Takealot’s route to profitability in clear view

Takealot Group, the South African e-commerce business owned by Naspers, produced strong growth in the six months to 30 September, months before the expected launch of Amazon.com’s retail operations in the local market.

According to the half-year financial results from Naspers and its European-listed subsidiary, Prosus, Takealot Group, which includes Takealot.com, Mr D and online fashion outlet Superbalist.com, saw gross merchandise value (GMV) and revenue grow by about 15% and 10%, respectively, year on year, in rand terms.

“The business continues to deliver acceleration in e-commerce growth in the country”, said Takealot Group CEO Mamongae Mahlare. “While Takealot Group is not yet profitable at a trading profit level, strong momentum towards profitability has been made through Takealot.com’s business operations, which are generating more revenue than they cost to run. This is a clear indication that the business health is solid, with profitability at an operating level.”

This is in spite of headwinds faced by retailers in South Africa, including high interest rates, inflation and load shedding. An increase in e-commerce-related crimes has also had a negative impact.

Takealot.com’s 15% year-on-year increase in GMV was accompanied by an improvement in its third-party marketplace seller base, which reached 10 800 in September. According to Takealot, its third-party sellers now contribute 19% to group sales.

Mr D, the group’s food delivery business, also saw GMV grow by 15% year on year, while Superbalist registered 13% growth. “Mr D and Superbalist are on track to do the same [show operational and trading profit] at the appropriate point in their development cycle,” said Mahlare.

All three businesses in the portfolio face stiff competition from rival offerings. In food deliveries, Uber Eats added store pickups earlier this month, allowing customers to add a variety of goods that they can have delivered beyond fast food.

TakealotNow

A competing service called TakealotNow is available on the Mr D app. Unlike the store pickup service offered by Uber Eats, TakealotNow sells inventory offered specifically on Takealot.com. The service it is still in a pilot phase with availability restricted to Johannesburg and Cape Town.

On the fashion front, Superbalist.com faces competition both close to home and from further afield. After selling Superbalist to Takealot Group in 2014, co-founders Luke Jedeikin and Claude Hanan went on develop bash.com, a mobile-first e-commerce platform owned by The Foschini Group. At the same time, Singapore-based Shein is making inroads into the South African market, with its fast-fashion and competitive pricing proving attractive to local consumers.

In the broader general e-commerce space, Takealot.com remains the market leader in South Africa. However, Amazon’s impending entry into the local e-commerce market, expected early next year, is keeping the Naspers-owned platform on its toes.

Read: Takealot pans commission over competition findings

Nonetheless, Takealot Group produced a resilient performance, only dampened by Naspers’s reporting in US dollars rather than in local currency. The weak rand had a negative impact on the group’s first half. Even though GMV went from US$700-million a year ago to $711-million, $91-million of the value was “lost” due to the weakening of the rand.  — (c) 2023 NewsCentral Media

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