South Africa's Shopzilla attacks: to merge with -

edited October 2014 in Site discussion

imageSouth Africa's Shopzilla attacks: to merge with -

Details have started to emerge of joining up with

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  • MantalityZAMantalityZA Johannesburg
    It baffles how these guys are still running at a loss. Perhaps two loss-making companies being merged into 1 mega-loss-maker is the answer... or not. Only time will tell. These guys need to put the heads of Checkers or Mr Price, or any other successful low margin retailer, on their board of directors.
  • Yeah - we've been talking to a lot of the smaller guys about this and fundamentally, the business model for those two was broken. For what it's worth, since I probably won't have time to write an opinion piece on the subject, my impression is this:

    - Kalalot/Takahari followed the Amazom model. Which is trade as close to break even as you dare because the important thing about online trading is user numbers not profit.

    - Amazon's model relies on big, big numbers of users so that it wins lots of investment from people who know it's on to something. Amazon also uses all the data its gathering to develop new products and services (ereaders, tablets, drones, AWS). The important thing is user numbers, so no expense is spared when it comes to quality and user experience.

    - Shopzilla's problem is that there's no way the market in Africa is going to be close to big enough for that strategy to work for a long time. At which point Amazon will either buy them out or enter the market and slay the beast.

    - In the meantime, Shopzilla can continue operating at a loss, but it's just a business operating at a loss. Not a fantastic innovator, or a paragon of user friendliness.

    - And also in the meantime, you have lots of other online retailers, like Yuppie Chef and Orms, who are doing really good business online, and making money. Because they've adapted the model to fit local circumstances and aren't relying on investment to pay the bills. Orms, for example, has out competed lots of traditional camera stores by selling online. Now, it's /opening physical stores again/ because it's doing what its customers want, not what customers in the US would want if it was based in San Francisco.

    That's my twopennorth, any way.
  • When comparing to Amazon it must be remembered that while Amazon generally makes slim profits, they're still profits. Even at 0.55% for Q1 - 2014, it still means they have more money coming into the bank, than going out. And that's with the fortunes spent on R&D, digital products etc etc.

    That means they make a substantial Gross Profit - $27.05B according to wikiinvest .

    Whereas for Shopzilla, especially once you factor in vouchers, they are most likely not even making much of a GP across their top sellers in departments like Gaming, Movies, Music and Electronics.
  • Good point - although I'd add that it took Amazon 7 years before it started to turn a very tiny profit on the store alone. Hypothetically, if Shopzilla had a R250bn addressable market it might well have a business model that could work - but that's quite a way away...
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