The report analyses the impact of offshore e-commerce retailers (OERs) like Shein and Temu on South Africa's retail clothing and textile industry. It examines historical trends and forecasts future scenarios, detailing how OERs' digitized, cost-optimized models have led to significant market share gains and job displacement in South Africa. The report compares South Africa's policy responses to those of other countries highlighting a global trend toward tighter regulations to ensure fair competition. Ultimately, it provides strategic recommendations for policymakers and local businesses to mitigate risks and enhance competitiveness within the evolving e-commerce landscape.
The report provides a comprehensive assessment of the impact of offshore e-commerce retailers (OERs), notably Shein and Temu, on South Africa’s retail clothing, textile, footwear, and leather (R-CTFL) industry.
The growth of e-commerce in the clothing and textile sector
The study reveals that OERs have experienced rapid growth in South Africa's R-CTFL e-commerce sector over the past five years, significantly disrupting local value chains. In 2024, Shein and Temu collectively generated approximately R7.3 billion in sales, representing 3.6% of the total R-CTFL market and a substantial 37% of the sector's e-commerce sales. This rapid expansion has come at a considerable cost to the local economy, with an estimated displacement including R960 million in lost local manufacturing sales, 2,818 associated manufacturing jobs, and 5,282 displaced retail jobs from 2020 to 2024.
Despite the growth in e-commerce penetration in South Africa (from 2.4% in 2015 to 9.9% in 2024), it lags significantly behind the global average (35.6%) and 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.
International policy responses
The South African government has initiated policy reforms to address these challenges, including the removal of VAT exemptions on low-value parcels (as of September 2024) and increased customs duties on imported clothing from 20% to 45%. However, enforcement gaps remain. Comparisons with countries like France, Türkiye, and Brazil show more aggressive policy interventions, such as mandatory local representation, advertising restrictions, and environmental compliance standards. Indonesia and India have even enforced bans on global e-commerce platforms, with India later allowing re-entry under specific conditions requiring the use of local CTFL value chains.
Future projections (2030)
The report projects future impacts under three growth scenarios for Shein and Temu through 2030, influenced by policy effectiveness and competitive advantages. Under a low growth scenario (5% p.a. growth for Shein/Temu sales), their combined sales could reach R9.7 billion by 2030, with their R-CTFL market share increasing to 4.4%. A moderate growth scenario (10.4% p.a., aligning with SA CTFL e-commerce growth) projects sales of R13.2 billion, maintaining their market share at 5.9% of total CTFL and 36.0% of e-commerce. In a high growth scenario (20.8% p.a. growth), sales could hit R22.6 billion, with their overall CTFL market share reaching 10.1% and e-commerce CTFL market share nearly doubling to 63.0%. In the most aggressive of these scenarios, more than 34 000 retail and manufacturing jobs could be displaced in the retail-clothing and textile sector by the end of this decade.
Recommendations for adaption
Key recommendations include:
Enhancing consumer protection and fair-trade practices by auditing online, offshore retail operations for compliance with the Consumer Protection Act, investigating product quality, accuracy of labelling, fair pricing, return policies, and POPIA compliance.
Optimising import processing and revenue collection by implementing handling fees for small parcels, restricting ports of entry, and reinstating a SARS Inter-Agency Working Group with CTFL industry representatives.
Investigating the consequences of mandated localisation policies, assessing their strengths, weaknesses, and risks to understand how to best motivate private-sector localisation.
Strategic recommendations for local retail and manufacturing, such as investing in end-to-end data integration of the supply chain, developing critical skills (data analytics, AI, product development), using supplier development and management to drive performance, and leveraging the scale of retail to unlock advantages for strategic supply bases (e.g., centralising raw material sourcing).