Recently I had the privilege of meeting with Donna Stephens, Head of Marketing & Customer Service at eRetailer TAKEALOT.com (previously knows as Take2). We met to discuss : 1) A name change, 2) The public disclosure of the ambitious goals at TAKEALOT.com
Based on this discussion I thought it a good idea to present a perspective related to how well TAKEALOT.com is positioned to achieve these goals. Some context:
In October 2010 Cape Town based e-retailer Take2 was co-acquired by Kim Reid (former Naspers senior executive) together with New York based hedge fund, Tiger Global Management. The tripartite partnership seems to have the internal equilibrium needed to change the landscape of e-retailing not just in SA but in Africa. The acquisitions fit neatly into the [assumed] strategy of Tiger Global Management who have more than US $ 9.5billion under their control and who have been steadily investing in emerging market internet-related businesses. Kim Reid seems the ideal candidate to man-ship given his considerable depth of experience with the Naspers owned MIH Group, no stranger themselves to investing in emerging internet-related businesses. Then there is Take2, a company started by seven investors in Cape Town in 2002. Take2 quickly moved to the position of SA’s second biggest online retailer, selling books, DVD’s, games, CD’s electronics, toys and much more … with what I am told is a very loyal consumer base.
On announcement of, without doubt, very ambitious goals the media responded with what could be best describe as “˜stoking the fire,‘ perhaps to determine just how much of a threat TAKEALOT.com represents to established and market leading e-retailer Kalahari.net. After-all there is an old saying that goes: ” If you try to steal the giants lunch, the giant is likely to eat you for lunch.” In this case I assume that by announcing the following goals….
“¢ To become Africa’s fastest growing, simplest, most customer centric internet mall (I like that internet mall)
“¢ Provide a wider offering
“¢ Increase depth of categories
“¢ Continue providing in-depth consumer service, interaction and relevance
“¢ Drive revenues past R1 -Billion within five years (from a annualised base of R 75 million)
….. and given that Kim Reid is ex-Naspers the storyline could be easy pickings for a storyteller who favours the controversial. Personally I do not find the controversial angle as interesting so let‘s take a look at the e-retailing industry and how TAKEALOT.com is positioned within this industry.
Before we get to looking at the business let‘s tackle the issue of the name change from Take2 to TAKEALOT.com, Why? Simple, post the acquisition and upon crossing the t’s and doting the i’s – a trademark conflict was uncovered. From my discussion with Donna, I gather that every effort was made to negotiate a retention of the name however the end result being unsuccessful, necessitated the change in brand. A name change by any brand is certainly cause for alarm bells to go off, because as any brand marketer knows, brand equity is not something that is easily bought. Even more so it pisses consumers off, especially those that are resistant to change. The one thing you do not want to do on your journey to growth is ditch the consumers that have helped you build your businesses foundation, especially as a result of not managing a name change well.
In this regard my opinion is that although the name change does represent risk to the existing business, the risk is manageable. Also given the ambitious goals, to do a name change now would represent significantly less risk than doing a name change in the future across a larger consumer base. An educated implication of moving to TAKEALOT.com now is; there will no doubt be a loss of a small percentage of the existing consumer franchise, due to amongst other reasons consumer resistance to change. Whether this loss will be temporary or permanent will be based on the marketing efforts executed by TAKELAOT.com to manage this transition, something which Donna reassures me, is top of mind for her team. Taking a closer look:
There is a fairly common understanding across the market that the tipping point for the e-retailing industry within a country is determined by comparing the money value percentage of e-retail (online) sales within a country to that countries total traditional retail sales. In developed markets it has been observed that the tipping point is where the online sales represents 1% of total traditional sales, implying that the 1% mark is where you see upscaling i.e. there is increased new entrants into the online space – either by traditional retailers moving into online or by new entrants to the online ecosystem and increased adoption by consumers of e-retail.
In South Africa the estimated value of online sales as a percentage of total retail sales is 0.4%. In addition, internet penetration within SA is estimated at 12% (6 mln users) and lastly South Africa is estimated to have credit card penetration of 16.7 %. These three elements, however not in isolation, are critical elements in determining the potential growth of the online market in SA. As a point of reference across developed online markets the following represents the percentage of online sales to total retail sales across the respective markets: Korea (9%), UK (8%), USA (4%), Japan (3%) and China (3%). Interesting to note is that South Africa is further down the development path versus other African countries e.g.
17.1 mln internet users (22% penetration)
<0.01% online retail penetration
2.5% credit card penetration
44 mln internet users (29% penetration)
<0.01% online retail penetration
2.5% credit card penetration
0.2% credit card penetration
Summary: South Africa is not quite at the upscaling mark. To reach that mark would require continued internet penetration growth, something which falls outside the direct control of TAKEALOT.com. It would also require either an increase in credit card penetration and/or the adoption of alternative payment platforms e.g. mobile payment platforms, both of which have proven to be challenging in SA. Also a sizable portion of the internet users in SA are users that demonstrate reluctance to the adoption of e-commerce (a major reason being lack of trust in internet security related to provision of credit card details), something which will prove to be a marketing challenge. To focus on other African countries would require innovative business models and based on the above figures would perhaps not be the most effective resource allocation for the short term. Expanding into other African countries is a must for the medium to long term, especially when one looks at the positive macro indicators across the African content e.g. GDP growth, growing middle class and their related purchasing power, mobile penetration and increasing accessibility to broadband access.
In the short term however commercial growth for TAKEALOT.com will most likely originate from South Africa, which would imply :
competing aggressively for existing online sales
Competing aggressively at acquiring new adopters of e-commerce
Driving an increase in the adoption rate for e-commerce amongst existing internet users and increasing the adoption rate for e-commerce amongst consumers who have not yet ventured onto the internet but have the means to.
So how well is TAKEALOT.com positioned?
As a brand neither Take2 nor TAKEALOT.com has broad awareness across internet users and the general population in South Africa. This is attributable primarily to very little marketing support by the previous administration. Donna and her team have conceptualised both Above The Line (ATL) and Below The Line (BTL) campaigns that will drive awareness of the value proposition, as part of the re-launch. The challenges that this team will face further down the line will be “˜grass root education‘ i.e. Driving education amongst: consumers who demonstrate reluctance in adopting e-commerce and with consumers who have not yet ventured onto the internet but have the means to. The objective, to build trust in the internet, e-commerce, e-retailing and most importantly TAKEALOT.com. This is going to require utilisation of traditional communication channels, mobile and digital i.e. social media, direct marketing. Most importantly this is a continuous marketing effort and one that would need to be refined consistently. To answer these challenges TAKEALOT.com has appointed M&C Satchi Abel as their Agency of Record. As newcomers with depth of experience this agency certainly is hungry to deliver. Time will tell how well they do and as the saying goes “œthe pressure is on!!!!“
Donna also mentioned that there are constant discussions with suppliers to explore alternate categories as well as specialist managers are being brought on board to improve overall category management and online merchandising. An interesting component to exploring new categories and merchandising would be getting the balance right between listening to what consumers need (Consumer Needs Research) and trying new things whilst measuring effectiveness through implementation. Getting this area right could be significantly advantageous to the bottom line i.e. through cross-selling, consumer recommendations, special offers etc. A challenge in this area will be dealing with established (brick and mortar) companies and brands (collectively – suppliers) that do not see the value of venturing into the e-commerce space just yet. Those companies and brands that do form partnerships with TAKEALOT.com may just find themselves in the first mover advantage seat, assuming off-course these suppliers are not already in bed with Kalahari.net. The TAKEALOT team are going to have to keep at this and work at it relentlessly… The tipping point will come. In this regard my opinion is that TAKEALOT.com have a good vision. This is also a tough one because this has a direct impact on both the end consumer and the business in terms of rand value.
Next the supply chain and warehousing. Although a very traditional [industrial] model TAKEALOT.com seem to be well positioned in this area as a result of their recent acquisition of a specialist logistics business and a second warehouse in Gauteng. These acquisitions coupled with the Cape Town warehouse will allow for the company to scale up operations. Strategically owning the logistics business provides a significant advantage as TAKEALOT.com could leverage this to differentiate themselves on speed of service delivery and quality of service delivery (aspects which make a difference to an online shopper). Growth opportunities here would be to look at alternative business models to reach the broader middle classes leveraging the supply chain as a growth driver.
Lastly with regards to the e-retailing platform and payment platform. Having platforms that are limited to those that are typical of e-retailers i.e. Website geared for desktops and a credit card payment platform, will restrict growth opportunities further down the line. This is also a tough challenge to overcome but one that if met will yield significant success.
In conclusion, my opinion is that for where TAKEALOT.com find themselves at the moment, the structure and plans that are on the table provide a sound strategic foundation. There is plenty room for experimentation, however, to navigate the growth path is going to require management that Napoleon would describe as “œplacing an iron hand inside a velvet glove“.