Takealot has helped revolutionize online shopping in South Africa. For over a decade long, the company has evolved from its humble beginnings at a warehouse in Montague Gardens to a continually expanding ecommerce giant.
The online retailer was launched by Kim Reid in June 2011 with a simple goal in mind; to be the largest, easiest, and most consumer centric online shopping destination in the continent of Africa.
Takealot started with just one category – selling books and DVDs on the platform – which is typically what most e-commerce platforms, such as Naspers former subsidiary Kalahari, 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.
The e-tailer is continuously improving its infrastructure to grow and scale its presence. The company now has over 100 pickup points across South Africa.
With distribution centres in Cape Town, KZN, and Johannesburg, Takealot started with 24 employees when it launched its online retail business and 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.
Takealot’s business model like many other online platforms in South Africa provides the infrastructure for the company and other sellers to sell their goods. It is an online marketplace that offers a variety of products and allows other third parties to sell their items on the online marketplace.
Apart from its own retail line, Takealot has a thriving marketplace for third party retailers that can use the online platform for sales, returns as well as its warehousing and fulfilment capabilities.
The online retailer charges a subscription fee for the third parties that sell their products on their platform and also earns a commission from the products the company sells itself on the online marketplace in addition to advertisements.
Takealot has achieved transient competitive advantage over its rivals by constantly analyzing the markets and adapting accordingly to satisfy all targeted demand. According to the NRF, 33% of millennials are value-driven shoppers and 93% of Gen Z shoppers shop bargain retail
This in short suggests that Takealot’s business model is appealing to a huge number of consumers most of whom are the retail customers of tomorrow. In the early days, Takealot was faced with fierce competition from companies including Bidorbuy and Makro but quickly turned the tables when merging with Kalahari in 2014 and receiving a $100 million investment.
Also, in 2014 the holding company acquired MR Delivery giving them control over their own logistics network, thus lowering their costs drastically enabling them to offer the same products at lower costs
Takealot mission is to be the most customer-centric online shopping destination in Africa, and has built a foundation on the simple concept that the customer comes first.
The success of the business is based on its ability to delight customers with amazing customer service. Takealot is dedicated to improving the customer experience, from the moment you arrive on the website or app and place an order to when it arrives at your door.
Background
To understand Takealot’s rise to the top, let’s take it back to the year 2000, when Kim Reid left Sony Music as a financial director and joined Multichoice as the company’s CFO. After working at Multichoice for close to a year, he joined internet service provider M-Web in 2003 with an assurance that he’d increase its focus more on business clients.
Reid worked a few years at M-Web then moved higher on the hierarchy of Naspers by joining MIH Africa, the company’s division responsible for handling its online businesses.
Around 2010, Tiger Global Management, a US based holding company which invests in a number of Internet businesses in emerging markets including China, Brazil, Russia and India, was scouring the South African e-retail marketplace and Take2 stood out as best suited to the firm’s strategic vision.
Take2 was established in 2002 by Neil Smith alongside Waine Smith and Jose Pereira. Prior to getting noticed by Tiger Global, it had managed a turnover of 75 million rands in its last financial year off a customer base of over 50 thousand active consumers.
While running MIH Africa, Reid had several interactions with Tiger Global because the firm had bought some of the companies he was looking after and when it found out he had left Naspers, it approached him to see if he would want to drive a local business and he said yes.
Tiger Global acquired Take2 in 2010 and claimed 83% of the acquisition, while Reid held 15% as its new CEO and two other silent partners took home the remaining 2%.
With a staff of 25, Reid was forced into early changes 7 months into his reign as CEO, he couldn’t register the Take2 trademark and was unable to buy the mark from the company that had registered it, so he rebranded Take2 to Takealot because the dot-com domain for Takealot was available.
Reid then launched Takealot’s first comprehensive online and offline marketing campaign with the help of its ad agency, M&C Saatchi Abel, to officially announce the new eccomerce brand to South Africans and also accelerate his plans of generating R1 billion in annual sales within five years.
In June 2011, takealot purchased a minority stake in Mr Delivery, as the company sought to build out its own in-house logistics expertise and also speed up its goals of same-day deliveries.
Mr Delivery’s origins trace back to 1992 in Cape Town when ordering was done over the phone from printed menus on the fridge at home.
The company further increased its stake to a controlling 60% ownership of Mr Delivery in January 2013. During this time, Mr Delivery was transitioning from a food delivery business into a Business to Consumer distribution business specialising in last mile deliveries to the consumer market.
In May 2014, Takealot raised $100 million from Tiger Global Management for continued expansion in South Africa and sub-Saharan Africa.
With funds available to strengthen its position, Takealot started by fully acquiring Mr Delivery in June 2014, in what has since proved to be a very successful acquisition.
After the acquisition, Mr Delivery was then split into two delivery businesses:
Firstly, the food arm of Mr Delivery was rebranded as Mr D Food in 2016, and again in 2017 as Mr D, and reengineered as a successful mobile app-based business.
Last year the group gave Mr D a new look to represent the business’ move from food delivery to a broader on-demand delivery service.
Today the brand takes millions of orders through its mobile app, boasts partnerships with over 8 000 restaurants including South Africa’s largest restaurant brands and Pick n Pay stores. It delivers to more than 2500 suburbs in all 9 provinces across SA.
While food delivery was always the core of Mr Delivery, the company added an inter-city non restaurant courier service in 2011 called Mr D Express in order to expand into logistics, and also increase revenue.
After fully acquiring Mr Delivery, Mr D Express was rebranded to Mr D Courier, and then again to the Takealot Delivery Team in 2016, which is a high-tech delivery operation geared for e-commerce speed and complexity.
The brand mainly delivers packages to Takealot Pickup Points across the country, thus allowing shoppers to collect orders at their convenience with over 90 branches nationwide and over 15 thousand drivers. With a focus on cutting-edge technology, the Takealot Delivery Team offers an uncompromising level of service to both customers and suppliers.
In October 2014, Takealot and Kalahari, one of South Africa’s earliest e-commerce stores launched in 1998, announced a merger with the aim of competing with both traditional retailers in South Africa and also global e-commerce giants such as Amazon and Alibaba.
The move was driven by the fact that, without scale, South African etailers couldn’t successfully compete against the local brick and mortar retailers and foreign companies such as Amazon and Alibaba.
After many years of losses on Kalahari and four years on takealot, the representatives of both companies realised they had to work together not only to survive but prosper too. The Competition Commission of South Africa approved of the merger in February 2015.
Under terms of the deal, Naspers acquired shares from Tiger Global such that the two companies had an equal shareholding in the merged business whereby they each held about 41% of the equity. The merger allowed both companies to trade separately and service their customers as usual through the festive season.
However after 7 months into the merger and 17 years of online retail existence, the Kalahari brand was out of business. Today if you try to access Kalahari.com, it will redirect you to the Takealot.com website.
According to Takealot, when taking the decision to discontinue Kalahari, they looked at the momentum of the two businesses, and found that takealot continued to grow at a tremendous rate and passed Kalahari traffic in December to January 2015. So the decision to change the brand was therefore one based upon pure momentum.
Another reason was based upon economics and the continued ability to innovate into the future. Takealot’s website was developed internally while Kalahari’s was built using various licensed platforms which were5 costly and difficult to innovate on.
Looking back, 2014 was such a monumental year for Takealot, besides the capital injection, merger and acquisitions, the company also launched its online marketplace for 3rd party sellers.
This wasn’t an original idea though, it was initiated by ecommerce giant Amazon back in the year 2000 when the company launched its very own Amazon Marketplace, which has since generated a billions of dollars for the company.
So therefore it was not surprising when Takealot followed the global online marketplace trend, and just like the originator, the company has benefited significantly too.
South Africans have various reasons for selling on the platform, some cite a desire to be their own boss with the flexibility to work from any location, while others are just lookin for extra income to supplement their existing income. Whatever the reason for selling, Takealot marketplace is their number one go to platform for selling online.
Despite posting a loss of R223 million in the six months to end-September last year, Takealot said its third-party marketplace sales with over 5899 sellers, continued to outpace first-party sales. In 2022, these marketplace sales accounted for 52% of Takealot’s total gross merchandise value and they’re expected to continue growing.
Shortly after securing the Kalahari merger, Reid was also talking to another ecommerce competitor called Superbalist. The fashion website had been looking for investors for some time after its launch in 2010 with no success whatsoever.
Before Tiger Global’s $100 million investment, Reid was also talking to another ecommerce competitor called Superbalist. The fashion website had been looking for investors for some time after its launch with no success whatsoever.
Superbalist was initially launched in 2010 as CityMob, a group buying website which was founded by Claude Hanan, Luke Jedeikin, and Daniel Solomon. The website featured daily deals – typically discounts on meals, hospitality, events, and travel packages. A deal was unlocked to consumers once the minimum purchase threshold was met.
In early 2013, CityMob was rebranded to Superbalist and began selling international fashion brands like G-star RAW and Diesel.
The 2013 to 2014 years were significant for the company, they were growing exponentially month after month and needed to seek investment to further fund their expansion and inventory holdings, so they started exploring outside investment.
They met with a lot of potential investment groups who had expressed interest in them but in the end, nothing happened.
That was until early 2014, when the founders met with Kim Reid and started early discussions with the group about investment opportunities. A 3rd due diligence followed, and on August 21st, they met at Cliffe Dekker Hofmeyr Attorneys in Cape Town to conclude the deal. The takealot group finally acquired 100% ownership stake in Superbalist.
Superbalist has since become one of South Africa’s biggest and most-loved online fashion destination which sell the country’s widest selection of fashion which caters to women, men, teens + kids with inclusive and wide-range sizes.
The online fashion retailer offers more than 30 thousand private label and third party branded products through class-leading mobile and web platforms while delivering to every corner of South Africa through its integrated in-house delivery team.
According to an official release issued by Kim Reid and Takealot, the buyout was aimed at broadening its appeal among millennials after noting that the millennial generation was the most powerful and relevant market on the planet and thus, they acquired a business run by millennials, focused on millennials.
In June 2018, Media24 and Takealot announced that they will merge their online fashion brands, Spree and Superbalist, thereby creating a fresh online fashion platform for South African consumers.
According to reports from both companies, merging the two businesses into a single entity had the potential to create a larger, more focused platform on which to build a substantial online retail, footwear and apparel business.
Under terms of the deal, the new venture was held 51% by Media24, while Takealot Group owned the remaining 49% of the shareholding. Takealot was given the responsibility of running the day-to-day operations and management of the business.
The spree brand was phased out after the merger and integrated into the system of Superbalist.
In 2017, Naspers paid out R960 million to increase its 41% shareholding in Takealot to 53.5%, the competition commission gave green light to the deal which ultimately put the tech conglomerate in the driver seat of Takealot. A year later, Naspers bought out Tiger Global’s remaining stake, leaving only a small number of shares in the hands of management, which the Cape Town headquartered company acquired in 2021 to finally own Takealot by itself.
The success of Takelot’s business model also rests on the company’s strategy when it comes to logistics and distribution.
Takealot has distribution centres totaling 75 000 square meters in the Western Cape, Kwa-Zulu Natal and Gauteng. The distribution centre in Johannesburg can store almost 4 million products at any time and about 10 000 parcels are dispatched per hour.
The company has three large warehouses, in Cape Town, Durban and Johannesburg, and also several branches throughout the country that handle orders for Takealot dot com and its sister company Superbalist.com
In April 2019, the online retailer opened its first series of collection points, branded Takealot Pickup Points. An innovative alternative option to delivery. This way customers can collect and return orders any day of the week. So far more than 100 Takealot Pickup Points are available in all the 9 provinces to enable the company to serve its 3 million plus customers all over the country.
Customers make orders on the Takealot website, the products are then shipped and received at the distribution centre’s receiving depot. Takealot’s business model ensures that on average 80% of the orders are already in stock in the warehouse. A smooth process takes place between the delivery centre’s receiving depot, all the way to the storage of goods on shelves, boxing, and packaging, as well as classifying each order according to its delivery destination.
The online retailor makes use of conveyor belts to systematically track the goods and for the correct classification of items before the collection trucks arrive. Takealot trucks then collect orders and distribute them to the local branches. Thereafter, the items are either taken to the collection points or delivered directly to the customer.
As a startup grows and scales through the early stages and beyond, it sometimes be challenging for a founder CEO to keep up with the fast-changing startup environment.
As a startup grows, a founder’s leadership skill set may no longer meet the business’ full range of growing needs. Even if the founder CEO meets the new demands of their startup success with skill acquisition to lead and grow the company, a lack of skills or qualities can become a crucial deficit.
When this point was reached in the case of Kim Reid and Takealot, he stepped down as the CEO in February 2021, and took the position of the group’s chairman whereby he focuses on the group’s longer-term growth ambitions.
He was later even appointed as the CEO of Blue Lake Ventures Group which owns BetKing on the 1st of August 2022, but that’s a story for another day.
Anyways, Reid was succeeded by Mamongae Mahlare, she joined the Takealot Group from Illovo Sugar South Africa where she was managing director. As a seasoned business leader, Mahlare brings with her a strong balance between operational experience, strategy, innovation, engineering, and brand, having previously worked at organisations such as SABMiller, Unilever and Coca-Cola.
She came at a time when takealot was in a tough position, with the arrival of new competitors set to shake up the online industry.
According to World Wide Worx and Mastercard’s online retail study, South Africa’s online retail industry reached 55 billion rands in 2022, a 30% growth from 2021 mainly driven by an ongoing boom in demand for home deliveries.
Despite its continuing dominance of the South African online retail market, Naspers-owned Takealot has seen its Growth Merchandise Value growth plummet from 72% in 2021 to 15% in 2022.
This slowing down growth rate could not have come at a worse time. Apart from increasing competition from local players, Takealot’s other headache is the imminent arrival of Amazon, the biggest online retailer in the world, and American retail giant Walmart’s full acquisition of Massmart which owns Makro, the South Africa’s second largest online retailer.
Despite still accounting for over half of all online retail sales in the country, the explosive growth of competing platforms like Checkers Sixty60, Mr Price, and Makro, is a cause for concern for Takealot.
Amazon and Walmart’s looming ecommerce proxy battle in South Africa coupled with an increasingly competitive local ecommerce front seems to be forcing Takealot to get aggressive with its growth initiatives.
To defend its market share, Takealot pushed its delivery footprint further into the townships after Pick N Pay groceries platform launched on the Mr D app in late 2022.
The agreement between takealot and Pick n Pay allows Mr D app users to order over 10 000 food and grocery products, at the same price as in-store, for delivery to their door in an hour. Customers place the order on the Mr D app, Pick n Pay does the picking in its stores, and Mr D’s delivery partners then collect and deliver the order to the customer.
This was followed by Takealot launching a “pick-up counter” initiative in partnership with Pick N Pay again, if successful, the counter will be rolled out across Pick n Pay’s 2,000-plus stores across the country.
The pick up counter will allow Takealot to take advantage of Pick n Pay’s extensive geographical presence to tap into South Africa’s booming online home deliveries boom and help it carve a significant market share on that front before Amazon, with its esteemed Amazon prime delivery service, hits the shores of South Africa.
We also saw the group launching a new 1-hour on-demand delivery service trial in Cape Town’s northern suburbs called TakealotNow, the service will initially be available in Durbanville, Bellville, Brackenfell, Kraaifontein, Kuilsriver, and Parow, before expanding to more locations.
A range of curated products are available for 1-hour delivery, including laptops, smartphones, beauty essentials, toys, and alternative energy products. TakealotNow is available through a section of the Mr D app, and customers can enjoy the speedy delivery up to 10 o clock.
What makes Takealot’s quest for growth a bit complex is the fact that the platform has been bleeding cash for the last four years. According to its latest financial results released in November 2022, the retailer incurred a R223 million rands trading loss.
However, if your parent company is Africa’s largest company by market capitalisation, you do not have to worry much about availability of capital to fund your growth ambitions. Takealot owner Naspers does not seem to be worried a lot about Takealot’s unprofitability streak, and for good reason.
There is still a lot of value to be unlocked in South Africa’s online retail industry and Naspers realises that Takealot, with its current dominance, is primed to be the biggest benefactor of this growth, should it play its cards right.
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