Insiders reveal how Takealot dominates online shopping in South Africa

If you want to import or launch a product and sell it online in South Africa, Takealot Marketplace is by far your best option. It does, however, come with very strict rules.

Merchants who spoke to MyBroadband on condition of anonymity explained that Takealot’s platform for third-party sellers offers tremendous value, but its dominance also places them at Takealot’s mercy.

Takealot’s marketplace does have competitors in the form of Bidorbuy and Makro. Loot also announced the launch of its own third-party marketplace earlier this year.

However, merchants who operate on multiple platforms say that sales through Takealot completely dwarf other channels.

“Takealot is probably 95% of our turnover,” one seller told MyBroadband. “For every 30-40 orders on Takealot, we maybe do one on our own website.”

The reason Takealot dominates the space is simple – its platform was built with a huge investment in logistics.

This allows Takealot to manage the quality of service of buying and shipping through its platform from start to finish.

Adding eggs to your basket

Sellers told MyBroadband that there is a cost to gain access to Takealot’s customers and logistics – a percentage of their revenue and their autonomy.

Part of the nature of ecommerce is that merchants don’t keep stock of every single item they sell. Such items are sold on a “lead-time” basis and the listing will be worded like: “Ships in 5–7 working days”.

Takealot places strict deadlines on merchants who sell products on a lead-time basis to make sure that they are shipped to customers on time. It also limits the number of lead-time orders that may be cancelled.

For example, Takealot might require you to deliver 98% of your lead-time orders within five business days, and only 1% of your lead-time orders may be cancelled.

Whether you’re a seller who has figured out how to import goods through Alibaba and resell them on Takealot or someone who produces something locally and sells it online, if you under-perform on your service level agreement (SLA) the Takealot Seller Compliance division will issue you with a warning.

After a final warning, sellers who don’t get their SLA compliance up to par will have their lead-time privileges disabled for two weeks. The decision can be appealed, but it can take more than a week before appeals are heard and they take up to another five business days to process.

This system places pressure on merchants, but is great for consumers.

When something goes wrong, though, it can be catastrophic for sellers who rely on Takealot for their income.

In June, MyBroadband heard from sellers who had their lead-time privileges revoked and were being blamed for delivery delays.

However, emails between sellers and Takealot showed that the sellers were struggling to make bookings at the Takealot distribution centre to deliver the goods that customers had ordered.

Sellers stated that for many of them this was a huge issue, as most of their items are provided on a lead-time basis.

Aside from not being able to sell, having your listings dropped from Takealot can have a significant long-term impact on your business due to the way its algorithm ranks products.

One seller explained that products that sell less frequently than other, similar products are ranked lower.

“If you have a product that sells once a month, the algorithm will rank it at the bottom. If you have something where you move thirty units a day, then [Takealot] lists it the top.”

Centralised versus decentralised logistics

While the strict rules associated with Takealot’s Marketplace and centralised logistics can make life difficult for sellers, alternative models have not been as successful in South Africa.

Makro’s online shopping service, for example, leaves it up to third-party sellers to send packages to shoppers.

This has caused so many problems that Makro is reportedly dropping many sellers and products from its platform.

Combined with Makro’s own order delivery delays, its online platform has become synonymous with delivery problems.

Massmart has said that it is aware of these issues and has plans to address its logistics challenges.

Protecting buyers from sellers, and sellers from platforms

Significant strides have been made in South Africa to protect buyers from unscrupulous sellers and scammers.

Platforms like Takealot Marketplace further try to ensure that buyers get the best possible experience while offering sellers access to a huge audience and unburdens them from having to worry about customer delivery logistics.

However, sellers have expressed concern over the amount of power Takealot now wields over South African ecommerce.

“Everyone’s too scared to speak out because they’re afraid of losing their income,” one seller said.

There is one big thing discouraging Takealot from mistreating third-party sellers on its platform, however – the income it generates from these sellers.

Back in 2017, Takealot CEO Kim Reid stated that he wants to grow the Takealot Marketplace from generating 17%–18% of the company’s gross merchandise value (GMV), to 40%–50% in the following 3 to 5 years.

While Takealot has declined to comment on its progress towards that goal, Naspers’ latest results show that the Takealot Marketplace grew its GMV by 77% between 2019 and 2020.

This was one of the main drivers of Takealot’s overall year-on-year growth of 46% GMV.

The success of Takealot’s Marketplace means that there is a symbiotic relationship between Takealot and sellers, with incentive for both parties to ensure that the system works well.

Takealot was asked for feedback regarding its marketplace, but the company declined to comment.

Now read: How Takealot handles warranties on big-ticket items

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Insiders reveal how Takealot dominates online shopping in South Africa