Business

Amazon plans to expand into South Africa in early 2023 - leaked documents

Business Insider US
Amazon warehouse workers in the US.
Amazon warehouse workers in the US.
REUTERS/Brendan McDermid
  • The plans will provide more competition for e-commerce operators Jumia and Mercado Libre.
  • Amazon is investing in long-term growth even as it scales back parts of its US retail business.
  • The company currently runs marketplaces in 20 different countries.
  • For more stories go to BusinessInsider.co.za.

Amazon plans to launch its online marketplace in 5 new countries by early next year, even as it dials back parts of its retail business in the US, Insider has learned.

The moves will likely mean more competition for local e-commerce companies, including Jumia, which operates across Africa, and Mercado Libre, a leading online marketplace in Latin America. 

The five countries are Belgium, Chile, Colombia, Nigeria, and South Africa, according to Amazon documents obtained by Insider. The timing of the rollouts were detailed in an internal timeline:

  • Belgium's marketplace, called Project Red Devil, is slated for late September.
  • The one in Colombia, dubbed Project Salsa, is scheduled for February 2023.
  • South Africa, codenamed Project Fela, is also expected in February 2023.
  • The marketplace in Nigeria is due to launch in April 2023. That project shares the codename Project Fela with South Africa.
  • Chile is planned for April 2023, too. That shares the Project Salsa name with Colombia.
  • All countries are planning to launch with their own marketplace and access to Amazon's fulfillment service called Fulfillment by Amazon, one of the documents said.

Amazon's Prime membership programme is expected to be available at launch in Belgium, while other countries will get it shortly after their introductions, according to that document. For example, Belgian shoppers, who are already able to sign up for Prime through some of Amazon's other European sites, will get their own dedicated Prime service for a more consistent pricing and shopping experience, it said.

An Amazon spokesperson didn't respond to a request for comment.

Plans for the new marketplaces show how, even as Amazon dials back parts of its retail business in the US, it continues to invest in areas that can generate long-term growth. Amazon has an expanding global footprint, with marketplaces in 20 different countries. Most are in more mature economies, and Amazon has so far had a relatively small presence in emerging markets like South America and Africa. 

For Amazon, expanding into more countries now makes sense. The company needs to generate more demand, as growth is slowing across the board following a two-year, pandemic-driven sales explosion. Amazon has been scaling back hiringsubleasing warehouse space, and limiting delivery network expansion this year in anticipation of a prolonged slowdown. Onboarding more sellers in new countries may help Amazon fill more of its warehouses, which are dealing with excess capacity after overbuilding facilities during Covid-19 lockdowns.

Costly expansion

Launching in new emerging markets can be costly. Internal financial documents show emerging non-US markets have a gross profit margin of around just 5%, compared to at least 25% margins in established markets like the US, UK, and Japan. Amazon's international segment is already one of its biggest cost generators, having lost $1.3 billion in the first quarter.

Having more overseas marketplaces, however, can potentially reaccelerate Amazon's international sales. In its most recent quarter, Amazon had $28.8 billion in international sales, down 6% from the year-ago period. The company expects the new Belgium marketplace to sell 3.94 billion euros worth of products by 2027, internal estimates show.

Amazon has been doubling down on overseas expansion in recent years. Last year, it opened marketplaces in Egypt and Poland, after having launched in Saudi Arabia, Sweden, and the Netherlands in the previous year. The company has invested more than $7 billion in India so far.

Amazon also moved its Prime organisation under SVP of international business Russ Grandinetti late last year, as Insider previously reported. The change was seen as a move to more actively promote Prime overseas as Amazon looks to expand its membership program beyond the saturating US market and grow international sales. In a note published earlier this month, JP Morgan estimated Prime has a penetration rate of 18% to 31% in international markets with "significant growth runway."



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