features won’t be available from launch. Learnings from previous market penetrations indicate that in the early stages we can expect to see the following:
- Global vendor contracts established for ‘good’ international brands
- Approaching and onboarding “local hero” brands for the local flavor
- Seller Central portal opened
- Brand Registry opened
- Launch will be low key
- Only organic positions are available the first view months
Global promotions, Prime, Brand Pages, Sponsored Products/Pages, and DSP will become available much later on, 3+ months after the initial launch.
With Amazon in it for the long-run, gaining market share as seen in Europe and Middle East, we sat down with Tim Van Der Bilt, Incubeta’s Global Head of Marketplaces to discuss the role that Amazon, and other marketplaces can play in your ecommerce strategy.
1) What will make Amazon different from South African marketplaces?
If the launch in South Africa goes the same way as in the Netherlands, Sweden and Poland (where Amazon has penetrated in the last 3 years), there will be an enormous international supply of brands that will differentiate it from the local marketplaces. There will also be the Prime offering with the content and extra features available that will set it apart from the other marketplaces in SA currently.
2) What can local brands do to prepare in advance for the launch of Amazon?
Don’t Neglect your Website: Amazon comes with many benefits and often shares data with brands, but investing in your own first-party data is more important than ever (especially with the upcoming loss of 3rd-party cookies). In fact, brands that can afford to solely sell on their own website stand to gain the most. In 2019, Nike stopped selling on Amazon and turned their investments to their owned channels, which they stand to profit from long-term.
Start Early: Based on all the other Amazon launches we’ve consulted brands through, we’ve seen that early movers are better able to maintain higher organic rankings, which in turn supports higher profits.
Don’t Put all your Eggs in One Basket: Amazon offers massive revenue opportunities, but many brands could also benefit from other marketplaces alongside Amazon. Such as industry-specific ones (e.g., Electronics, Fashion). This is especially true for local players. In fact, it’s common for local marketplaces to maintain market dominance for years after Amazon’s entry, even significantly improving their offerings as a result of competition. Local players can leverage their advantage in terms of brand trust and localization, where Amazon tends to fall short.
Start Creating & Refining your Content. Ensure your content – product photos, descriptions, keywords, etc. – are organized and optimized for when Amazon opens its doors. Doing this early on will make Amazon set-up, adoption, and launch a much smoother and faster experience. Additionally, if you can already start selling on other marketplaces, do it. Apart from diversifying your revenue streams, these other marketplaces could serve as a great testing ground for content optimization and selling strategies.
Register your Brand on Amazon’s Brand Registry. By doing so, Amazon will help you protect your business from counterfeits, unauthorized selling, parallel imports, and any other misuses of your brand. You don’t have to be actively selling to register, and Amazon doesn’t have to already be present in your country either.
Decide how you want to sell on Amazon. Brands have two options: Vendor Model VS Seller Model. Smart brands are able to select the appropriate model for each product.
3) What’s the Difference Between Vendor Model and Seller Model?
The Vendor Model is a classic wholesale model where brands sell their products to Amazon at a fixed cost price. Their products are then sold to consumers under Amazon’s name. In this model, Amazon controls product assortment and pricing, which means while it’s the simpler model of the two, if Amazon decided to lower product prices and competitors followed suit, it could lead to price erosion of your products.
The Seller Model is the direct-to-consumer model, where brands control their own catalog, inventory, shipping methods, and RRP (recommended retail price). Sellers pay Amazon fixed fees on their sold products and can make use of Amazon’s Fulfillment by Amazon (FBA) Program, which gives brands access to Amazon’s global warehousing and fulfillment services. Compared to Vendors, Sellers have more control over their prices and product assortment, but need to take a more hands-on approach.
4) What is brand hijacking and how can local brands avoid this?
Brand hijacking is the act of misusing or abusing a brand such as by selling its products or services as an unauthorized seller, producing counterfeits, or otherwise representing a brand in a way that violates their intellectual property rights or general brand standards. If brands want to protect themselves against brand hijacking, which happens more often than most realize, the first and most basic thing they should do is claim their brand on Amazon via Amazon’s Brand Registry, and get basic Amazon training.
5) How will Amazon Impact the local Ecommerce space in SA?
By far the biggest impact of having Amazon in SA will be a macroeconomic one. Amazon will push local industry to move faster, enhance the quality of their services, and make smarter investments to compete.
Additionally we’ll likely see changes in regards to Upskilling, Talent and Pricing.
Upskilling: Marketers are going to need to double down on testing and learning ahead of Amazon’s entry to see whether this new marketplace offering works for them.
Talent: While Amazon may take time to dominate market share, they are traditionally aggressive in recruiting top talent, often limiting attention to this process.
Digital “War”: Pricing could be impacted, but it’s unlikely this will be a race to the bottom. What’s more likely is a war of non-price differentiators, specifically on how local players will improve the way they serve consumers.
6) What can we learn from other market penetrations?
While Amazon boasts its strengths in logistics, brand awareness, data, technology, and customer-centric services, it can have its weaknesses when it comes to localization and building brand trust. Pitfalls that have a great macroeconomic impact on markets.
When Amazon enters a new market, they often take time to gain dominant market share, which can lead to local players being given the space, and time to improve their offerings. In certain cases the initial launch was unsatisfactory for advertisers. Incubeta’s Head of Marketplaces for the Nordics, Ulrik Grevenkip-Cactenskiold, notes that when Amazon entered Sweden in 2020 many brands noticed that their products were already being sold on Amazon by unauthorized sellers, content was poorly translated, and several goods were incorrectly priced.
That being said, we can expect the expansion into ZA to directly contribute to market maturity, including the way brands strive to meet growing consumer demands.
7) What are the opportunities and challenges of Amazon’s entry into the SA market
The expansion of Amazon into the South African market offers a host of opportunities, and challenges for buyers and sellers alike.
With a burgeoning ecommerce trend in South Africa, Amazon will be a welcome retailer, with their warehouse solutions giving locals the opportunity to expand their business and benefit from higher logistic standards. Similarly, these high logistical standards could make international distribution a real possibility for many local manufacturers. We can certainly expect Amazon to be there for the long-run, gaining market share as seen in Europe and the Middle East.
That being said, local players will lose market share in their category when Amazon expands their product catalog. However, with Takealot already being established, Amazon might have some difficulties in gaining market share – and service differentiation will be key.
8) What are the do’s and don’ts for local ecommerce players?
- Register your brand on Amazon SA to claim your content and build your brand awareness
- Calculate on fees and decide on possible strategy to be present
- Consider your account options; register as a Seller or start negotiations as a Vendor
- Upload your product assortment and invest in local optimized content
- Wait until Amazon is big enough. Start preparing ahead to save big investment on playing catch-up later
- Set high expectations for the first year(s). Amazon will not be your biggest platform from the beginning.
- Use Amazon as a ‘sell-out’ platform. Amazon is created for long term performance and growth.
9) What does Incubeta’s marketplace team do for their clients?
Our team of certified marketplace specialists help global brands drive ecommerce revenue by optimizing how they market, sell, and advertise on platforms such as Amazon, Zalando, bol.com, Allegro, and more.
We do this by supplying technical, strategic, and analytical support, including; marketplace training, marketplace activation, audits, data integration, optimizing creatives, content and keywords, end-to-end marketplace ad campaigns, regional marketplace expansion; and strategic consulting (e.g. pricing mechanics, go-to-market strategies, troubleshooting, etc.).
Want to learn more? Enroll in Incubeta’s Amazon Academy and get Amazon-Certified in two days. Incubeta’s Amazon Academy is a comprehensive and practical certification program for professionals or teams seeking to develop expertise in Amazon. We’ll teach you how to set up an account, protect your brand from fraud and counterfeit, develop a revenue-driving Amazon strategy, understand Amazon advertising, optimize your content and logistics, and more.
For more information around how Incubeta can help, or to get in touch with our marketplace specialists, get in touch or access our resource portal that’ll give you all the information your business needs to understand Amazon, its potential impact on your business, and how you can optimize it to upgrade your growth for the long-haul.