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2023-11-29 9:49 AM

Takealot’s Steady Progress Signals E-commerce Shift in South Africa

  • Takealot, a prominent South African online retailer under Naspers, significantly reduced its trading losses by 85%, showcasing substantial progress in its quest for profitability.
  • Naspers reported a surge in revenue by 9% to $3 billion, yet operating costs led to an extended operating loss of $426 million, primarily due to challenges in its e-commerce segment.
  • Despite obstacles like currency fluctuations and market challenges, Takealot demonstrated growth in gross merchandise volume (GMV) and marketplace seller base, hinting at a promising trajectory toward financial viability.
By Miriam Matoma

In a significant development for South Africa’s e-commerce landscape, Takealot, the prominent online retailer, has shown remarkable progress in narrowing its trading losses by a substantial 85%. However, amidst this leap forward, the conglomerate, including Naspers, continues to grapple with the elusive goal of turning profitable.

As reported in the financial results for the six months ended on September 30, 2023 (1H24), Naspers, a tech and investment group that owns Takealot, showcased a commendable surge in profits. Yet, the company still faces extended operating losses, particularly in its e-commerce division.

Despite a 9% revenue increase to $3 billion for the period, soaring operating costs have offset these gains, resulting in an operating loss of $426 million, a significant extension from the prior year’s $111 million loss.

Naspers’ comprehensive results encompass figures from all majority-owned and managed businesses within its portfolio. The company attributed the rise in operating losses, soaring from $111 million to $426 million, primarily to an impairment loss recognized on Edtech investments.

However, buoyed by gains from partial disposals of equity-accounted investments, such as Tencent, Naspers managed to achieve an overall profit during the period. Nevertheless, the e-commerce segment remains a challenging area, continuously recording trading losses. Naspers expressed optimism about the segment’s potential to transition into profitability by the latter half of the fiscal year.

The e-commerce sector’s consolidated revenue from continuing operations exhibited a 10% increase to $2.9 billion, driven primarily by growth in Classifieds, Food Delivery, and Payments and Fintech. On an economic-interest basis, e-commerce revenue surged 15% to $5.3 billion, despite trading losses improving from $820 million to $249 million.

Takealot’s Performance and Challenges:

Zooming in on Takealot within the South African context, the company continued to register losses, albeit substantially reduced from the preceding period. The latest figures indicated losses amounting to $2 million (~R at current rates), marking an impressive 85% reduction from the previous $13 million (~R at current rates).

Despite facing challenges such as rising interest rates, inflation, and the impact of foreign exchange rate fluctuations resulting in a $91 million blow, Takealot’s gross merchandise volume (GMV) climbed to $711 million from $700 million. However, in dollar terms, there was a 2% decline, whereas in local currency, it experienced a 15% increase.

Acknowledging the hurdles faced, Mamongae Mahlare, Takealot Group CEO, emphasized the solid momentum toward profitability. Mahlare highlighted that the takealot.com business operations are generating revenue surpassing their operational costs, marking a promising trajectory toward financial viability.

Expanding Marketplace and Growth Initiatives:

Moreover, Takealot.com has been actively expanding its marketplace seller base, reaching approximately 10,600 sellers by September 2023. Additionally, part of Takealot’s retail business, Mr D, demonstrated promising growth with an 11% revenue increase and a 15% rise in GMV in local currency, excluding mergers and acquisitions.

The partnership between Mr D and Pick n Pay, a prominent local grocery retailer, continues to scale, showcasing the potential for further market penetration and revenue expansion.

Looking Ahead:

Mahlare affirmed that while the Takealot Group hasn’t achieved profitability at a trading profit level, the positive trajectory of takealot.com’s business operations indicates a solid business foundation. The CEO expressed confidence that both Mr D and Superbalist.com are on track to follow suit in achieving profitability at the appropriate phase of their development cycle.

The ongoing commitment to growth, coupled with strategic partnerships and operational efficiencies, signals a promising path forward for Takealot and its affiliates within the Naspers conglomerate. As the company endeavors to navigate challenges and leverage opportunities, the focus remains steadfast on sustainable growth and eventual profitability in the ever-evolving e-commerce landscape within South Africa.

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Miriam Matoma

Miriam is a freelance writer, she covers economics and government news for Rateweb. You can contact her on: Email: miriam@rateweb.co.za Twitter: @MatomaMiriam

Tags: Takealot