Shein, Temu strike Takealot where it hurts as e-commerce giant grapples with loss

The Takealot Group has incurred yet another massive loss, but is counting on tax amendments that will level the playing field.

The South African e-commerce giant, which houses the Takealot, Superbalist and Mr D brands, has been wrestling with a wave of competition from the east (Shein and Temu), and the west (Amazon) as it battles to reach profitability.

But hope is on the horizon for the country’s e-commerce pioneer: from 1 July, the South African Revenue Service (SARS) will be tightening its grip on all clothing imports, which is likely to give the e-commerce giant a boost on its home turf.

Previously, customs duties for imported parcels under R500 were significantly lower (20% import duty, 0% VAT) compared to larger shipments. Known as the “de minimis rule”, the loophole was allegedly exploited by some retailers. Temu and Shein, in particular, have been accused of splitting larger orders into smaller packages to qualify for the lower tax bracket.

To create a fairer playing field for all clothing retailers, SARS will now subject all clothing imports to a 45% import duty and an additional 15% VAT.

SARS has also said it is working with courier companies, which are using an incorrect customs code for small packages, to ensure the correct duties and VAT are applied.

Previously, retailers skirted the rules around taxation of parcels worth more than R500 by undervaluing small parcels in order to qualify for a lower import duty (20%) and no VAT. This practice, says the National Clothing Retail Federation, gave these offshore businesses, which do not invest in the country or drive local employment, an unfair advantage and hurt local clothing producers.

Internet giant Naspers — which owns the Takealot Group — released its company results on Monday, revealing that the Takealot Group remains massively unprofitable.

The results for the year ended 31 March 2024 show that the group lost $14-million (R253-million) for the year.

Takealot has described the consumer environment as “challenging”, made worse by the rise of interest rates and high inflation.

Against this backdrop, it has delivered 3% growth in gross merchandise value — the total value of merchandise sold in a given period of time —  8% growth in revenue in local currency and reduced trading losses by $4-million from the previous year.

Its marketplace seller base now exceeds 10,000 active sellers.

Mr D has grown by 16% in GMV, despite noting tough trading conditions in its traditional middle-income market.

Mr D has also reached profitability for the first time, with a trading profit of $3-million.

South Africa’s online retail sector surged by 29% last year, reaching R71-billion. A recent World Wide Worx study predicts the sector will hit the R100-billion mark by 2026, capturing 10% of all national retail sales.

That study says established brick-and-mortar stores like Shoprite Checkers (whose Sixty60 rose by 63.1% growth), Pick n Pay (online sales rose by 76%) and Woolworths (online sales up by 47%) far outpaced Takealot, which only saw a 6% increase in sales, suggesting that traditional retailers are effectively leveraging their existing infrastructure and brand recognition to build strong online presences. Their strategic shift towards e-commerce, coupled with investments in customer service tools, is proving to be a winning formula. DM