With Shein, Temu and Bash threat, can Superbalist ever make money?

It’s rather amazing that Naspers’s Takealot unit managed to offload online fashion retailer Superbalist.

The unit has been shopped around for a while, with news of the sale first emerging in March. You can be sure that everyone’s had a look at the business, including the listed retailers such as TFG, Mr Price Group, and Truworths.

Retailability, owner of Edgars, Legit and a number of other brands, would’ve likely had a glance too.

Of course, TFG has invested hundreds of millions in Bash, a single app and web-driven platform that brings together the group’s dozens of brands in a single place. There’s no point in buying Superbalist save for acquiring market share. It no doubt believes it can continue taking share organically. (An interesting thought experiment is whether TFG would’ve built out its bash.com business if it could’ve acquired Superbalist and reversed it into the group instead?)

Very little is known about the consortium of “retail and private equity investors” led by Blank Canvas Capital that bought Superbalist, but it has moved swiftly to remove the direct links to the broader Takealot Group.

It appears to still be based at the Takealot offices in Foreshore, Cape Town (and will be paying rent for the space as well as any other shared services like HR or payroll that it is using).

It has also contracted Takealot to continue handling fulfilment. One assumes this covers the picking, packing and delivering of orders. This means that the new owners won’t need to invest significant amounts of capital in building out this competency themselves.

Importantly, it also means that Takealot can be assured of sizeable volumes going forward, which helps drive down the cost of fulfilment across the group (the trick will be for Superbalist to sustain current volumes, as the price per unit for deliveries will no doubt increase below certain thresholds).

ALSO READ: Takealot sells online fashion retailer Superbalist

The big question …

The question really is whether the business is able to make money. We know it hasn’t (ever) under Takealot, presumably at the same delivery cost per unit as it’ll pay going forward.

What magic sauce does this consortium have that Takealot didn’t?

It certainly doesn’t have the scale of TFG, which has allowed the retailer to enable a mammoth omnichannel play in Bash with fulfilment costs that are absurdly low. The model it uses for Bash relies on so-called ‘reverse logistics’, where it uses its existing distribution network to collect items ordered on Bash.com from stores when delivering products. This means it doesn’t need a separate set of giant warehouses.

The only new piece of the puzzle plugged into its existing network is last-mile delivery from the depot to the end customer. For this, it relies on third parties but is building out its own last-mile network in areas where it makes sense. By June next year, it sees itself handling a quarter of all deliveries.

ALSO READ: How mighty Shein is hurting TFG, Mr Price, others

The Chinese threat …

The competitive threat from Chinese retailers Shein, Temu and Wish has been relentless. This is clear from the growth in turnover on Superbalist, which was up 45% in Covid-19 hit 2020 (April 2020 to March 2021), 42% in 2021, 13% in 2022 and just 7% in 2024. There is every reason to believe that sales growth (measured by gross merchandise value) may be negative this year.

Add the fast-fashion giants the entry of Amazon into South Africa will deliver (albeit muted to date), and the aggressive push by TFG with Bash, and one can see why Superbalist suddenly isn’t that great a business right now.

Shein overtook Superbalist, when measured by market share, sometime in the last year.

Data from third-party consumer analytics outfit Reveal shows that Superbalist has lost about two percentage points of market share over the last two years, with Shein mopping up about the same amount. Growth in spend over a three-month rolling period is down sharply for Superbalist – it turned negative around one year ago.

The priority for any retailer in the face of all this competition is to keep the customers they already have, as acquiring each new one is costly. Reveal data shows that retention is declining across most retailers and that “Superbalist is experiencing the weakest retention”. Across the first half of this year, retention was negative 7%.

Shein, on the other hand, saw retention growing by 23% – the standout across all retailers.

For TFG, the Bash strategy is working, with its overall market share growing to record levels according to this data.

Combining all its brands under one platform has seen ‘multi-brand’ orders nearly double. The platform will likely break even on an Ebit (earnings before interest and taxes) basis this financial year (between July 2024 and June 2025).

Can Superbalist? Sure, the numbers guys will be able to find additional costs to take out of the business now that it’s free of the legacy Naspers corporate structure. But will that be enough?

The key is to keep growing sales. Right now, that looks very, very challenging indeed.

This article was republished from Moneyweb. Read the original here.