Takealot is betting a large part of its future growth on a subscription service that includes benefits such as next day delivery, through a tie-in with its delivery unit.
In recent years, many businesses have shifted their models towards recurring revenue, driven by subscription services.
Such models allow businesses to have a recurring streams of revenue from customers as opposed to one-time or irregular purchases. Customers are offered lower costs for certain products and services, or access to a bundle that puts various offerings together. The Naspers subsidiary has decided to go the route of a bundle.
In May, SA’s largest online retailer launched TakealotMORE, a subscription service akin to Amazon Prime, offering quick, free delivery and collect options on the platform, as well as free delivery for orders on the Mr D app.
“Amazon started with Prime. E-Mag has Genius in Romania. Flipkart and Checkers have a subscription programme. It makes sense because you add value to the consumer,” Takealot group CEO Frederik Zietsman told Business Day during a media briefing on Tuesday.
“What consumers are looking for more than anything else is a one-stop shop, where they can get whatever they want and only have to pay one fee.”
Founded in 2011 and owned by Naspers, Takealot — made up of takealot.com, fashion outfit Superbalist and food delivery business Mr D Food — is the largest e-commerce business in SA. It accounts for about 2% of the overall retail market, which is dominated by brick-and-mortar outlets such as Shoprite and Mr Price.
While subscriptions have been growing in popularity as a way to lock in customers for the long term, the number of subscriptions that consumers have to contend with, from gym, video on demand, music streaming, pay TV, software and even for vehicles, has led to a state of “subscription fatigue”. Even then, Takealot believes its bundled offering is enough to entice consumers to take on another subscription.
“Why we believe we can bring a new subscription [to the market] is because we are the only platform that can offer grocery, restaurant/food delivery and general merchandise e-commerce in one platform. There is no other subscription service that is like that and it would be hard to think of anyone that can do that.”
This comes as Takealot reported another full year of losses for its business, dragged down mainly by Superbalist.
Takealot.com and Mr D reported a profit in the year to March 2024.
Its gross merchandise value and revenue grew 13% on an organic basis to $1.523bn (R28.1bn), while it was up 8% in local currency, excluding any merger and acquisition activity. The group narrowed its trading losses by 36% to $14m.
Growth continued despite challenges including a tough consumer environment, driven by the rise of interest rates and high inflation. “There was also increased fragmentation as competitors continue to invest heavily in e-commerce capability. Temu and Shein have made inroads in the SA market and the recent arrival of Amazon will intensify competition further,” Takealot said.
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