Takealot-subsidiary Superbalist has issued staff with Section 189 notices as part of a retrenchment process.
Naspers-owned Takealot acquired Superbalist in August 2014 after it received a US$100 million cash injection to expand its South African operations.
Superbalist was founded by Luke Jedeikin, Claude Hanan, and Daniel Solomon, then known as Citymob.
Citymob quickly became a favourite among online shoppers thanks to its exclusive experiences, premium products, and hand-selected styles.
In 2013, Citymob pivoted the business to fashion eCommerce as Superbalist, which became South Africa’s largest online fashion retailer.
At the time, former Takealot CEO Kim Reid said he was excited about the acquisition because the millennial generation is deemed to be the most powerful and relevant market.
Superbalist continued to operate as an independent brand under its existing management team, led by Hanan and Jedeikin.
However, the founders left Superbalist in December 2019 and joined The Foschini Group (TFG) two years later to help the company realise its eCommerce ambitions.
This year, they launched Bash, an online shopping service offering all TFG’s brands on one platform which competes head-on with Superbalist.
Superbalist told Daily Investor that it had embarked on a Section 189 process that will lead to the restructuring of its business.
“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.”
Superbalist said its first and most important focus is on doing what is right for its staff while still being conscious of the decisions to deliver a business geared for a long-term future.
It added that the Superbalist retrenchments are unrelated to the rest of the Takealot Group. “Each operating company is measured against its own strategy and performance,” it said.
Takealot’s struggle to turn a profit
Naspers’ latest financial results revealed that Takealot incurred a loss of US$22 million (R407 million), significantly higher than the US$7 million (R129 million) a year earlier.
Naspers blamed slowing consumer demand in a rising inflationary and interest rate environment in South Africa for the higher loss.
Delving deeper into Takealot’s finances reveals that the company is struggling to contain costs and turn a profit.
Former Takealot CEO Kim Reid said the company was set to become profitable in 2021 and was on track to achieve this goal.
Between 2019 and 2021, Takealot significantly reduced its losses, giving the market confidence that it would reach profitability in the 2022 financial year.
However, Takealot is now going in the opposite direction and is widening its losses instead of shrinking them.
For Takealot to turn the situation around and become profitable, it must increase margins, reduce costs, and become more efficient.
The latest retrenchments may, therefore, be an attempt for the eCommerce giant to cut costs in an attempt to turn a profit.