‘TEMU’ and ‘Amazon’ are words on many South African ecommerce business owners’ lips right now. TEMU’s entry into the paid media landscape has been called “bombastic” by some and “borderline combative” by others. At the same time, the prospect of Amazon and its promises of superior distribution channels, cut-throat pricing and marketing might have local platforms feeling unsettled.
What does TEMU’s presence and that of the US retail giant mean for local retailers and their paid media support specialists?
The past four years in the ecommerce arena have been phenomenal globally, and certainly in South Africa.
We have watched businesses rise out of the ashes of the Covid-19 pandemic, we have seen brick and mortar businesses pivot spectacularly to ecommerce, and we have forged a successful path for both our smaller mom-and-pop style clients as well as some of the large, national retailers who we service.
Things have taken a dramatic turn since TEMU’s arrival in the South African market. Add to that the recent launch of the Checkers Sixty60 app, putting fast delivery of over 10 000 larger Hyper products at customers’ fingertips, and it is easy to see why retailers are feeling rattled.
For the past few years the landscape has been pretty even keeled. There has been enough space for everyone and plenty of pieces of the pie, depending on your budget. Despite global economic challenges, retail has been steady, with nice growth in certain FMCG sectors.
Aggressive stance
TEMU’s aggressive stance and entry into the South African market in February 2024 changed that. The company are notorious big spenders, with a reported ad spend of $5.17 billion in the US since launching there in 2022.
TEMU’s entry into the market in week six of 2024 wasn’t unexpected, but their hostile approach from week eight and later in weeks 10 and 12 was like nothing we have seen – buying up advertising in every conceivable channel, forcing price hikes, and creating a volatile, panicked auction environment for paid media. It affected the bigger retailers as well as independent e-commerce operators with much smaller budgets.
Our team has been tracking TEMU’s behaviours weekly across numerous categories. TEMU took a no-holds-barred approach, including keyword bidding at all costs. They have been aggressive in their strategy to secure ad space by prioritising their own brand terms.
TEMU is also increasingly using Dynamic Keyword Insertions which allows them to insert keywords like branded names into their headlines and ad copy to increase ad relevance.
TEMU actively bids using branded names as naming devices within ads. They get reported to Google and ads are quickly removed, but often that means the retailer whose name has been cannibalised (especially small retailers), has already lost a prospective customer.
Retailers can report this kind of violation to Google and help expedite eradicating this kind of untoward behaviour, by filing a Trademark Complaint online at service.google.com.
It was of course concerning for our larger retailers, but because we have deep knowledge of this arena and are in the business of agile strategising, we were able to hold fast and adjust our behaviours accordingly.
Ethical element
As verified experts and partners in the region, TDMC has access to support suites at Meta, Google and Shopify, and this plays a crucial role in uncertain times like these. We have the advantage of having real time meetings with support staff at these companies and are able to use information to assist with decision-making for all our clients, whether they have millions to spend a month or not.
Aside from the bidding war upset that has transpired, there is an ethical element that is of deep concern at TDMC HQ.
Ecommerce has done amazing things for South Africa since 2020. However, TEMU’s arrival speaks to money going offshore – each and every TEMU sale is money that is taken out of the local economy. TDMC is specifically in the business of creating business for local ecommerce operators, so that’s where a lot of our concern lies – it’s become an ethical dilemma.
Amazon says, ‘hello Africa!’
Amazon’s arrival certainly seems less concerning from a perspective of principled retail behaviour. Their investment in a complex local logistics infrastructure, and their marketplace offering and employment opportunities are promising, but what does it mean for retailers in the long term?
The arrival of Amazon is a double-edged sword, presenting opportunities for growth and expansion but also posing significant challenges to existing market players. The next few years will be critical as businesses adjust to this new competitor and recalibrate their strategies to thrive in a more dynamic market environment.
Amazon’s arrival will have understandably set the likes of Takealot and many of its suppliers on edge. However, the US retail giant’s entry into the market in May has been underwhelming – and if first impressions are crucial, theirs has been less than stellar.
Consumer understanding around Amazon’s offerings has been confused – many assumed incorrectly that they would have access to Amazon’s full international basket.
A look at weeks one and two of operations, the cursory discounts on appliances (some admittedly impressive), and low basket value items like makeup and toiletries, have not been enough for consumers to abandon the Takealot ship.
TEMU and Amazon’s arrival and their access to massive budgets and big buying power is exactly why retailers should be aggressively working on their owned media assets.
More focus on excellent creative, shifting advertising budgets to top-performing categories, and moving focus on other categories to non-auction environments like newsletter or SMS sales campaigns, are just some of the strategies Shepard suggests for retailers.
This strategy filters down to customer experience too – an area that Amazon is known for fulfilling well. “If they are wanting to survive and thrive, retailers are going to need to double down on their service offering – from delivery turnaround times to customer communication, and certainly after-sales service and sweeteners.
Where trust is high, sales follow
While there is no denying that upped ad spend is inevitable, we believe it is crucial for brands to use these challenges to deepen their brand stories and work on creating authentic connections with their customers.
TDMC has already seen this play out in many of their innovative UGC campaigns for clients. Where trust is high, sales tend to follow. Now is the time to tell your brand story, to get your messaging and ‘reason for being’ right, to spell out why your product offering is so outstanding, and crucially to work hard on retaining that customer.
TEMU’s customer retention strategy uses loss leader sales offerings and casino-like in-app gamification, but these aren’t necessarily sustainable. It is in the game of acquiring customers and should settle into their positioning within the market.
But what does another player (and now, with Amazon, another two players) in the market mean for retailers? This is where customer trust and loyalty are going to be your biggest asset, adding more value than ever before be it through bundle deals, clever campaigns, and superb quality and value for money – all of these are essential to brand building and depth.
For potential suppliers on Amazon’s channels, there are numerous hoops to jump through. But if they get it right, there is opportunity to be had, given the global giant’s marketing budget and the added credibility selling on the platform will offer.
In the long term, the broader implications for the South African consumer could be significant. Increased competition may lead to better prices and services for consumers, but at the same time, increased competition will likely drive up marketing costs for suppliers and competitors.
Cover all bases
Our advice to retailers is to work hard to cover all their bases, whether in their owned media or on a variety of sales platforms. You need to be consistently working to meet your customers where they are and to service them efficiently.
The choice involves weighing the potential for increased visibility and sales on Amazon against the benefits of partnering with established local platforms that have a strong understanding of the South African consumer market. The strategic decision will depend on each brand’s target audience, product type, and long-term business goals.
The point about the South African market is certainly solid – like our sportsmen, the South African consumer is an unpredictable character with a mettle that isn’t always accounted for or understood by external forces, especially when it comes to their hard-earned Rands.
It took the Covid-19 years to convert our consumers and many retailers to the advantages of ecommerce, it remains to be seen whether they can be manipulated in a way that foreign platforms would like them to be.
Cheryl Ingram is the managing director and co-founder of The Digital Media Collective, one of South Africa’s leading ecommerce agencies. TDMC has launched more than 200 e-commerce stores in the last three years, helping entrepreneurs and some of South Africa’s most esteemed retailers build profitable online retail channels. The agency is one of only four accredited Shopify Expert Partners in South Africa and is also a Google Premier Partner and Meta Business Partner.
Caleb Shepard, who as Media Director at TDMC, has a keen insider perspective on trends and movements in paid media at any given moment. He is a dynamic strategist and creative, with 7+ years experience in the digital marketing industry, a BCom degree specialising in digital marketing and is Facebook Blueprint certified.
