Lol Beo...
Okay OPINION TIME:
While there are many issues with the two largest online retailers in South Africa merging, we have to keep in mind the possible business factors that have lead them to this point. These two companies are in direct competition with each other, and their whole business plans are virtually identical. They provide the exact service. Now what we know from business that competes in the same category like this, is that they try and outdo each other in either price or service. This is a good thing for the consumer, as it means we get all the benefits of their competing.
What we tend to forget though, is that even these two giants of online shopping are still very small in the total retail space in South Africa. Online shopping only consists of 2.5% of all sales in South Africa, and traditional brick-and-mortar stores are still the kings of sales. This means that a price increase/decrease in that sector will have a bigger effect on the prices set on all electronic good sold in South Africa. Even though online stores have lower prices due to less overhead costs, they cannot undercut their store-based rivals too much, in fear of transgressing the Competition laws of the country.
So with that in mind, I thing that there are a few possible scenarios that caused this merger:
1. Kalahari and/or Takealot is not turning a profit. They may be liquid, but it seems that most of their working capitol is tied up in stock that doesn't move fast enough to create a healthy cash-flow. This issue is what has caused many online businesses to close their door. This may also have happened due to the online stores not generating the same stock turn-around as their offline counterparts. You see, they have to have a fair few SKU's in stock at all times to ensure that their service delivery does not suffer. This causes them to invest too heavily into stock levels, and having less disposable cash available to business investment. With the merger, the two companies can manage stock levels much better, and share the burden of stock retention, effectively freeing up moneys to spent elsewhere in the business. This is a good thing for us, the consumers.
2. Amazon is coming to SA. I honestly think Mister 44 is on to something, and it makes total sense that Amazon may be opening a store in SA. This means that both Takealot and Kalahari will take huge hits to their bottom line should that happen. One, or both may even close down, as Amazon has a way of cornering the market for itself. With a united front. Takealot and Kalahari can stage an effective stand against Amazon
All in all, I think this merger is to ensure the existence of both these online retailers. I thinks they have done this to survive in the changing market. And even though some of you might think that this is a bad thing that they are merging, it would be much worse is one of these companies should close their doors for good.
