Takealot is now almost the size of Game

On a ‘sales through the tills’ basis, it’s already 1.5 times the size.
The front desk with the conveyer from the warehouse at Takealot’s pickup point on the bridge over the N1 between Joburg and Pretoria. Image: Neil McCartney

The Takealot Group, comprising Takealot.com, Superbalist and Mr D Food, is now 81% of the size of Massmart’s Game when comparing revenue only.

In the year to the end of March, Takealot reported revenue of $827 million, which equates to R12.3 billion at the average exchange rate of those 12 months. By contrast, Game reported 52-week sales to the end of December of R15.3 billion.

These comparisons are not strictly apples-to-apples as Takealot’s revenue includes all first-party sales through its Takealot.com website, its commission on marketplace sales on the platform, those through Superbalist as well as all commission revenue earned on Mr D Food (which will likely be somewhere in the single digit percentage of billings range, net of course).

Game’s figure is a sales-through-the-tills figure, of which the vast majority is actual sales of products.

But that Takealot was half the size of Game on a revenue basis last year shows how rapidly the former has grown, and the latter, well, hasn’t.

Read: Massmart doubles down on everything but horror-show Game

Massmart’s Game is the most obvious overall comparison as it remains one of the largest general merchandise retailers in South Africa. Sales were down 8.7% year on year. Notably, Game reported a trading loss of R1.031 billion, equal to a trading loss margin of 6.7%.

Takealot competes head on with both Game and Makro in categories such as televisions, appliances, consumer electronics, and textiles. The Takealot group has grown revenue by 25% in rand terms over the last year (Naspers reports in US dollars). Naspers says Takealot.com grew revenue by 29% in the year.

Gross merchandise value …

But far more impressive is the growth of gross merchandise value (GMV) across the group. In 2022, this is up by 46% to $1.493 billion – or R22.28 billion.

This is one-and-a-half times (146%) the sales of Game last year.

Naspers does not split out the breakdown per segment within Takealot, but Takealot.com’s GMV growth was 27% in FY2022. Superbalist – which Naspers now owns 100% of following a complex transaction with subsidiary Media24, which used to own 51% – grew GMV by 42% from FY2021.

Mr D Food was the star performer in GMV growth, with an increase of 51% year on year. However, in this business Takealot will ‘only’ earn a commission or fee on each takeaway delivery.

Swings and roundabouts

The group is still reporting losses, with a loss of about R104 million ($7 million) equivalent to a 1% trading loss margin. This loss margin is similar to its blockbuster lockdown year in FY2021. So-called ‘adjusted’ Ebitda (earnings before interest, tax, depreciation and amortisation) has close to doubled from $8 million (R130 million) in FY2021 to $15 million (R224 million) in FY2022.

Again, it doesn’t provide specific breakdowns but it does say that Superbalist “improved its trading loss margin by almost 2 percentage points to 7% during the year”.

This means Superbalist is still losing R7 on every R100 in sales.

Given this information (that Superbalist is still firmly loss-making), one could construct a scenario where Mr D Food is unprofitable on an outright basis, but that Takealot.com is. Much depends on where the delivery costs are being accounted for, given the dependence Takealot.com has on the Mr D Food delivery network to handle its last mile.

Because the group’s overall trading loss is 1%, it means that Takealot.com and Mr D Food together offset the Superbalist loss (7% trading loss margin) by some distance.

Read: Pick n Pay ups on-demand grocery delivery ante with Takealot deal

The group says Takealot.com’s marketplace, or third-party sales from resellers, “continued to outpace first-party sales and accounted for 52% of GMV. This means more than R500 of every R1 000 in sales on Takealot.com is for third-party products. This is likely significantly more profitable for the retailer as it carries no risk in holding stock.

Last year, it was estimated that 65% of Amazon’s $600 billion in worldwide GMV was from its Marketplace, or sales from third parties using its platform for fulfilment and delivery. Naspers says in the last financial year “there were 5 899 active sellers [on the Takealot platform], up from 310 sellers seven years ago”.

Amazon is reported to be entering the South African market in early 2023.

Naspers says “the pandemic has accelerated the longer-term momentum behind ecommerce in South Africa and there is still much room for further growth”.

It adds: “According to Euromonitor, the total ecommerce market is projected to reach some R98.6bn by 2024 and ecommerce penetration (including grocery) is forecast to reach 6.4% by 2023.

“This is well below many other countries – from China to Brazil – and it highlights the vast potential for South Africa and for Takealot”.

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