Takeaway from Takealot: just talk a lot
The Naspers-owned online retailer is gearing up for what could be its busiest Black Friday. Having made R196m in 2018, the company is expecting 80% growth in 2019.
Takealot CEO Kim Reid spoke to Business Day about warehouses, technology and the outlook for online retail.
What is your outlook for online retail in SA?
It’s probably sitting at 1.3% or 1.4%, there’s no reason it shouldn’t grow to 7%, 8% or even 10%. Over the next 24 to 36 months, it’s very difficult to tell you what the total penetration is going to be.
For our business, we’ll continue growing at the rates we have been growing at for the next five years. There’s no reason we shouldn’t continue to do that. We’re in a very good spot; as long as we keep on executing, the opportunity to grow is there.
Having the largest centres in Johannesburg and Cape Town, what informs which parts of your warehouses are automated?
When you’re receiving [everything] from fridges to earrings, it’s very difficult to automate that process completely.
One theory is you could build one warehouse, automate it completely and have absolutely no people and spend a heck of a lot of money, then spend years trying to earn that back. Or grow your business cash flow then put the efficiencies in. That’s really the way we’ve looked at it.
Our new system has parcels moving along a conveyor belt, with a computer that can read parcel addresses sending them down one of many chutes to the correct truck based on its final destination, which is faster than human-based sorting and more accurate.
The sorting system came about because we had a look at the throughput through the business and where we were going to struggle the most. And it’s the easiest to automate because there are set places that it goes to, distribution hubs are set and you can grow them and put in additional [sorters and] chutes as you grow.
We’ve got the sorter which is now live here, which is now integrated into all of our systems. Then we’ll put a sorter in next year into Cape Town, which still uses a manual process.
How does the Durban warehouse differ from the others?
It’s more of a sortation facility. Most of the product comes from Joburg, it’s shipped to Durban, gets sorted in Durban to a different branch. It’s just more efficient that way, otherwise we’ll be trying to send trucks to particular branches.
Remember a branch is a small facility and it only has a certain capacity, so we’ve built a large facility which then does an “interim sort” to the rest of the branches in KZN.
Why did the company decide on a franchise model for Takealot branches?
Mr Delivery was a business held by private shareholders who we bought from and it was franchise at that stage, and it actually works quite well for us.
Instead of us putting infrastructure into every one of those branches and our own management to manage that whole layer, the branch owners run that part. We’ve got quite strict contracts on service delivery with each one of them, which is an incentive to do things correctly.
How does Takealot think about its investment in technology?
We are constantly developing. Our code is all selfdeveloped. So we ve got upwards of 200 engineers who work for us today, developing code in different parts of the business, specifically on the logistics side.
We spend a lot of money on engineering. If we could hire another 100 engineers tomorrow, we would. It’s finding those engineers that’s the hard part.
What are the benefits of being part of the Naspers group?
We do learn from other businesses all the time.
Naspers has been a great shareholder. There’s a company called eMag in Eastern Europe, which is also an online provider whom we discuss different things with.
We’ll discuss picking and packing rates, benchmarking, technology, how they’ve done certain things with them. They’ll discuss the same with us.
We meet with a lot of the entrepreneurs. I think that’s where we get most of the benefit from any of these guys. We’ve had the benefit of discussions with Flipkart in time as well. Naspers facilitates that type of thing. They’re well funded and they fund and back us completely, on the technology side as well. On the product side, they help us to an extent as well. They’ve got guys sitting in different parts of the world who develop products and who run methodology and everything else.
WE’LL CONTINUE GROWING AT THE RATES WE HAVE BEEN FOR THE NEXT FIVE YEARS. THERE’S NO REASON WE SHOULDN’T
WE MEET WITH A LOT OF ENTREPRENEURS. THAT ’ S WHERE WE GET MOST OF THE BENEFIT. NASPERS FACILITATES THAT TYPE OF THING