Takealot and Amazon make a lot of money selling other people’s products. Though many shoppers don’t realise it, more than half the items each company lists come from independent sellers — from small home businesses to brand-name brick-and-mortar stores.
Given that this is central to growing or, in Takealot’s case, creating profit, neither company keeps these numbers particularly secret in their annual reports.
Amazon says more than 60% of its sales come from third-party suppliers. In 2022, Takealot said independent sellers accounted for 52% of its total gross merchandise value (GMV). More recently, it said it had 10,000 active sellers on the site.
This concept is not new. Amazon allowed third-party businesses to sell products alongside its own back in 2000. Like a traditional market, Amazon offered small businesses infrastructure such as marketing, technology and logistics, and charged a percentage fee for every product sold via its Marketplace.
Some argued that this would dilute Amazon’s brand and profits, but it did the opposite. It enabled the store to rapidly expand its product range and skim a bit off the top of every item sold at little financial risk to itself. If products sell, Amazon wins. If products languish in warehouses, Amazon charges fees to defray costs. When Amazon launched Marketplace, it had yet to make a profit. Three years later it reported its first profit of a not insignificant $73m.
It’s hardly surprising that Takealot copied this model in 2015 — right down to the name. Four years after Takealot’s rebranding from Take2, it introduced Takealot Marketplace. And though South Africa’s biggest online store has yet to see a profit (its latest annual results reported a $14m, or R253m, trading loss), it is relying on third-party sellers to help drive its growth.
In its latest full-year report, Takealot says its “third-party share of GMV is projected to increase as more sellers are brought onto the platform and the company expands the breadth and depth of its selection”. It “aims to empower small and medium businesses by supporting and coaching new sellers, while managing and helping underperforming sellers”.
Those underperforming sellers have been thorns in the flesh of both companies and their burgeoning marketplaces. Disgruntled sellers have complained that both stores retain all the power, can drive traffic to their own stock where profitable, and squeeze them for fees, commissions and pricing.
Their market dominance also means that unhappy marketplace sellers have little alternative but to put up with whatever their overlords throw their way. A 2022 Competition Commission inquiry into online intermediation platforms, which mentions Takealot, found that “while marketplace sellers can walk away from small e-commerce platforms that do the same, this is not the case with the leading platform accounting for most online sales”.
In a best-case scenario, sellers will pay commissions of between 15% and 20% before they’ve taken profits of their own
Still, both online stores put positive small business spins on their Marketplace operations. Amazon’s Marketplace landing page features a testimonial from a small condiment business that says Marketplace sales resulted in a $56,000 jump in sales. Takealot does something similar, if less dramatic and specific — it shows glowing recommendations from Marketplace sellers that run on its signup pages.
These are not easy money-making schemes, though, as demonstrated by entire Amazon Marketplace consultancy businesses and a plethora of YouTube explainer videos that have mushroomed out of demystifying this phenomenon — usually for a fee or to peddle an e-book or online course.
As even Amazon and Takealot’s handy online calculators demonstrate, profits aren’t a given — or necessarily easy to achieve.
Before realising sales, Takealot and Amazon charge sellers a flat monthly membership fee of R400, though Amazon also offers a R10 per product sold tier. Storage fees range from free for fast-moving products to hundreds of rand per month for those that take longer to sell.
Every successful sale also attracts a commission of between 4% and 18%, and fulfilment fees of at least R20 for light items and several hundred rand for heavier products. Inter-distribution centre costs and customer returns can also eat into profits.
Given this, marketplace selling requires some caution and strategy. But Amazon’s local launch, which relies heavily on marketplace suppliers to stock its pages, presents an opportunity alongside Takealot’s for the right SMEs.
Even so, it’s best to read the fine print carefully, treat the glowing testimonials with an ounce of cynicism, and find products padded with plenty of profit margin that are likely to sell, and fast.
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