E-commerce growth boosts Karooooo Logistics
The head of SA’s largest vehicle-tracking business is confident in the continued growth of its logistics unit, which has been helped by the expansion of online retail.
Over the years, Karooooo has anchored itself on vehicle tracking, with Cartrack still accounting for the lion’s share of earnings.
But in 2021 CEO Zak Calisto and his team saw an opportunity to become a one-stop logistics and fleet management platform. In September that year, Karooooo acquired 70.1% of Picup for R70m, subsequently renamed Karooooo Logistics.
At the time, Picup was completing more than 200,000 monthly deliveries for business such as stationer Waltons and Dis-Chem. It is now the fastest growing part of the group’s business, driven by e-commerce growth.
According to a study by World Wide Worx, Mastercard, Peach Payments and Ask Afrika, SA online retail passed 6% of total retail in 2023, translating to R71bn.
In the year to end-February, Cartrack grew operating profit 17%, while Karooooo Logistics delivered a record operating profit of R26m from R5m a year ago.
Karooooo Logistics and competitors such as Pingo, which delivers on behalf of Checkers Sixty60, have filled the gap for those businesses looking for delivery services without putting down the upfront capital to set up their own fleets or networks. Karooooo Logistics provides a network of drivers and delivery partners — similar to Uber and Mr D Food — to offer courier and other delivery services to businesses.
Amazon, which began operating locally this year, has partnered with courier operators DPD Laser and The Courier Guy to implement its speedy delivery.
Calisto told Business Day that Karooooo had put in a bid for this contract but conditions that would jeopardise its work at other clients stalled negotiations.
Amazon had for years largely stayed away from heavily investing in the African market due to poorly developed infrastructure that would make it difficult to implement its famous next-day delivery service.
“They didn’t want us to do Pick n Pay and Dis-Chem. They started putting up a lot of rules to us. So we told them, no, because we have all of these relationships. But over time, I think we’ll get that deal,” Calisto said.
Even without Amazon, Calisto is happy with the progress that the company is making, fulfilling online orders for a number of large retailers. He is particularly bullish about the partnership with Pick n Pay’s delivery business.
“We’ve got Clicks, Dis-Chem, Pick n Pay ... there’s about 10 names. And they’re all growing quite a lot, especially Pick n Pay. I believe it’s only a matter of time before Pick n Pay will beat [Checkers] Sixty60.”
In recent years Checkers Sixty60 has grown to become one of SA’s most popular e-commerce platforms, promising grocery shopping and delivery within an hour.
While Karooooo was able to grow profits for the logistics unit by five times in the period, Calisto admits that this rate of growth is unlikely to remain at those levels as the business scales further.
“We expect the growth rate to slow down. But even if it slows down to a fraction [of that] it’s still very high. We’re probably expecting growth well above 30% year on year,” the Karooooo boss said.
The logistics business uses a crowdsourced driver network model made up of independent drivers, meaning it does not own the vehicles, much like Uber.
When asked if Karooooo had appetite to have its own vehicles, Calisto said: “We’re not there yet and I don’t think we want to be there [for now]. Things could change in the future but at this stage, we just want to be a software platform.”