Takealot looking to sell Superbalist: report

 ·8 Mar 2024

Takealot is looking to sell its fashion retailer Superbalist because of concerns about increased competition from Chinese apparel shops Shein and Temu, reported Daily Investor.

Daily Investor learned from well-placed industry sources that Takealot is investigating the sale of Superbalist.

Details about the planned sale are unclear, and Takealot declined to comment.

However, it is understood that the company’s management is worried about the competition from budget-friendly Chinese retailers such as Shein, Temu, and Wish.

Shein and Wish have a strong presence in South Africa’s eCommerce market, and Temu recently joined their ranks with a successful local launch.

Temu is a fast-growing business in the country, launching its South African site in January 2024. It is competing with established players by offering affordable products and free delivery.

The parent company that owns and operates Temu – PDD Holdings – also owns Pinduoduo, a popular e-commerce platform in China.

Numerous accusations have been made that Shein and Temu exploit tax and customs loopholes to import their products cheaply into South Africa.

It was reported recently that a national industrial policy officer for the Southern African Clothing and Textile Workers Union, Etienne Vlok, said the government should consider urgent changes to tax rules on small items to ensure fair competition for local businesses.

The National Clothing Retail Federation (NCRF) had also flagged these issues with the South African Revenue Service (SARS).

NCRF executive director Michael Lawrence alleged that Shein and Temu undercut local retailers, putting thousands of local jobs on the line and limiting revenue collection.

Temu disagreed with the suggestion that it relied on the so-called de minimis rule that lets goods of low-value enter South Africa while avoiding Customs declarations or duties.

“The primary drivers behind our rapid expansion and market acceptance are the supply-chain efficiencies and operational proficiencies we’ve cultivated over the years,” Kieran Powell, a Temu spokesperson, told Bloomberg News.

“We are open to and supportive of any policy adjustments made by legislators that align with consumer interests,” Powell said.

Suparbalist for sale

Superbalist, known initially as Citymob, was established in November 2010 by three local entrepreneurs – Luke Jedeikin, Claude Hanan, and Daniel Solomon.

Citymob quickly gained popularity among online shoppers due to its exclusive experiences, premium products, and hand-selected styles.

In 2013, Citymob changed its business model to focus on fashion eCommerce and rebranded itself as Superbalist, which eventually became the largest online fashion retailer in South Africa.

In August 2014, Takealot, which Naspers owns, acquired Superbalist after receiving a cash injection of US$100 million to expand its operations in South Africa.

Former Takealot CEO Kim Reid expressed his excitement about the acquisition, citing that the millennial generation is the most powerful and relevant market.

Despite the acquisition, Superbalist continued operating as an independent brand with its existing management team, which was led by Hanan and Jedeikin.

However, the founders left Superbalist in December 2019 and joined The Foschini Group (TFG) two years later to help the company realise its eCommerce ambitions.

Last year, Superbalist embarked on a Section 189 process that will lead to restructuring its business.

It explained that growth post-Covid has not reached the levels that had been forecast.

“As such, we need to reevaluate our structures to ensure that the business operates effectively in this current economic environment,” it said.

Takealot is now looking for a buyer for Superbalist. Industry experts said they will likely look at local and international buyers.

It is understood that Takealot is confident it can compete against Amazon, which is set to launch a South African marketplace this year.

However, it is concerned that low-cost Chinese retailers like Shein, Temu, and Wish may negatively affect Superbalist’s operations, said Daily Investor.

Experts said it made sense for Takealot to try to offload Superbalist and focus on Takealot with Amazon’s launch looming.

Daily Investor asked Takealot for comment regarding the planned Superbalist sale, but the company preferred not to comment.

“In keeping with our group policy, we do not comment on any speculation surrounding mergers and acquisitions,” Takealot said.

Profit struggle

Looking at a more South African context, Takealot continued to post a loss, though it has been reduced significantly from the prior period.

This was revealed in Naspers’ results for the six months ended 30 September 2023 (1H24).

Takelot’s losses amounted to $2 million for the period (~R at current rates), reduced by 85% from $13 million (~R at current rates) before.

Takealot’s gross merchandise volume (GMV) increased to $711 million from $700 million previously. This reflects a 15% increase in local currency, as stated by Naspers.

However, in dollar terms, there was a 2% decrease, attributed to a $91 million loss due to fluctuations in foreign exchange rates during the conversion process.

“Rising interest rates and inflation depressed consumer demand while load shedding created strain,” Naspers said.

“Despite this, Takealot group has reduced its trading losses by a significant 85% when measured in US dollar, excluding any impacts from M&A.”

Takealot.com continues to grow its marketplace seller base, which reached approximately 10,600 sellers in September 2023.

The group continues to struggle with its e-commerce segment, which is still posting a trading loss. Naspers said it hopes this segment will turn to profit by the second half of the financial year.

Read: Chinese e-commerce boom in South Africa – as local retailers cry foul

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