The e-commerce behemoth Amazon reached the shores of sunny Cape Town officially going live on Tuesday, 7 May 2024 sparking concern for SMEs and competitors in South Africa.
In a recent campaign, Takealot took its stand, waving a proudly South African flag. Being the warm and friendly country that we are – we’ve embraced Amazon.
Amazon means business, and this should be good news for small businesses in South Africa, especially those looking to sell their products online and use the platform as an additional distribution channel.
So, what does this mean for your small business in South Africa and how should you prepare for the e-commerce boom?
Cash flow may be holding small businesses back from taking the plunge and selling on Amazon. With Lula’s Revolving Capital Facility your business can get funding and make Amazon the vehicle that drives you to your next level of success.
A Testament to the Rise of E-commerce in South Africa
It’s no surprise Amazon would be so compelled by the South African market. Data from Rand Merchant Bank (RMB) reveals that the value of e-commerce transactions in South Africa is expected to rise by 150% up to R225bn by 2025.
The adoption of a making online purchases has been particularly acute since the pandemic, when restrictions placed on brick-and-mortar outlets resulted in a 30% drop of in-store shopping.
A testament to this is online retailer Temu, which started delivering in South Africa in January. Just a a few days after the launch of Amazon, Takealot launched TakalotMORE, which offers unlimited delivery subscriptions and same-day delivery.
Checkers Sixty60 also started beta-testing same-day delivery on larger items in the same month.
The e-commerce market in South Africa is expected to grow at CAGR (Compound Annual Growth Rate) of 12.5% by 2027. The explosion of e-commerce is imminent.
Amazon’s Unique Opportunities for Small Businesses
Amazon’s expansion into South Africa is transforming the e-commerce landscape by tapping into a growing middle class and increasing internet penetration.
This move offers local small businesses an opportunity to sell products on its platform, offering the potential for economic empowerment and growth.
Let’s delve into some of the unique opportunities Amazon presents small businesses in South Africa:
Access to a Larger Customer Base
Amazon’s platform provides a new marketplace for South African businesses to reach a potential of 60 million people. Although South Africa’s internet penetration stood at 74.7% of the total population in January 2024, this number is rising.
Strong Logistics Infrastructure
In South Africa Amazon currently partners with DPD Laser and The Courier Guy – two last-mile logistics companies to fulfil its orders. It also boasts 3000 local pick-up points. In a press release issued by Amazon, MD Robert Koen, the choice of partnership was fuelled by the good reputation of both logistics’ companies.
Considering Hidden Variables and Inventory Costs
A golden key to successful online sales is – product. Having the inventory to scale a small business online may require several components, one of which includes the right balance of inventory. This will come at a cost.
Striking the Right Balance of Inventory Required to Sell Online
Failing to plan, is planning to fail – this is especially true for South African small businesses. Amazon is a platform to be leveraged for business growth – with business growth comes increased costs.
Having access to the necessary business funding is a fundamental part of prepping for selling online. Basic inventory requirements include accurate demand forecasting to determine how much stock is needed.
When selling products online it’s important to remember that merchants benefit from keeping stock at optimal levels. Striking this balance enables sellers to fulfil all customer orders without having to allocate too much capital to inventory and storage space.
Strategies for Inventory Success
A few strategies can help small businesses determine how much inventory is enough to effectively strike this balance.
One strategy includes striking a balance between danger levels and dead stock. Danger levels are below the minimum stock level – which can be calculated using a simple formula. Dead stock is an excess that does not get sold.
Another way to determine that the sweet spot is met is by making use of an inventory management software that helps merchants track, organise and control inventory levels.
Modern inventory management software can handle tasks like batch tracking and calculating sales growth for minimum stock levels.
Determining the right balance of inventory is crucial for e-commerce success. When considering business funding options to support this journey –a convenient and easy option is Lula’s Revolving Capital Facility.
Funding to Facilitate Your E-Commerce Journey
A revolving capital facility is a line of capital that you can tap into when you need business funding, much like a revolving loan.
The revolving capital facility provides a flexible line of business funding that you can withdraw from whenever you need it without having to go through the application process again.
A Revolving Capital Facility is subject to ongoing credit and affordability assessments; however, the process isn’t as strict and lengthy as the initial application.
The complexity of loan applications may be a significant hurdle for small businesses when considering selling online.
Strict eligibility criteria can deter efforts to sell online, but what if there was an easier alternative? Access to easy, quick and flexible business funding can set SMEs up for e-commerce success.
Explore the Infinite Possibilities
The good news is small businesses don’t need to struggle to find the resources and support they need to thrive.
Lula is a financial partner that understands the unique challenges SMEs face with entering the e-commerce marketplace, and may be the best business funding alternative.
Applying for business funding has never been this easy. It’s quick, easy, Lula.
Having considered the challenges and opportunities accompanying Amazon’s entry into the South African market and what the rise of e-commerce means, it’s now time to go and explore the possibilities of what this can do for your business and how you can achieve e-commerce success.
