CAPE TOWN - South Africa’s online shopping superstore Loot.co.za has set its sights on unlocking further value in the business and entrenching its foothold in the competitive e-commerce industry, supported by the company’s capital-efficiency position and a sound market understanding by its top executives.
The company said that it viewed its growth strategy in the long term and is prioritising revenue growth before profitability.
Gary Hadfield, chief executive of Loot.co.za, said on Friday that the company had built a strong platform and has consistently delivered hyper growth, while hitting its margin and bottom line targets.
“We are acutely aware of the crucial areas and investments required to scale this type of business. We have conducted detailed analysis of the investment quantums received by African players and funded by the likes of Kinnevik, TigerGlobal and Millecom.”
“By comparison, we could be viewed as still being in “bootstrapping” mode, running a lean business, but with a sound grasp of where we get our gains and what will drive value creation. We will be investing a lot more in crucial areas,” Hadfield added.
Loot was launched in 2002 with a big focus on books; from 2011 to 2017 the focus has been on building a strong value chain and rapidly transforming the business into a leading and competitive 18 department R14million general-merchandise retailer.
The company on Friday said its capital-efficiency principle had seen the business grow into a top three online retail revenue-generator.
Hadfield said taking into account what’s happening locally and globally, it was essential that the company made online shopping more inclusive.
“A robust mobile-shopping offering is a crucial success factor for us to reach lower LSMs and the unbanked millennials, while delivering a great shopping experience for all our customers. Loot mobile user’s sessions have increased by 59% year-on-year, but more significantly our revenues have surged 98% year-on-year.”
A study conducted by World Wide Worx with the support of Dark Fibre Africa on internet access in South Africa 2017 showed that the South African internet-user population passed the 20million mark for the first time in 2016, reaching 21million. And it’s expected to grow to at least 22.5million in 2017.
The study also found that penetration declined rapidly as income declined - falling to 61.3% for those earning between R14000 and R18000; 42%for those earning between R3000 and R6000; and below 30% for those earning below R2500 a month.
Arthur Goldstuck, managing director of World Wide Worx, said the findings of the study highlighted the extent to which lower income South Africans were being frozen out of the internet economy.
“The research showed that a third of adult internet users rely on their cellphones as their primary means of access. For low-income users, internet access requires data costs to be taken off airtime, and those costs remain among the highest in the world,” Goldstuck pointed out.
In its strategy to make mobile more inclusive and tap into the unbanked populace, the group has partnered with SCode in a groundbreaking innovation to fulfil its targets.
Hadfield said their partnership with SCode would make it easier for unbanked people to transact with the company.
“The SCode cash-payment option solution allows Loot shoppers to check out and pay for their orders with cash and credit/debit card at places like Shoprite and Checkers’ money kiosks as well as post offices.
“When the shopper clicks to pay with SCode, he receives an SMS with a code that is presented at these kiosks for payment. This is a first for South Africa,” he said.
Hadfield is an industry veteran with more than 15 years’ experience, after serving at executive levels at Kalahari from 2000 to 2010, the latter as chief executive from 2005 to 2010, before taking over the reins as chief executive at Loot in 2011. The company in 2015 attracted the interest of Sekunjalo Investment, the Dr Iqbal Survé-controlled investment vehicle, which bought a 75% stake.
Hadfield said he had worked closely with Survé since the deal. He was also a participant at Summer Davos and had accompanied Survé to China every year since then.
This had allowed him to connect with executives from companies like Airbnb, Alibaba and Uber and he developed a sound grasp of China’s e-commerce, which has many parallels to the African one.
“Dr Survé is regarded as a ‘gutsy’ entrepreneur to have invested in this space, post the extensive market consolidation of the local industry.
“Besides the vision, historical performance of the business, a strong value chain, my extensive experience and an acute understanding of the economic engine of building a large e-commerce business, having a robust, well-engineered technical platform has been key,” Hadfield said.
“What we also shared with Dr Survé was capital efficiency,” he pointed out.
Loot has opened a new warehouse in Midrand close to a Fedex hub and will be moving into a larger warehouse in Cape Town’s airport industrial sector in October, which is also near a Fedex hub, with a free delivery offer on orders valued at R250 or more.