South African online stores Takealot and Kalahari are merging to the detriment of smaller e-commerce ventures.
Both Takealot and Kalahari offer a robust platform for online shopping in South Africa however this is within a small market of online shoppers, which barely accounts for 1% of the total amount of retail sales in the country.
Creating a monopoly in the market will not fare well for smaller online retail companies looking to gain ground in a tiny, competitive market with a limited number of internet users in South Africa that currently sits on an estimated 18.5 million. Compound this to the fact that a large number of these internet users do not utilise bandwidth intensive data applications – those that would be required to do online shopping tasks – the market shrinks even more.
According to Finweek, research shows that around half the population in SA (25 million) live below the poverty line earning less that R425 per month and, “even though three-quarters of people in the this BoP group own mobile phones, the usage of data applications is fairly low.”
With a strong financial backing from the Naspers group and US firm, Tiger Global Management, and a combined internet traffic flow of well over 4 million users, the merged internet property will sit on a throne of power ruling the tiny LSM 10 and above markets in the country.
Countering this monopoly is the state e-commerce market in South Africa which is, at best, still in its developing phases. This provides opportunities for companies with more tailored business solutions to effectively target the growing online market. Bridging gaps between online language barriers that Google Translations still struggles with and selling niche products are just some of the ways in which the observant entrepreneur can make inroads.
For now the majority of the online retail market in SA will be serviced by Kalahari and Takealot and online shopping systems like Edgars and Game stores currently do not stand a significant chance of grabbing a share due to their limited range of products and lacklustre internet representations. However, it is never over until the fat-walleted-lady sings and powerful brick and mortar retail chains can translate their store sales into online purchases.
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