Takealot under siege

Over the past few years, local eCommerce powerhouse Takealot has come under immense pressure as it faces increased competition and regulatory crackdowns.

Takealot is South Africa’s largest eCommerce retailer, with over 2,000 employees and millions of products.

The service was officially launched in June 2011, following the successful acquisition of an existing eCommerce business called Take2 by the US-based investment firm Tiger Global Management and Kim Reid in October 2010. 

In 2014, the company received a $100 million investment from Tiger Global, which was quickly followed by the purchase of Mr Delivery.

This gave the business ownership over its logistics network through the Takealot Delivery Team division and its app-based on-demand food delivery service through the MR D division.

The same year saw the successful acquisition of online fashion retailer Superbalist.com and the announcement that Naspers-owned Kalahari.com would merge businesses with Takealot.com. 

It was successfully completed on 1 May 2015, when all Kalahari customer accounts were successfully transferred to Takealot.com.

In early 2018, Naspers increased its investment in Takealot to 96%. In October 2018, Superbalist and Spree merged to provide customers with the latest on-trend local and international fashion.

Today, Takealot is a household name and South Africa’s largest eCommerce retailer. It is known for its excellent service levels and its wide product range.

It is ranked as the country’s top eCommerce service and has dominated South Africa’s online shopping market for a decade.

Regulatory crackdown

Takealot’s success has attracted attention from regulatory authorities. In 2023, South Africa’s Competition Commission imposed numerous strict conditions on Takealot, which will significantly influence its current operations.

These restrictions formed part of the Competition Commission’s Online Intermediation Platforms Market Inquiry Report.

The commission said Takealot is the clear eCommerce market leader with a dominant share of overall online sales in South Africa.

Takealot has an even stronger position in providing online marketplace services to sellers. This is where businesses can trade within the Takealot platform.

According to the commission, smaller businesses wishing to trade on online marketplaces in South Africa are highly dependent on Takealot.

It imposes ‘narrow price parity’ on sellers, preventing them from pricing lower on their own websites.

Therefore, developing this alternative online channel prevents sellers from reducing their dependency on Takealot.

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

As such, Takealot was required to remove this clause and inform all marketplace sellers on its platform.

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

According to the commission, this creates a conflict of interest as it sets the rules for the marketplace and competes with marketplace sellers.

The CompCom said Takealot has incentives to favour itself, and its retail buyers have strong incentives to tilt the balance in their favour.

Following the release of this report, Takealot said the commission failed to consider competition from bigger brick-and-mortar players and outfits like Shein, Wish, and AliExpress that operate outside local consumer protection laws.

“While we were disappointed with some of the Competition Commission’s findings in the final report, we continue to take a cooperative stance with the Commission because we are aligned on supporting small businesses, protecting consumers, and enabling inclusive economic growth in South Africa,” Takealot told Daily Investor.

“While we proactively engage with the Competition Commission, as a proudly South African company, our focus and commitment lie in building a resilient and sustainable business that benefits consumers and the local economy.”

International competition

“Since the final Competition Commission report was published, the online retail environment has become even more dynamic and competitive, particularly concerning the increasing prevalence of offshore online platforms that have no physical presence in South Africa,” Takealot said.

In the past few years, South Africa has seen a rise in the popularity of these platforms, with the most prominent being Shein and Temu.

Shein and Temu are experiencing remarkable growth in South Africa due to their aggressive marketing strategies and low prices. 

Unofficial numbers suggest that the two Chinese retailers ship over 1 million packages per month to South African consumers.

Local competitors like Superbalist have struggled to keep up because of their higher prices and significantly smaller marketing budgets.

In addition, international eCommerce giant Amazon launched in South Africa this year, adding to the competition in the local eCommerce space.

Takealot warned that offshore online platforms without a physical presence in South Africa extract value from the country without contributing to local communities or skills development.

It said these players ultimately harm small businesses and local manufacturers and threaten entrepreneurs’ and corporations’ ability to create job opportunities. 

“The emergence of offshore online platforms is not unique to South Africa. It is a global phenomenon that requires decisive and urgent attention,” the company said. 

“It is a phenomenon that was never contemplated or dealt with in the final Competition Commission report published last year, and it is critically important that this be given urgent attention.”