Takealot under fire

Takealot is under siege with increased competition, margin pressure, mounting losses, and new Competition Commission action, which is set to disrupt its business.

Naspers’ latest results revealed that Takealot incurred a loss of R407 million over the last year, significantly higher than the R129 million a year earlier.

Takealot grew gross merchandise value (GMV) by 13% and revenue by 12%, but despite the growth, its loss widened.

Naspers said it reflected slowing consumer demand in a rising inflationary and interest rate environment in South Africa.

Increased competition, especially from international eCommerce giants like Amazon.com and Shein, also created margin pressure impacting Takealot’s profit.

The struggle to turn profitable had become so significant that Takealot-subsidiary Superbalist has started a retrenchment process to cut costs.

“Like many other businesses, we are faced with the reality that growth post-Covid has not reached the levels that had been forecast,” it said.

“As such, we need to reevaluate our structures to ensure that the business operates effectively in this current economic environment.”

Despite Takealot’s financial challenges, the Competition Commission has imposed numerous strict conditions which will significantly influence its current operations.

The Competition Commission found in July that Takealot’s narrow price parity clause distorts South Africa’s eCommerce market competition.

While Takealot opens its online marketplace to third-party sellers, it trades extensively through the Takealot Retail division.

This creates a conflict of interest as it sets the rules for the marketplace and, at the same time, competes with the marketplace sellers.

As such, the Competition Commission instructed Takealot to segregate its retail division from its marketplace operations.

Takealot must also extend its employee code of conduct and create an independent complaints channel to include contraventions based on unfairly harming marketplace sellers.

In addition, Takealot must introduce a 60-day dispute resolution process for marketplace sellers’ returns and stock loss complaints.

Takealot’s Buy Box should also be re-engineered to reflect the cheapest and fastest options for the consumer.

Naspers CEO warns of negative consequences

Naspers CEO Bob van Dijk has warned that the Competition Commission interventions would benefit global eCommerce giants like Amazon at the expense of South African retailers. 

Van Dijk told Business Day that the Competition Commission demands would constrain businesses like Takealot, which have grown locally and positively impacted the local economy. 

He said that while Naspers has been engaging with the commission for the last two years, “we do not necessarily agree with the findings of the report.”

“In particular, there are some market definitions in there that economists would roll their eyes at if they had a close look.”

The report did not impose any measures on brick-and-mortar retailers which have developed online stores, such as The Foschini Group or Makro, nor on foreign competitors like Shein and Amazon. 

Van Dijk is bothered about this discrepancy, particularly in relation to Amazon and Shein. 

“What bothers me most is that Takealot is built by South Africans, run by South Africans. There is a lot of employment, and the regulation hits a business like Takealot while Amazon gets an advantage,” Van Dijk said. 

Amazon has the financial muscle “that is a thousand times Takealot’s, so that is something I’m really concerned about, and if Amazon makes a profit, I can assure you, you’re going to see very little of it in South Africa”.

Takealot’s Superbalist is under increasing pressure from Shein, with the division starting a retrenchment process last month. 

Shein, a Chinese fast-fashion retailer, is the most downloaded shopping app on South Africa’s Google Play store, attracting customers with its competitive prices, on-trend fashion, and speed of delivery.

Shein’s entry into the South African market has caused a stir among local retailers concerned that it is exploiting import tax loopholes. 

Walmart and Amazon are also eyeing the South African e-commerce market. Walmart has been operating in South Africa for over a decade through Massmart but has struggled to compete with local retailers. 

Amazon is expected to launch its e-commerce business in South Africa in the coming months.

The entry of these global retailers is likely to accelerate the growth of the eCommerce market in South Africa.