Takealot has sold its fashion business Superbalist in the face of competition from international e-retail
Local e-commerce retailers are still struggling to hold their own against international competitors, with authorities yet to finalise a tax regime the industry says is necessary to level a playing field skewed in favour of the likes of Shein and Temu.
Last week, the Takealot Group, owned by Naspers, sold its clothing and fashion business, Superbalist, to a consortium of retail and private equity investors led by Black Canvas Capital.
The Takealot group — which comprised Takelot.com, Mr D and Superbalist — recorded a trading loss of 13% for the year ending March 2024, dragged down mainly by the fashion business.
Market commentator and investor Simon Brown said the sale of Superbalist shows how difficult the e-retail and clothing space has become. “I think it’s an admission that it’s not doing great for them, and I think it’s a bigger admission that clothing is difficult. So, kind of in light of Amazon coming into South Africa, in light of Temu and Shein, I think they are saying ,‘It’s not a space we want to be in,’” he said.
“I think Temu and Shein would probably do better on the clothing side because their stuff is so cheap.”
In its 2 September statement, the Takealot Group said the “strategic acquisition will support Superbalist’s ongoing growth, allowing the Takealot Group to dedicate its efforts to further expanding Takealot and Mr D”.
Arthur Goldstuck, the chief executive of market research group World Wide Worx, said the group can now focus on providing competitive prices on products and categories, and set the agenda or lead the market in pricing strategy in the increasingly difficult space.
“The online retail and clothing sector has become far more challenging, because you’re competing with global players who are both incredibly nimble and incredibly large. They operate at such a scale that they are transforming logistics globally, which means that it is almost impossible for local players to compete purely on price,” he said. “They will have to compete on quality, service and after-sales service, as well as marketing those strengths.”
Local retailers have long complained that the playing field is not level, especially with duties on Chinese imports being much lower than those on domestic products.
The South African Revenue Service was meant to apply a 45% tax on certain Chinese imports in July, but revised its decision to a 35% tax that kicked in on 1 September on an interim basis, with the final updated regime set to be announced in November. Import duties on Chinese products were previously marked at 20%.
But Goldstuck cautioned that the import duties may not have a dramatic effect, because there are more issues at play.
“The secret to low-cost products is not only in labour costs or avoiding import duties, but far more so in the number of middlemen that are cut out by the low-cost retailers,” he said.
“With that being the underlying differentiator, and local retailers paying close attention to their strategies, we can probably expect a growing movement to direct sourcing from retailers, to the extent that they will even look for ways of buying directly from factories and, in the longer term, production on demand.”
But the Cape Clothing Textile Cluster believes there are more opportunities than threats from the Chinese competitors.
“What Shein and Temu taught us is that they were the first leaders in globalising what people want to wear and put avatars out there for entrepreneurs to mimic those and supply them with similar goods to [those] which they shop,” said Graham Choice, the cluster’s chairperson.
(Graphic: John McCann/M&G)
He said the local industry could use the software created by Shein and Temu to increase its own visibility and become a more responsive industry that meets customers’ tastes.
The local industry is still coming to terms with and assessing the likely effect of Amazon’s entrance into the South African market, Choice said.
The global e-commerce giant launched its platform in May, with more than 20 departments including electronics, books, toys, household items and beauty products.
Brown said that ultimately,the competition is good for consumers, who can also expect more innovation from existing players.
“There is space for two big players … I think we’re going to see innovation, we’re going to see better pricing, and I think our markets are big enough for both Takealot and Amazon and then [Foschini’s online fashion store] Bash, which will sort of be number three,” he said.