The silent threat to South African online shops

In the past financial year, Naspers invested $202 million (R2.7 billion) in Takealot, and through the investment increased its effective stake in the company to 96%.

Over the past year, Takealot has increased its gross merchandise volume by 57%, and this growth is expected to continue.

While Naspers did not reveal how much revenue Takealot generates, industry speculation puts it at over R3 billion per year.

There is therefore no online shop in South Africa which comes close to Takealot’s scale and revenue, and its dominant position gives it a significant advantage over its competitors.

To further strengthen its position, Spree and Superbalist will merge to form FashionCo, which Takealot will run.


Silent threat to SA online shops

It is understandable that smaller South African online retailers are watching Takealot closely, trying to figure out how they can compete against the giant.

However, the biggest threat to online players in South Africa may not come from Takealot – but rather from international companies targeting local consumers.

While Amazon is the best-known international ecommerce retailer which ships directly to South Africa, many other companies from the United States and China are now targeting local shoppers.

These companies offer products at lower prices than South African online shops, and with direct shipping consumers often do not care where the goods come from.

Advertisements on Google Search and Facebook (below) clearly illustrate how international online shops like Gearbest, Cafago, and Wish are targeting local consumers.

Gearbest

Cafago

Wish


Local online shops are facing an uphill battle

Two ecommerce players, who spoke to MyBroadband on the condition of anonymity, said local shops cannot compete on price against Amazon or the Chinese players.

They said the only real benefit which local ecommerce players can offer is faster local shipping, but that is usually not enough to create loyal customers.

There are also the benefits of local product support and guarantees, but these factors do not rank highly when a client can get a big discount from an international retailer.

A dagger in the heart for most ecommerce shops in South Africa, however, will be if Amazon establishes a strong local presence.

One of the industry players said there does not appear to be a way through which local online shops can fend off international companies targeting local customers.

Even if a consumer has a bad experience with one online store, they will move to another international shop which offers them the best price.


Now read: Takealot increased sales by 57% in one year

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The silent threat to South African online shops