Shein and Temu have together secured a 3.6% share of South Africa’s retail, clothing, textile, footwear, and leather market, generating 7.3 billion rand (US$408 million) in sales in 2024, according to a report by the Localisation Support Fund.

Shein, an ecommerce retailer founded in China, entered South Africa in 2020, followed by Temu in 2024.

Their market entry has intensified competition for local retailers, who saw their market share in these sectors decrease from 75.3% in 2011 to 74% in 2024.

International physical retailers such as H&M, Zara, and Cotton On hold a combined 3.4% share in the same market.

Shein and Temu also account for 37.1% of South Africa’s ecommerce CTFL market, with Shein making up 28% of online women’s clothing sales.

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🔗 Source: Reuters

🧠 Food for thought

1️⃣ Regulatory arbitrage created unfair competitive advantages worth billions

Shein and Temu’s rapid success in South Africa demonstrates how international e-commerce companies can exploit tax loopholes to gain significant market advantages over local competitors.

The companies benefited from South Africa’s de minimis rule, which allowed imports under R500 to incur lower taxes, creating an uneven playing field that local retailers couldn’t match 1.

This tax advantage was substantial. The South African government estimates these companies avoided over R3 billion in unpaid taxes, money that could have supported local business growth and employment 2.

The regulatory gap highlights a broader challenge facing governments worldwide as they struggle to adapt tax frameworks designed for traditional retail to the realities of cross-border e-commerce.

When South Africa finally closed this loophole, local retailers immediately reported positive responses from consumers who were now seeing the true cost of these international platforms 1.

2️⃣ Speed of digital market penetration far exceeds traditional retail expansion

The contrast between Shein and Temu’s market capture and traditional retail expansion reveals how digital platforms can accelerate market entry in developing economies.

While established retailers like Shoprite took decades to build their African presence, expanding from 8 stores in 1979 to 2,214 stores across the continent by 2016, Shein and Temu achieved significant market share in just 4-5 years 3.

Shein alone captured 35% of South Africa’s online women’s clothing market and 28% of all online ladies’ clothing sales, demonstrating how digital-first companies can bypass the infrastructure investments and regulatory hurdles that traditionally slowed retail expansion 45.

The rapid penetration also reflects South Africa’s growing digital economy, with the online retail sector valued at R71 billion in 2023 and growing 29% year-on-year, creating fertile ground for agile international players 6.

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