Earlier today it was reported that two of the largest South African e-commerce retailers Kalahari and Takealot, that have been rivals for a long time are going to merge. The value of the deal has not been disclosed.
The deal, which is yet to receive approval from the South African Competition Commission, comes after Takealot recently secured $100 million in funding from Tiger Global Management. Kalahari on the other hand is owned by the media and e-commerce juggernaut Naspers which owns various entities including property24.co.zw, OLX, Konga and Multichoice.
In a statement released by both companies and quoted on Techcentral one of the challenges the e-tailers face was that of competing without scale against South African brick-and-mortar retailers as well as global e-commerce giants Alibaba and Amazon.
‘An executive for Kalahari also mentioned the need for the two companies to work together to ensure survival after going through years of losses.
Essentially foreign e-commerce entities like Alibaba that have been operating in the same space as guys like Kalahari and Takealot have been enjoying certain advantages. One of these is the avoidance of local tax.
This aspect of foreign competition is one of the biggest challenges that comes with operating an online business. While its been passionately expressed by these two South African e-tailers it rings true for any other startup in e-tailing in Zimbabwe, or any other part of Africa.
The internet means that your competition is the large multinational that notices the same attractive market that your startup sets out to serve. If however you fail to play your local strengths (like what Alibaba did in China ironically) and aggressively push for relevance with high quality products and service, the worst will happen.
No doubt Kalahari and Takealot have been doing their best in a generally uncomfortable situation, but there’a a lot to more to take from the move these two are making. It looks like a preparation for tougher competition in a non-level playing field.
It’s started in South Africa where e-commerce is somewhat more mature, but every other e-tailer in Africa should take heed. As African tech and consumer opportunity rises, the onslaught from guys like Alibaba is yet to come and its best to batten down the hatches.