South African consumers have embraced online shopping platforms Shein and Temu for their affordable prices, but local retailers are feeling the strain. These international companies have shaken up the South African market by using their large scale to keep costs low and shipping goods by air to global delivery partners. A recent industry report by Nedbank shows that South Africa’s online retail sector hit R71 billion in 2023, growing 29% from the previous year.
This growth has led to more competition, with local brands like Shoprite Checkers, Pick n Pay, and Woolworths greatly expanding their online offerings. International players like Shein and Temu have also made a big impact. Shein entered the South African market in 2020 and became the most downloaded shopping app by 2023.
Temu, owned by Chinese e-commerce giant Pinduoduo, launched in January 2024 and quickly became popular with consumers. These companies have an advantage by not needing physical stores, allowing them to invest heavily in advertising, especially on social media. Local competitors struggle to match their ad budgets.
However, low-cost Chinese online retailers like Wish have seen their popularity decline due to issues with product quality and rising prices.
Shein and Temu challenge local retail
Nedbank points out that Shein and Temu may face similar issues if they don’t adapt their supply chains to include more local vendors.
For example, Amazon’s South African site, which launched in May 2024, plans to source over 60% of its products locally, providing benefits like same-day and next-day delivery, multiple pick-up points, and easy returns. Shein and Temu have also faced scrutiny over their labor practices, with allegations of forced and child labor. Both companies deny these claims, but a U.S. government investigation found a high risk of forced labor in Temu’s supply chains.
Additionally, these companies have been accused of taking advantage of South African tax loopholes. The “de minimis” rule previously let parcels under R500 pass through customs with lower duties and no VAT, disadvantaging local retailers. As of 1 July 2024, the South African Revenue Service now requires standard import tax on all Shein and Temu orders, creating a more even playing field.
Local industry groups, including the National Clothing Retail Federation of South Africa and the Southern African Clothing and Textile Workers’ Union, have called for government action. The Department of Trade, Industry and Competition is now investigating Shein for possible tax avoidance. It remains to be seen if these actions will adequately protect local retailers, but stricter tax compliance will at least ensure fairer prices for South African online shoppers.
