SA’s largest e-commerce platform says it’s “game on” as it gears up to meet competition from global retail behemoth Amazon.
Takealot — founded in 2011 and comprising takealot.com, fashion outfit Superbalist and food delivery business Mr D Food — has long enjoyed its position atop SA’s online retail market. As of next year, however, the Naspers-owned group will see the world’s largest online retail platform encroach on its turf.
“We believe we have a very strong platform across the value chain that we have built, and that we’re ready for the competition,” Takealot group CEO Mamongae Mahlare tells the FM. “We say: game on.”
It may seem an audacious statement — but it’s not entirely unfounded when you consider the company’s dominance in South Africa’s growing e-commerce space.
In its most recent financial year, Takealot’s gross merchandise value — the value of goods traded in a given period — grew by 46% to R24.4bn, with revenue up 36% to R14.14bn. To put that in context, TFG, one of SA’s largest retail operators, generated turnover of R4.4bn through its online channels in its most recent financial year.
But online remains a small slice of South Africa’s retail pie: it makes up just 4% of the total retail market. That’s still double its market share before Covid, though.
Takealot has grown in other ways too. When it introduced its marketplace in 2014, allowing third parties to advertise and sell their wares on its platform, just 127 businesses took up the opportunity. Today, there are 8,000 businesses on the platform — most of them SMEs — serving 4-million customers.
We believe that we have a very strong platform across the value chain that we have built, and that we’re ready for the competition
— Mamongae Mahlare
Not everyone is positive about how that third-party sales strategy has played out. The Competition Commission, for example, is investigating allegations of “bullying” by Takealot arising from its market inquiry into online mediation platforms.
At issue is whether the third-party retailers are prejudiced by operating on a platform that is geared to sell its own merchandise. The commission asserts that Takealot favours or gives prominence to its own stock over that of third-party sellers.
In a report filed in July, the commission said it had found that, “in almost all cases, the complaints against Takealot were justified, and the conduct did preference Takealot, or its retail buyers, or undermined competition on the platform to the detriment of marketplace sellers and ultimately consumers”.
It’s an interesting contention, give Amazon’s pending entry into the local market. After all, the third-party model was popularised by that company — and it, too, has been accused by US regulators of similar indiscretions.
One could argue, however, that third-party sellers aren’t entirely dependent on Takealot: they can list their products wherever they think they’ll generate the most business. Take beauty business Masodi Organics. Its products are listed on Takealot — but they’re also available through retail chains including Clicks and Pick n Pay, as well as online platforms such as Cosmetic Connection and Zulzi.
Vodacom has taken a similar approach, positioning its VodaPay app as a marketplace that the likes of Makro can use to sell their products. And it’s thought that Amazon’s entry into the local market will give South African businesses yet another channel through which they can sell their wares.
But while some see the Competition Commission inquiry as a step towards levelling the playing field of South Africa’s e-commerce sector, others argue that the competition authorities are stifling progress in the market.
Think-tank the Free Market Foundation, for example, argues that the potential for competition already exists on these retail platforms, and that the commission’s recommendations amount to “misguided activities which serve to punish successful businesses that acquired their market position through voluntary transactions which satisfied consumer preferences”.
In the case of Takealot, Mahlare says her firm has, if anything, been a force for good for SMEs.
“I do fundamentally see [Takealot] only as an enabler. What is powerful is the synergistic nature of the relationship with all of these businesses on the platform,” she says. “We can only grow if they grow. And today, over half of the revenue we generate is from the partnership we have with these SMEs. So that shows how seriously we take enabling and supporting those businesses to thrive on the platform.”
With the commission report due in February, Mahlare remains positive about the future of the company — and about the online retail space in South Africa more generally.
“It’s still a very nascent category,” she says. “When you compare [it] with emerging countries similar to ours, like in Latin America, they’re sitting at about 10%-14% [of the total retail market].”
In her view, this means there’s a lot of scope for e-commerce to grow in South Africa — and this is what is luring large global competitors to the local market. But it is Takealot, she hastens to add, that has shown proof of concept in South Africa.
“The Takealot group [provided] a solid business case around the opportunity that exists,” she says. Takealot proved the viability of the market — “and that there is room for growth”.
In almost all cases, the complaints against Takealot were justified, and the conduct did preference Takealot, or its retail buyers, or undermined competition
— Competition Commission
Still, the company is surely feeling some heat from Amazon’s imminent arrival. Up to now, large international online retail platforms have largely steered clear of the African market. Poorly developed infrastructure would, for example, make it difficult for Amazon to implement its famous next-day delivery service.
It’s this lack of investment that has given local e-commerce players such as Nigeria’s Jumia and Takealot a huge leg-up in their markets. Until now, that is.
Then there’s the issue of resources. While Takealot has enjoyed its position as the largest local e-commerce platform, it has yet to produce sustainable profit (the online retail unit posted a R223m interim loss to September).
It’s the result of prioritising growth over profit — and it is indicative of the resources that go into growing and scaling large tech businesses. Amazon, for example, spent years in the red while CEO Jeff Bezos brought it to scale, ploughing eye-watering amounts of capital into developing the world’s most formidable e-commerce empire while showing little to no profit.
Takealot and its parent have similarly poured billions into developing one of the most sophisticated delivery and logistics networks in Africa. As Naspers CEO Bob van Dijk has previously said, it’s an investment that has helped Takealot defend its market position.
“Takealot has built a very well organised logistics and delivery network,” he said. “They’ve spent more than a decade doing it at scale, which allows for efficiency and predictability.”
The company is exploring new avenues to stay ahead of the pack. One of these is joining forces with payments providers such as Payflex in offering “buy now, pay later” (BNPL) services. The idea — endorsed by global players such as Apple and PayPal — is to help boost the adoption of e-commerce by offering flexible credit options to hesitant consumers.
“Offerings such as BNPL are fantastic in terms of our context where customers have some financial constraints,” says Mahlare.
The model, offered by online payments companies including Payflex, PayJustNow, CheckiD and MoreTyme, from online-only bank TymeBank, guarantees full payment to the merchant, while allowing customers to buy goods and pay small amounts upfront and the balances over time, usually within weeks.
“We have seen an adoption of the BNPL,” says Mahlare. “On Takealot we’ve had it for about four months — we’ve had it for about a year and a half in our fashion business Superbalist — and it has done extremely well in that time.”
It’s a win for merchants, as it gives them cash upfront, while shifting the risk of nonpayment or default to the BNPL provider. For the BNPL providers, there’s access to a much larger market.
Payflex, for example, considers its tie-up with Takealot to be a big win — by far the most exciting in the past couple of years, says company founder and CEO Paul Behrmann.
“We [recently] launched on Takealot ... and, since then, Payflex has done phenomenally on the platform,” he says of his company, which has grown to 500,000 customers in South Africa. “If you look at growth in electronics and other goods, apart from fashion, it’s really — to a large extent — coming from Takealot.”
It’s not just new payment options that e-commerce players need to consider. According to Leon Jacobs, chief information officer at RCS, the consumer finance arm of international banking group BNP Paribas, customer experience is set to be a key differentiator between platforms.
“With competition in the sector set to increase dramatically over the next few years, we will undoubtedly see a number of customer-experience innovations coming to the fore,” he says.
“Superbalist’s first-to-market launch of Fit Finder — an advanced sizing technology that helps shoppers to find fashion items in their size — is a great example of how machine learning is improving online customer service and making e-commerce more accessible, practical and ‘fail proof’ for consumers.”
Takealot has done a lot to leverage its first-mover advantage in South Africa. The question now is if that will be enough to take on a global powerhouse — and just how committed that powerhouse is to winning over the local market.
The next few years will tell if power lies with deep pockets, or a deep network.
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