South Africa Marketplace Playbook: Amazon Growth, Takealot Reality, and Enterprise Execution

Podcast transcript

Paul Sonneveld
Hi everyone, and welcome back to Marketplace Masters. Today, we're going to go deep into one of the most interesting e-commerce markets to watch right now, namely South Africa. As Amazon starts building traction locally and takealot, which is the local incumbent, continues to hold a dominant position, enterprise brands are facing some really big strategic and operational decisions. 

I am joined by Maon, let me just bring him up here, Maon Seidel, founder and CEO of eCommerce Counsel. So he's based in South Africa and works closely with very large brands. He brings a perspective that goes well beyond the usual conversations about listing and ads and all that. So in today's episode, we're going to talk about what it really takes for an enterprise brand to succeed across Amazon and take a lot and why operational discipline is really the difference between growth and missed revenue. Welcome to the show today, Maon. 

Maon Seidel
Thanks, Paul, and welcome to everyone that's joined us. It's a great honor to be here. 

Paul Sonneveld
Let me just see. There's a funny thing going on with my camera here. So it looks like it needs a bit of focus. Here we go. There you go. It's getting dark here. it's picking up some of the light i can see we've got a bunch of people joining us. Actually, we've got a number of live attendees. We've got some shout outs a couple of people joining us on YouTube and LinkedIn. We got cara from Cape Town. We've got some people from KL as well kuala lumpur so that's great, and also a good reminder for me just to before we dive into it to remind everyone, this is a live show. 

So if you have questions, make sure to pop them in the comment section, either on YouTube or on LinkedIn, and I will do my best to serve them up to Maon, and hopefully, we'll get a great answer. But I've got some questions of Maon first, as per usual, we'll get right into the topic. And I thought maybe let's set the scene a little bit. All right. Many people may not be familiar, particularly our international audience, with the current state of the e-commerce market in South Africa. So why don't we start there? How would you describe the current landscape for e-commerce in South Africa, particularly from the perspective of an enterprise brand? 

Maon Seidel
Thanks, Paul. Yes, I think South Africa is at an interesting inflection point. You know, if you look at pure play channels, Takealot has been dominant for many, many years. They've got somewhere around five million active users and quite impressive revenue of around seven hundred and fifty million dollars in their last financial year. So it's quite a serious business. But Amazon's entry has fundamentally changed the conversation, I guess, you know, not because they're already matching take a lot on volume because they're not.

But rather because what's behind them is a three trillion dollar giant with the global infrastructure. And they have a very deliberate and tested strategy of slowly chipping away at the incumbent. So for enterprise brands, this isn't a wait-and-see market anymore. The window to build the right foundations on both platforms is right now. And what we've seen is that brands moving fastest are ones that have treated Amazon's arrival, not just as a disruption, but as a call to arms or a forcing function to get their operational fundamentals right across all channels. 

Paul Sonneveld
So I was just going to ask maybe, you know, whether you have any numbers to hand, but roughly what is the split of e-commerce? Like how much does take a lot still take of the sort of market versus Amazon, like that rough balance? Do you have a, can you share any sort of rough figures with us, just to give a sense of magnitude? 

Maon Seidel
Yes, so if you look at, if we look at users, as I said, Takealot is somewhere around five million active users. And the guesstimate at this point is that, you know, Amazon have been here for two years now. In fact, actually this month is two years. They're sitting at around one and a half million users so far. So, you know, in terms of size, I would say Takealot's probably got three times the customer base at this point. 

In terms of revenue, we don't know the revenue numbers for Amazon particularly, but we can ascertain that in terms of in terms of take a lot, they were at, I think, seven hundred and fifty million dollars in revenue last year. They are roughly a three-billion-dollar business. And so once again, not small, but quite importantly, they're backed by a company called NASPERS who have a significant stake in them. And they're about a sixty billion dollar business. So some very big checkbooks floating around, you know, in the market in South Africa. 

Paul Sonneveld
Yeah, that's helpful to have that sort of order of magnitude in terms of where those places are. I mean, certainly from the Australian perspective here, obviously, Amazon entered the market probably around ten years ago now or eight or nine. We had a large incumbent called eBay, and fairly quickly, Amazon managed to catch up, actually. So I wouldn't be surprised if you see that change quite significantly in the next couple of years, as I'm sure you wouldn't be either. 

But that does beg the question. So if I'm a large brand, and this conversation is very much focused on the sort of enterprise brand perspective as opposed to sort of the individual kind of seller. Like large brands, I'm looking at South Africa today. Uh, and I'm seeing, you know, a very large incumbent take a lot, and I'm seeing, um, you know, the up and coming challenger, I guess, Amazon with, you know, big backing, uh, as well. Um, how should I think differently about those two marketplaces, and what role can they currently play for me as a brand? 

Maon Seidel
Yeah. Um, so I think they're not, they're not interchangeable, and treating them as the same would probably be a bit of a mistake. Take a lot more mature, obviously, it's an established channel, they've got a well-developed promotional calendar, they've got a loyal local base, and a buying team structure that tends to reward relationship management, and it's where the thing is, it's where most enterprise brands have built their pure play presence, up until this point 

But Amazon South Africa brings their global infrastructure. They bring a vendor model that's got quite specific content and operational standards and significantly more advertising sophistication. Even if it's not fully active yet in South Africa, some of it is, and the rest will be coming very soon. So the brands winning on both aren't treating them as the same job. You know, they're building channel-specific strategies and obviously with dedicated budgets. 

I think the key difference is that Takealot will probably deliver more of the right now kind of revenue. But using right now strategy for Amazon would be a mistake. But on that, I heard something recently that I found quite amusing, that if you were to ask any brand selling on Amazon in the USA, Germany, UK, Australia, or any other market, what would they have done differently if they had it all over again on Amazon? And without fail, the answer would always be, I wish I'd started sooner. Because playing catch-up later is an expensive game, and it actually is easily avoidable. 

Paul Sonneveld
I think that's such a truism. I mean, it's hard to say it's this hindsight thing, right? But there's a real opportunity to build the asset at a time when, and when I say asset, I'm talking about like your seller reviews, your listings, CPCs are cheap. There may not be the same magnitude of sales, and there aren't, but actually, there's an opportunity to really get a foothold and an asset there whilst it's really affordable. It doesn't require that level of investment that one needs these days to say, you know, to start an Amazon store in the US. Just before we move on, can I just clarify, Takealot, do they operate a 3P model or is there also a 1P part of their business? 

Maon Seidel
There's also a 1P part of the business. In that respect, they are quite similar to Amazon, where they have a vendor central, let's call it, as well as seller. And I think that the last time I looked, there was something like thirty or forty thousand sellers at least that are using the 3P model. But I just want to add something there as well, Paul, is that when we talk about these numbers, you know, they're not as significant as we would see in bigger, mature markets. 

But the important thing is that in South Africa, we're only at about ten percent penetration of online within the retail sector. And this number is growing quickly. You know, for a number of reasons. We're always a bit slower than other markets, but also because of access that is being improved as we speak. Access to a larger portion of the population that will be easily, will easily be able to shop online where traditionally it has been more of a struggle. So I would see South Africa potentially up there as one of the fastest-growing e-commerce markets, purely because the penetration is still at lower levels. 

Paul Sonneveld
Yeah. And just a minor follow-up question on that, you know, I'm sharing my complete ignorance about Africa as a geography and how it works. Is, I mean, is it useful, helpful to think about South Africa as a base into other parts of Africa, or is the market just not structured that way? 

Maon Seidel
I think it's always useful. My understanding is that the rollout of a platform like Amazon, it's not going to be necessarily regional. I think the next big market that Amazon wants to attack, well, to penetrate in Africa is Nigeria, because that is a massive market. It was on the roadmap for them, I think, even before they were going to launch in South Africa. But, you know, I think the bordering countries or the neighbouring countries in South Africa might not have the volume and the size of market. But if you looked at Africa as a whole, it's definitely a growth, you know, it's a growth area. And I think in some ways it's the last serious, you know, exponential growth area that is available. But it's going to be concentrated in key markets, which I'm not sure would be a slow regional rollout, but more specific spots that Amazon would choose. 

Paul Sonneveld
Yeah, sure. Where the ROI is there more in the medium term. Yeah, I understand that. So going back to South Africa. 

Maon Seidel
Just to add as well, if we consider AWS, Amazon Web Services, that is initially a South African company. So in terms of that part of the Amazon business, they're also head office in Cape Town as well. So they have quite a big base here as a group. And that would tend to be the launching pad for the rest of Africa, not only in the marketplace business, but again, in AWS and a bunch of other stuff they offer. 

Paul Sonneveld
So you're part of the service provider ecosystem in South Africa. I mean, I think it's probably very early stages. I haven't met hundreds of marketplace agencies yet in South Africa. I think it's really early stage and you're probably one of the earliest, if not the earliest, on the ground there, which means that you are having a first look at how brands are doing on these marketplaces without a little external support. When you look at that, what are you seeing on the ground there in terms of the common mistakes or areas where enterprise brands most commonly underperform on the marketplaces, whether it be Takealot or Amazon? 

Maon Seidel
Paul, you know, the short answer is almost never where they think they are. Brands often assume that this is a content and an advertising challenge. So, you know, they tend to invest in better creative or increase their ad spend and often sit back and wonder why revenue is flat. But nine times out of ten, the real issue is actually upstream. Things like stock availability, forecasting misalignment, you know, between the brand team and the marketplace or simple things like purchase orders sitting unprocessed because nobody owns the PO internally. 

We had a client that was ranking really well. The ads were performing great, but sales were flat. And the problem actually was a fulfillment disconnect. Inventory just wasn't flowing through correctly. So when we were able to fix that operational layer, without changing anything else, the sell-through improved relatively quickly within six to eight weeks. So, you know, it's until you fix that, what that is broken underneath the marketing layer, is essentially like pushing water uphill. 

Paul Sonneveld
I mean, a lot of that speaks to, you know, having the fundamentals in place for being able to do DDC shipping and e-commerce. When you're talking to your customers, you know, how do you prepare them or because I think the other dynamic here is a play is I'm not too familiar with what take a lot expects, but certainly when Amazon came into our market, they set the bar way higher than any of the incumbents did, which meant, you know, people really needed to lift in terms of their operational performance and the like. And quite frankly, a lot of brands were reluctant to do so. They were like, well, these other parties have always thought this was okay. I'm just going to do the same. I mean, how are you experiencing those conversations? 

Maon Seidel
Yeah, I think how we've positioned things is to say that, guys, if we optimise or we set things up that is compliant or follow policies of Amazon's, we're set up for any other platform. So this is the stock standard measurement. This is the North Pole, the Northern Star, not the North Pole of where you know if you get it right. For Amazon, you've probably got it right for any other platform; they are the most stringent. And I think what's really interesting especially using platforms like MerchantSpring and a bunch of others out there, we're able to understand competitively what's going on. From a perspective of, let's say, bestseller ranking, if we have a look at a bunch of SKUs or ASINs across the world, and we have a look at those that are leading, they're set up in a very specific way.

With a lot of clients in South Africa, when we tell them we need six images and we need videos and we need some really, really great A-plus content or enhanced brand content, and by the way, we need to build your brand store as well, and it needs to do this, that, and the other. It feels as if that's, well, why? And what we're able to do is point to the fact of here is where the success is happening, and it's because, to a large extent, they're set up efficiently, and they're set up correctly. So this is an investment that you're making that is actually going to play out well for all the platforms that you're on. I don't know if that answers the question. 

Paul Sonneveld
Yeah, no, I was going to ask, of those different, I mean, heavy operational focus, right, in terms of getting the basics right, do you find, is there a pattern, is there a thread, you know, as you bring on more clients to help them, you know, rather than talking about, hey, let's run DSP campaigns, let's do sophisticated subscribe and save, you're probably having completely different conversations with these clients, right? 

You're probably having to explain, you know, what the role of an agency is in the first place, but then beyond that, You know, what are the most common, you know, what are the most common things that you need to sort of work with them to fix, you know, on their operational front? You know, is it inventory? Is it forecasting? Is it internal stakeholder management? You know, what are, what will be on your top two or top three challenges that you have to tackle as part of onboarding a client? 

Maon Seidel
Yeah, look, I think for me that the biggest, the biggest piece is about accountability. And in a large corporate, the e-commerce channel might touch the brand managers, the category team, the logistics, the finance team, the sales director, and they all have different priorities and different reporting lines. So what we're finding there is that there's very seldom somebody who's owning the entire thing end to end. And what our role often becomes, it's as much about internal coordination as it is about platform execution. So we're doing the translating between what Amazon needs operationally and what the brand team is able to deliver. So that's where we exist in bridging the gap. And it consistently is what determines whether the channel grows or stagnates. 

The other thing to add is the entire layer of right from the top where executive sponsorship is required. We talk about a single point of accountability on the brand side, but if there's somebody that owns that internally within an organisation and isn't just having it as a side responsibility. They also tend to come up with realistic expectations because marketplace growth, as we know, is an instant. It requires so much from catalogue investments to the operational discipline and an honest horizon on when you're going to start seeing compounding results. So brands that usually lack that internal champion, I think they underestimate the operational lift and trying to manage it entirely through the existing trade or field sales structures, which just aren't built for it. 

Paul Sonneveld
Yeah, yeah, it just becomes an afterthought, or it becomes the most junior sales rep's responsibility, along with all the other emerging market channels, right? So, I mean, it is interesting, and it strikes the question, you know, certainly from an agency point of view, which is, you tend to go in there, and you go, actually, guys, we need to get all these fundamentals right, right? Because otherwise, what's the point? 

But then you need to balance that with, you're on the pressure to deliver some wins, some quick wins and that, right? And that must create quite a bit of tension at times. Where do you go to for quick wins in South Africa, particularly on Amazon, but maybe on Takealot as well? When you take on a client, obviously, you're it's a bit like you've got to drive the car and change the tires at the same time. But y what are what are some of the wins that you find actually that you know they are they give you some good runs on the board early on it builds that trust with the brands? What's your go-to list? 

Maon Seidel
So I think from a top line perspective, as i said before, if you have somebody that is really just interested in additional revenue this year, this quarter, or this month. I think that, and if they're just chasing ROI metrics, Takealot is probably the better place to spend your resources, your time and your money. But I don't think it can be done in isolation. Yeah, it's going to be a channel that is going to split more revenue, but I think it's more about trying to look at the long-term picture. 

The long-term work is essentially about building that sustainable rank and getting that share of voice, and to get that operational infrastructure in place. What we encourage clients to do is to think in a ninety-day cycle, essentially. What are we fixing this quarter? What are we building for the next? And I think the brands that treat marketplaces purely as a promotional channel, they can tend to plateau. 

But in the short term, I think that if you've got a clean catalogue, if your pricing is correct, if you've got at least a few decent images on a listing, if you go the extra length to have proper A-plus content on every listing, you have a brand store. And I think when it comes to the vendor relationship, it's about having a really good relationship with the buyer. There is the added value service, Amazon vendor service that costs money, but I think it's about an ongoing conversation with the actual buying people and those that would have some influence over the buying algorithms, I guess.

And then it's about looking at things on a daily and weekly basis and not hoping that we can look at it once a month. You know, there are opportunities that surface on a daily basis. And there are issues, and there are crises that, you know, can appear on a daily basis that, you know, can do the opposite. It can be a quick loss instead of a quick win. 

Paul Sonneveld
Mm-hmm. Yeah, no, you touched on a really important point there around the relationship with Amazon. In my experience, I've often seen quite a big difference between the approachability and the collaboration with Amazon people in emerging markets or growing markets than in mature markets. And it's certainly, I'm sure, the same in South Africa where, you know, Amazon, whether it's on the seller or vendor side, they're really incentivised to grow the catalogue, to bring on sellers, and they're very willing to invest incentives and help and all that to make that happen. So take full advantage of that as well. 

Maon Seidel
Yeah, it's actually an interesting relationship if you step back a little bit, where Amazon is the client, actually. And we're trying to sell the product of our clients to Amazon. And, you know, in a normal course of events, the client is the primary individual that has to be taken care of. But the relationships we've built as an agency with some of the buying teams internally is that they need our help. They've got something to fulfill. They've got a KPI to, to, to achieve. And that becomes that that's a number of sales of, of different products and the growth of different categories. And without the products that our customer, that our client supplies, they don't hit those numbers. So, they're often pushing us really, really hard to make sure that our client can deliver sufficient stock and sufficient inventory. 

Paul Sonneveld
Yeah, they have their KPIs, of course. 

Maon Seidel
And they look to us to help them with their KPIs. 

Paul Sonneveld
Yeah, of course. It's fascinating. I mean, if we can make our the amazon counterparts look good internally, then that's most of the job done right, and everything else becomes easier. 

Maon Seidel
Exactly. 

Paul Sonneveld
That's still true anywhere in the world, by the way. I don't think that's specific to South Africa, but what about one of the things we haven't touched on i think maybe implicitly but but not explicitly which is considerations for when brands actually enter South Africa? So obviously, we're talking about, I guess, assuming local enterprise brands selling on Amazon and take a lot. But are there further considerations or other considerations for brands, maybe looking at South Africa as an expansion opportunity, right? 

They may have great content. They may already have good reviews on ASINs. that may be very familiar with the whole Amazon ecosystem and now looking at South Africa as, I guess, making an investment for the future. Go back to our earlier point. What advice would you give to brands that are trying to expand from international into South Africa? And then I also just, before you answer that, hold that thought. I can see a number of questions flowing in from Louis in particular. So I'm going to take that one right after you answer this question. So yeah, why don't you head off and then

Maon Seidel
So what's interesting is that there's a lot of global brands that already exist in South Africa, you know, there are the companies that have distribution rights and that have agencies and across the board from from all your top brands, from you know i think this is obvious from a from a Nike to a Coca-Cola. But we're working with a company by the name of Pernod Ricard, which is they're the guys that owns Jameson and a bunch of other really well-known alcohol brands. 

And as much as they're looking at their footprint across Amazon internationally, we've had to purpose-build something for them in South Africa for various reasons. Alcohol volumes might be different, the sizes of bottles might be different, and some collaborative stuff is different. And we've had to actually purpose-build that for this market. But that said, in terms of international brands that are operating incredibly well in the US, UK, Germany, Australia, wherever it might be, it's a simple, not easy, I wouldn't say easy, but simple operation to actually extend into the South African market. 

The question then becomes about having a 3PL in South Africa that could assist, or if your volumes are substantial enough, shipping directly into Amazon and or Takealot itself. But I do think having a local 3PL is definitely the route to go. And I think that what's interesting about that is that often strategically, if you end up being able to penetrate the pure play marketplaces, it becomes a much quicker conversation when you start looking at the brick and mortar businesses in South Africa. 

We're having great penetration, great success online, you should consider. And there's some really, really large businesses and massive brick-and-mortar chains that aren't going anywhere right now. There's access across the country, and sometimes more so than in other developed markets, where the broad customer base has access to brick and mortar, sometimes even more than they have access to online shopping. 

Paul Sonneveld
That's a great link yeah, great link now let me bring Louis or sorry not Louis Javier or Javier Louis he's got a question it sounds like he's based in Europe he's very interested in this question which is for European manufacturer brand making it very practical and real here you know obviously looking to expand into South Africa what's most interesting Amazon or Takealot?

Maon Seidel
Very good question. I think we've chatted a little bit about it just now, but the reality is, it depends on what your strategy is. If you're trying to understand where you could be three to five years from now within the South African market context, I would definitely put quite a big focus onto Amazon. I do believe that their success is going to match that success that they've had in almost every other market they've been into. 

But if you have a much shorter-term strategy and you're looking for immediate returns, immediate revenue, you cannot leave out Takealot. They do have three times the market customer base than Amazon does. So it depends on how big your catalogue is, and it depends on how sustainable your supply chain is. So if you've got something that has been selling really, really well in other markets for a couple of years, I would say the first step would be registering on Takealot, getting into that market and then at the same time having a look at the setup and the infrastructure build on the Amazon side. 

Paul Sonneveld
That's great. Thanks for your answering the question, Maon. And thank you for posing the question, Javier. That's great. We are at the thirty-minute mark, and I'm always respectful of time. But we have one more question, and then we will wrap up today. And our last question for today is from Gerard. He asks, hello. It's a nice greeting. For enterprise brands entering Amazon South Africa early, what is the most expensive, you know, we'll fix it later, mistake you keep seeing? What is the biggest mistake that new entrants, new sellers, or vendors on Amazon South Africa tend to make? 

Maon Seidel
I think I could answer that in many ways. And there's many really good answers to that. But I would start with the strategy. And I would start with, you know, very often it's really exciting to get up and selling and seeing your products online and seeing revenue coming in. But one would have to be really strategic in what your specific goals are in the short, medium and long term. And sort of create that roadmap and stick to it. Obviously, these things change as we go along. But what I've found is that if you don't carefully think about every single step you're making and what impact that has on your cash flow and, you know, a whole bunch of other things within your business, you can get to a point, you know, you almost be careful what you wish for. You start saving so much you can't supply. 

So I think what needs to be fixed first and not fixed later is your strategic thinking and your positioning within the market. I think that inventory is my biggest bugbear. There needs to be stock available all the time. But my understanding is also that that means you have to have the cash flow. So I think that's another thing, another layer I would say that might not be platform specific but more business specific is that make sure that your cash flow, the access to cash flow is going to match your strategy and don't try and retrofit that later because it will be a disaster. Does that answer the question? 

Paul Sonneveld
Yeah, no, I think it was great. Thank you for your question, Gerard. I mean, working capital, cash flow, and particularly tied to the question of, you know, how much inventory should I send, right? Because invariably, you're either not going to have enough or it doesn't sell, and now you're stuck. And, you know, what do you do with it? Are you going to put it back on a ship and send it back? Probably not. So that always requires a lot of thinking, planning, forecasting, and hedging, you know, in terms of... products so absolutely 

All right, we are essentially out of time here on Maon, so we're gonna have to wrap it up. Really great conversation about South Africa, you know, at least I have a much better perspective on what the marketplace uh looks like, what the landscape looks like and what to consider, sort of entering now and where to get the returns now versus the medium term. We've had quite a lot of interest actually in this episode, and there may be people listening now live or people watching this on demand later. That said, look, actually, I do have more questions. I want to follow up with you and want to have some further conversations. So, what is the best way for our audience to get in touch with you? 

Maon Seidel
So you can send an email directly to me. That would be maon@ecomcounsel.co.za, which is M-A-O-N at E-C-O-M-M-C-O-U-N-S-E-L. So it's not Council of the CIL, it's Council S-E-L, as in legal counsel. maon@ecomcounsel.co.za. 

Paul Sonneveld
Let me just see if I've done it right here, that is correct 

Maon Seidel
That is correct 

Paul Sonneveld
Perfect, okay, that's where that is the preferred way. 

Maon Seidel
And if we have a conversation or if you guys want to have a call and set up a call with me, we do obviously have quite a large team, and we can bring in specific experts on specific areas that you would like to discuss in more detail.

Paul Sonneveld
Yeah, perfect. I appreciate that. All right. Fantastic. Well, I'm going to say goodbye to you, Maon. It was an absolute pleasure. And I look forward to staying in touch and see how South Africa really evolves. I'm sure there are going to be some very exciting years ahead, especially on the Amazon front. Yeah. 

Maon Seidel
And Paul, thank you for MerchantSpring. It really does a lot of the heavy lifting for us and a lot of the work that we're doing. So I appreciate the effort you've put into making that tool as fantastic as it is. 

Paul Sonneveld
Thank you. Thanks for the kind words. All right, everyone, that brings us to the end of today's episode. These episodes go really, really quickly. Thank you so much for tuning in. I'd love to see you next week. 

We're gonna be talking about vendor direct fulfillment and how to get it right from an operational point of view. So head to our website, merchantspring.io, go to resources and have a look at all of the upcoming live webinars we've got lined up for you, including the one next week about vendor direct fulfillment until then stay safe, take care and see you next time.