Offshore e-commerce retailers, such as Shein and Temu, are rapidly gaining ground in South Africa’s retail clothing, textile, footwear and leather sector, displacing thousands of local jobs, including in e-commerce.
This is creating an urgent need for digital transformation, including the adoption of artificial intelligence (AI).
The Localisation Support Fund (LSF), in a recently released report, found that Shein and Temu’s presence in the local market has already resulted in millions of rands lost in local manufacturing sales, and more than 8 000 direct and indirect jobs lost between 2020 and 2024.
In a worst-case scenario of Shein and Temu growing their sales locally by 20.8% annually through to 2030, their combined sales could reach R22.6 billion and their e-commerce share of the retail market could climb to 63%. Combined with their impact on the physical market, this would put more than 34 000 South African retail and manufacturing jobs at risk, says the report.
The research also found that SA’s e-commerce sector, although growing its penetration rate in the retail space, significantly lags the global average growth rate of 35.6% and that of other emerging markets like Brazil and Vietnam.
“This is due to structural and logistical challenges, such as limited last-mile delivery infrastructure and a strong consumer preference for physical retail,” the LSF’s report states. Its figures show digital sales have grown from a market share of 2.4% in 2015, to 9.9% in 2024.
World Wide Worx’s latest report on online retail, released in May, showed “significant” growth in SA’s online retail sector, which surged to R71 billion in 2023.
The report, conducted by World Wide Worx in collaboration with Mastercard, Peach Payments and Ask Afrika, stated the sector’s growth represents a 29% increase from 2022, positioning the sector to break the R100 billion mark by 2026.
“The strategic shift towards competitive e-commerce offerings and enhanced customer engagement, including sophisticated AI-driven tools, has fundamentally transformed the retail landscape in South Africa,” says Arthur Goldstuck, CEO of World Wide Worx.
Naspers, the JSE-listed owner of Takealot, is increasing its investment in AI, describing it as an “indispensable tool” that will underpin future growth across its platforms. The group reported 20% revenue growth and a 46% rise in core headline earnings, which it attributed to its focus on innovation and AI adoption.
The company’s AI strategy is aimed at improving productivity, accelerating innovation and building a high-impact portfolio that leverages data and customer insights. In its annual results presentation in June, Naspers said it is “embarking on a journey to ensure we are an AI-first company,” with innovation driving operations, customer experience and broader impact.
AI is already being used to improve operational efficiency across its marketplace businesses, while supporting its longer-term strategic goals. Over the past year, the group invested $7.8 billion (R140 billion) in AI-native start-ups and expanding its ecosystem.
The LSF recommends several digital measures to help counter Shein and Temu’s erosion of the local retail market, including end-to-end supply chain digitisation, data analytics, and the development of AI and product development skills as key strategic priorities for local retailers and manufacturers.
Using AI to forecast demand, personalise customer engagement and improve operational efficiency is highlighted by the report as a potential differentiator that could help local firms become more competitive. Takealot is already using AI to enable intelligent stock positioning, advanced demand forecasting, fraud monitoring and productivity tools.
AI-driven supplier development and management could also support performance improvements, while centralising raw material sourcing, and integrating data across the supply chain would enable cost savings and more agile responses to market shifts, states the LSF.
However, veteran ICT commentator Adrian Schofield notes SA is, in general, not moving swiftly enough towards an era in which the fourth industrial revolution is a reality, and there is a need for workers to be rapidly trained in AI.
Other recommendations by LSF include auditing offshore retailers for compliance with the Consumer Protection Act, the Protection of Personal Information Act and other standards; streamlining South African Revenue Services customs procedures; and exploring the potential of localisation policies to promote domestic production.
Government previously responded to the threat posed by Shein, Temu and other similar entities by removing VAT exemptions on low-value parcels and raising import duties on clothing from 20% to 45%.
Other markets have taken stronger steps. France and Turkey have implemented restrictions on advertising and imposed environmental compliance rules, while India and Indonesia have banned certain global platforms outright. India later allowed re-entry under conditions requiring use of local value chains.
At the end of July, US president Donald Trump suspended favourable duty-free import costs on small-value Chinese goods, citing the risk of illegal drug imports, which can be smuggled in via smaller packages.
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