The head of Naspers, which owns SA’s largest e-commerce platform, warns that new competition watchdog regulations could give an edge to global giants like Amazon over local e-commerce firms in a growing retail sector.
At the beginning of August, the Competition Commission, which launched an inquiry into the digital economy in May 2021, called for Takealot to split its marketplace and retail businesses. The watchdog said that the separation is necessary to prevent Takealot from favouring its own products over those of third-party sellers and to create a level playing field for small and black-owned businesses.
Splitting the businesses would remove what inquiry chair and economist James Hodge called “a conflict of interest” presented by its hybrid platform model.
But Naspers CEO Bob van Dijk disagrees.
“We’ve actually been co-operating and engaging with the Competition Commission throughout the last two years of the inquiry but we don’t necessarily agree with the findings of the report,” Van Dijk told Business Day in an interview. “In particular, there are some market definitions in there that economists would roll their eyes [at] if they had a close look.”
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.
Naspers does not disclose the financial performance of these businesses individually. Collectively, they posted a loss of $22m (R417m) in the year to end-March. Takealot has not had a profit since it began trading more than a decade ago.
The company has been ordered to hire separate senior management teams to oversee the divisions and to stop promoting its own products above those of third-party sellers. It may also no longer enforce the rule that suppliers cannot sell goods at a lower price on their own websites.
The commission said that while Takealot operates a beneficial marketplace, it can do more to support black businesses joining the site by offering expertise and discounts.
The aim of the inquiry was to promote fair competition online and ensure small and black businesses can take part in the digital economy, which is dominated by large multinationals.
Constraint
Van Dijk said the reality is that the digital economy in SA is still in its infancy and the new regulations may actually constrain locally grown businesses such as Takealot.
“Look, Takealot empowers thousands of small companies to sell, it helps consumers to get stuff they want at a good price. So to go and get, at an early stage, all kinds of regulation in there might actually hurt customers, it might hurt SMEs. We will continue to talk to the Competition Commission about this issue.”
The report did not impose any measures on other online retailers that have physical stores, such as TFG, Checkers and Makro, or on foreign competitors such as Apple, Google, Booking.com and Shein, which the commission had initially targeted but later softened its stance on.
Van Dijk is particularly bothered by this discrepancy, especially when considering that Amazon — which is expected to start trading in SA soon — will not have to abide by the same rules as Takealot, given how the company is defined in the SA market.
“The thing that bothers me most is that Takealot is built by South Africans, run by South Africans’ profits. If it’s possible, they will go to SA.
“There’s lots of employment and the regulation hits a business like Takealot while Amazon, which is a $3-trillion company ... is one of those powerful companies in the world, it gets an advantage because they are not defined as a ‘leading firm’.”
Amazon has the financial muscle “that is a thousand times Takealot’s, so that is something I’m really concerned about and if Amazon makes a profit, I can assure you, you’re going to see very little of it as SA.”
The group has already started feeling some of these effects as Superbalist has started a retrenchment process to reduce staff as it battles a weak economy and increased competition from clothing retailers.
Among a host of factors, the online clothing unit is also likely to face competition from Chinese fast fashion retailer Shein, one of the world’s largest clothing chains. Said to be worth at least $100bn, Shein manufactures clothing cheaply and exports cheaply to SA. It does not pay taxes as retailers do because it sends small parcels directly to consumers, which have lower taxes. Anecdotal evidence suggests Shein goods are becoming more popular in SA.
With Katharine Child
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