/ 30 June 2024

No silver bullet solution, Takealot boss says as Chinese retailers penetrate local space


Online retailer Takealot ramped up its sales during the Covid-19 pandemic as digital shopping increased because of lockdown, but the company is struggling to stay ahead of the game as new players enter the local market.

This week, parent company Naspers published its results for the year ending March 2024, which showed that the Takealot Group, which owns Takealot.com, Mr Delivery and Superbalist, recorded a trading loss of 13%.

Takealot group chief executive Frederik Zietsman said the company was operating in a tough and competitive retail environment during the year under review.

“The competition we faced during the last financial year wasn’t the competition we were used to. When we refer to competition we’re used to, that’s the bricks-and-mortar players that were in the markets,” he said.

While Takealot.com and Mr Delivery reported double-digit revenue growth for the period, Superbalist, the group’s most troubled business, reported marginal growth, with Zietsman citing the rapid uptake of online Chinese retailers Shein and Temu in South Africa. 

Since its arrival in South African in 2020, Shein has grabbed a large bite of the online retail space. 

According to 22 Seven Insights, the company had 7% of market share as of April, against Pepkor (14%); TFG and Mr Price (12%) and Superbalist (8%). Temu, which sells items other than clothes, officially launched in South Africa in January, adding to the pressure.

The competition is ideal for cash-strapped consumers but not for businesses struggling in a tough economic environment.

In a move aimed at protecting local retailers, the South African Revenue Service (Sars) has removed concessions, effectively rendering it more expensive to buy apparel from international retailers such as Shein and Temu. 

The regulation, which goes into effect on 1 July, will see import duties on leather, textiles and clothing increasing from 20% to 45%. 

It aims to level the playing field and enhance efficiencies for businesses in South Africa, said Tshepo Marumule, the head of external affairs and public policy at Takealot.

“It would ensure that all players are competing on the basis of the same cost structure. 

“They’re competing on the basis of the same regulatory implications that operate on the basis of the same compliance requirements as existing players operating according to the level of inputs into the function.

“It says to Shein and Temu: ‘Operate on the same basis as the rest of businesses in South Africa.’” Marumule said.

It’s not only a South African problem, Zietsman said, noting that other countries have also taken measures against Chinese retailers.

“It is a global issue that’s come up in France, the US, the EU, in Australia, Turkey. So, each territory has tried to deal with the issue in their own unique way.” 

Zietsman said the company had been proactively collaborating with Sars, from both a skills and expertise perspective, “to make sure that the lifting of the concession is not a paper tiger and it’s actually a real, executable change”.

While conceding that government interventions were important to protect local industry, market commentator Simon Brown said Takealot could enhance its business to increase profits.

“It’s not a case of implementing the tariffs that currently exist, and that requires assistance from Sars and treasury … that is important, but I think they’ve got to innovate within themselves,” he said.

Zietsman said the company had launched more initiatives in the past 12 months than the previous 24, including Takealot Now,  which delivers products on demand, as well as a personal shopper programme that allows people living in rural areas to shop on behalf of their community.

It is also working on punting Mr Delivery as a service that goes beyond food to include household items and other products.

All the initiatives are driven by the high demand for fast delivery, Zietsman said.

“We are now getting into a high innovation cycle. 

“We will push out more of these jet skis into the water to make sure that we always stick up to date with consumers’ needs,” he said.

As businesses await the announcement of President Cyril Ramaphosa’s new cabinet after the 29 May national and provincial elections, Zietsman called for a trade and industry minister who “thinks digital” and will focus on industrialisation, skills development, investment in infrastructure and support for the manufacturing sector.

Johannes Burger, head of legal at Takealot, said the government should consider ways to unlock the potential in the digital economy and the online retail space to stimulate small enterprises. 

“We need to think carefully about localising our digital economy and being able to reap the benefits that the digital economy can present. 

“We need to ask ourselves at this point in time where we are, ‘Do we need cheap Chinese imports, which is a consumer benefit, or do we need to stimulate our economy?’” he said.

“I think it’s very difficult to, at this point in time, come with a silver-bullet proposal that’s going to solve everything. 

“I think it needs considered research and understanding of what the issues are and what the levers are. If you pull on one side, and what happens on the other.” 

Burger said an e-commerce tariff was something that could be considered in the long term. 

Analyst Brown said while it was likely that the frenzy around Shein and Temu would eventually dissipate, Takealot should still position itself better for competition, including from Amazon, which entered the South African market in May.

“I think, over the next three to five years, Amazon is going to become a significant threat to the online landscape,” Brown said.