What's Happening?
Shein and Temu, e-commerce retailers founded in China, have gained a combined 3.6 percent share of South Africa's retail, clothing, textile, footwear, and leather market, generating sales of 7.3 billion rand ($405 million) in 2024. Shein entered the market in 2020, followed by Temu in 2024, disrupting the local retail landscape with aggressive pricing and strategic marketing. These companies initially benefited from tax loopholes, which have since been closed, impacting local retailers who had urged regulators to address the issue. The Localisation Support Fund report indicates a decline in domestic retailers' market share from 75.3 percent in 2011 to 74 percent in 2024, while international brands like H&M, Zara, and Cotton On hold a combined 3.4 percent share.
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Why It's Important?
The rise of Shein and Temu in South Africa's fashion market highlights the growing influence of international e-commerce platforms on local industries. Their success underscores the challenges faced by domestic retailers in competing with global giants that leverage pricing strategies and marketing tactics. The closure of tax loopholes represents a significant regulatory shift aimed at protecting local businesses, but the impact of these e-commerce platforms continues to reshape the market dynamics. This development may prompt further regulatory actions and strategic adjustments by local retailers to maintain competitiveness.
What's Next?
South Africa's tax authority plans to impose new taxes on fast fashion parcels to protect the local clothing industry from international competitors like Shein. This move could alter the competitive landscape, potentially affecting the pricing strategies and market share of these e-commerce platforms. Local retailers may need to innovate and adapt to these changes to regain market share and appeal to consumers. The ongoing evolution of the retail market in South Africa will likely involve further regulatory scrutiny and strategic shifts by both domestic and international players.
