Online retailer Takealot.com has raised over $100 million (R1.1 billion) through US firm Tiger Global Management to fund its attempt to unleash the potential in the domestic e-commerce market.
Although the company did not want to spell out what it planned to do with the investment, it did indicate that it wanted to overtake its major competitor, Kalahari.com.
“We anticipate that we will be larger than them within the next 12 months,” chief executive Kim Reid said on Friday.
“We have big plans, most of which will remain confidential. The injection of cash allows us to aggressively grow the business and take us to the number one position in the South African market in the near future.”
Although still in its infancy, he added, e-commerce in South Africa was growing as more consumers became accustomed to transacting online. Research indicates that there are more than 13 million internet users in the country.
Based in New York City, Tiger Global Management is an investment firm that deploys capital through private equity partnerships and public equity funds. The latter focus on long-term trends in the technology, telecoms, media, retail and consumer sectors.
The company has investments in India, the Middle East, China and South America.
Reid said the potential for e-commerce was large in a retail market in excess of R500bn where online transactions accounted for less than 1 percent of sales. In developed markets, e-commerce accounted for about 12 percent to 14 percent of the retail market.
“We believe the market potential is here and if we continue to execute well we will build a great company,” he said.
Takealot.com processed more than 40 000 orders a month at present and was growing at over 100 percent annually. The company has warehouses in Johannesburg and Cape Town, and sells products in 18 categories, including media, electronics, lifestyle, camping, sports, home and kitchen products.
Reid said e-commerce challenges in Africa were similar to the global challenges. These included connectivity, payment infrastructure, propensity to buy online, and geographic dispersion of customers.
“Of all the challenges the greatest challenge seems to be people’s propensity to buy online,” Reid said.
However, this was fast disappearing as people tried the services of Takealot.com.
Lee Fixel, a partner at Tiger Global Management, said: “We have been impressed with Takealot.com’s executive since our initial investment in 2010 and believe the company is establishing a strong leadership position in South Africa and sub-Saharan Africa.”
Mike Saunders, the chief executive of DigitLab, a full service agency that deals with social media management and digital research, pointed out that the digital world had disrupted the marketing worlds and had also changed the way that business communicated with its customers.
“There is a unique relationship between the retail industry and the digital world. Retail has more potential than almost any industry to create serendipitous experiences for consumers, mainly because retailers tend to control the supply chain, from manufacture to customer purchase,” he said.