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Johannesburg - E-commerce brand Kalahari.com will eventually be discontinued as the business is planned to be folded into takealot.com after a merger deal was given the go-ahead this week.
This is according to takealot co-CEO Kim Reid in an interview with Fin24 about his company’s merger with Kalahari.com.
It is unclear when exactly the Kalahari brand will be discontinued, but Reid said an update on the situation will be communicated to customers. The Kalahari website will continue to operate in the short-term as normal until it is integrated into takealot.
On Monday, the competition commission gave the green light for the Kalahari-takealot deal on condition that no more than 200 jobs are cut.
Reid told Fin24 that US investment firm Tiger Global Management will have an approximate 41% stake in the merged businesses. Meanwhile media company Naspers will have an equal stake to that of Tiger Global Management and management and shareholders will own the remaining stake of the merged unit.
Reid will remain co-CEO of takealot along with co-CEO Willem van Biljon.
Reid said the deal becomes effective on February 1, 2015 and will close on February 23, 2015 following accounting procedures.
"And post-February 1, 2015 effectively we start managing the business," Ried told Fin24.
"We'll continue to manage the businesses and run the businesses separately for a period of time which is as of yet is undetermined.
"And at a stage, we will then consolidate the businesses completely under the takealot brand. So, there won't be a Kalahari brand anymore. It will be purely a takealot brand, and we'll use the takealot platform and systems to run the new merged business,” Reid added.
Reid said reasons for the merger include giving the e-commerce business more scale and supply influence, using takealot’s self-developed technology which costs less than Kalahari’s platform, making use of delivery infrastructure through Mr Delivery, the consolidation of warehouses and accessing a bigger customer base.
"It means that we effectively become a much bigger business overnight as opposed to growing into becoming a much bigger business,” Reid told Fin24.
E-commerce does remain a fledgling industry in South Africa.
A previous joint statement from Kalahari and Takealot in October 2014 said that online retail accounts for less than 1.5% of the market in South Africa, compared to markets such as the US and UK where as much as 14% of consumer goods are purchased online.
However, internet use in South Africa is growing as World Bank figures show that 48.9% of SA’s 50 million population had access to the internet in 2013 - a figure that dramatically increased from just 24% in 2010.
Moreover, World Wide Worx Managing Director Arthur Goldstuck also said in 2014 that the size of South Africa’s e-commerce market could be pegged at R4.4 billion for 2013.
Reid told Fin24, though, that takealot plans on tapping into the country’s total consumer retail market as well.
"The fantastic part about is there's an R800bn consumer retail market in South Africa today and that's what we're growing into. So, we're not creating a new market; we're basically feeding off that existing retail market,” he said.
Job cuts?
On Monday, Hardin Ratshisusu, the acting deputy commissioner for the competition commission, told Fin24 that the takealot-Kalahari merger is approved on condition that “potential job losses should not exceed 200”.
“It’s an approval subject to conditions to address employment concerns,” Ratshisusu told Fin24.
Responding to a question about this requirement, Reid told Fin24 that “the limitation in job cuts is something that is customary in any competition process”.
"They (the competition commission) have a public-interest mandate and they apply that to make sure that certain things happen within a certain framework,” Reid said.
"That doesn't mean that we're embarking on a retrenchment process; that just means we have a limitation in the event we do retrench,” he added.
Reid further said that Kalahari and takealot have a combined total of between 850 - 920 staff.
Looking ahead
Reid is upbeat about the merger but said a lot of work lies ahead.
"We're positive about the e-commerce environment. We think there's a great opportunity, but we also think that to get to that opportunity, this merger was necessary,” he said.
"We've got a lot of work to do still. There are significant challenges that lie ahead for the business to get the merger right and to get everything integrated.
"Both takealot and Kalahari customers should continue to operate as they normally would. There will be no initial changes to any of the sites in the short-term. If there are changes going forward, we'll communicate those timeously,” Reid said.
Listen to Fin24's interview with takealot co-CEO Kim Reid below.
Also, tell us what your thoughts are on the Kalahari brand being set to be discontinued.
- Kalahari.com is a part of Naspers, the owner of Media24, Fin24's parent company.
