After years of groundwork, ‘teenage’ Takealot targets profit

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 27 Mar 2023

E-commerce giant Takealot Group says it contributes billions to South Africa’s gross domestic product (GDP) annually and has also created 33 000 jobs across its ecosystem since inception.

The Naspers-owned e-commerce group, which comprises SA’s biggest e-tailer, Mr D Food and Superbalist, says it contributed R10 billion to SA’s GDP in the 2021 financial year, and pays around R2 billion in taxes annually.

The company has now set its sights on making profit after years of loss-making. This push comes amid rumours that US-based online retail giant Amazon is looking to establish a South African presence.

Takealot, which has distribution centres in Cape Town and Johannesburg, started with 24 employees when it launched its online retail business in 2011.

It has since grown to create around 20 000 direct jobs and over 13 000 indirect employment opportunities through its marketplace SMEs and delivery couriers across the three businesses.

Reflecting on the company’s milestones during a video interview with ITWeb, Takealot group CEO Mamongae Mahlare noted the three arms of the group are built on the premise of creating a local business that will empower South Africans., she noted, will continue investing heavily in technologies that will help drive job creation, and support local SMEs in a country with a high level of youth unemployment.

“When started in 2011, we were one of the few companies that were in the e-commerce space in South Africa at the time. The biggest milestone is in being able to establish a marketplace in 2014, which started with only 124 sellers and has now grown to list over 8 000 SMEs. These consist of mostly entrepreneurs who are starting their business on our platform and seeking nationwide presence.

“Another milestone is the opportunity presented by the COVID-19 pandemic, which saw SA’s e-commerce sector grow from 1.9% of total retail to now sitting on just over 4%.

“Takealot may be a teenager, but as an e-commerce player, we still have a lot of growth opportunities and a lot of work to do to increase the adoption of e-commerce for SA,” Mahlare commented.

Online retail in SA passed the R50 billion milestone in 2022, accounting for around 4.7% of the total retail market, according to the Online Retail in South Africa 2022 study conducted by World Wide Worx with Mastercard.

While SA’s e-commerce sector is still a young industry, Takealot has been closely observing the trends of other international countries, whose percentage is between 11% and 25%, Mahlare said.

Takealot started with just one category – selling books and DVDs on the platform – which is typically what most e-commerce platforms, such as Naspers subsidiary, specialised in during those days.

Today, it has grown to offer more than one million products, having garnered over three million customers during the last 12 months, as more South Africans take to the platform for their everyday needs, she added.

The e-tailer is continuously improving its infrastructure to grow and scale its presence. The company now has over 100 pickup points across SA.

“In terms of our payment ecosystem, what we have done is that we’ve partnered with other tech players to be able to provide a wide variety of payment options to enable customers to pay through an array of solutions and methods.

“We continue making investments in infrastructure; for instance, we are able to make deliveries to homes in remote areas, which don’t have a physical address, through GPS-based needle coordination. We are also looking at leveraging more tech to improve our same-day and next-day delivery services,” explained Mahlare.

Takealot Group CEO Mamongae Mahlare.
Takealot Group CEO Mamongae Mahlare. and were two of SA’s biggest e-tailers when they announced a merger in 2014, after Naspers acquired a 45.5% stake in and closed down

Takealot founder Kim Reid said at the time that the move was driven by the fact that without scale, local e-tailers simply can’t compete successfully against the local brick-and-mortar retailers, and foreign e-commerce giants, such as Amazon and Alibaba.

Founded in November 2010, (formerly Citymob) launched in November 2013 as an online style apparel destination for South Africans, while Mr D Food was bought by the group in 2014 from South African food delivery business Mr Delivery.

With rumoured to be planning to set up operations in SA in the near future, Takealot has been accelerating its growth strategy.

The e-tailer is now in profit-making mode, after the group reported a combined R224 million loss across its businesses in its November trading report.

The group grew gross merchandise volume (GMV) by 15% and revenue by 13%, with a trading loss of $13 million, according to the report.

Mahlare pointed out that every new business goes through a loss-making period before reaping significant profit, particularly in a young industry like SA’s online shopping sector.

“The business became profitable in 2021 and this was a huge milestone for the business because it allowed us to start thinking long-term and we are looking at how do we continue and invest even further.

“Our objective over the next two years is to make our two other businesses become profitable. Being able to contribute over R2 billion in taxes as an ecosystem in 2021 demonstrates that if there is enablement and support for digital markets, the sector has great potential to address job creation.”

In further growing the industry, government and the e-commerce ecosystem need to work to resolve several barriers that hinder online shopping growth, such as shoppers’ preconceived notions of online shopping, further lowering data costs and improving the county’s infrastructure, she continued.

“Once people shop for the first time online, they really realise the massive benefits of doing so in convenience and saving time through the technologies that identify their unique preferences. So, a lot of focus should be applied on how to enable such markets to thrive and accelerate, because of the sector’s track record in creating so many jobs and contributing to the economy.”