Fall of the Shopping Matrix

Copyright (c) Noelle Adams. All Rights Reserved.

August saw the closure of one of the most popular South African online retailers, The Shopping Matrix, due to financial mismanagement.  While this may have come as a shock for Internet shoppers, it does not mean that local online businesses are failing.  Potential for success is still great, according to industry leaders. 

Ster Kinekor, one of TSM’s major creditors, has applied for provisional liquidation of the online retailer, or e-tailer.  According to TSM’s weekly e-mail newsletter the decision is due to ‘major mismanagement caused by the previous directorship’, leaving the company in at least R4 million debt.   

Andro Engelbrecht, current director of YTech Holdings, TSM’s holding company, similarly cites mismanagement as one of the chief reasons for TSM’s closure, along with ‘drying up of private equity finance’.  He goes on to describe the company’s state as being so poor at his arrival, in May 2002, that furniture was about to be removed to compensate for unpaid rent.  

Previous managing director, Waine Smith, has publicly denied responsibility for TSM’s financial woes. 

TSM was one of the older SA e-tailers, having started operation under the name Shopping Matrix.com in October 1999.  Its 32 000 registered shoppers, able to buy a range of products from DVDs to books and computer software, were treated to frequent bargains.  

TSM’s collapse is also despite the company repeatedly being voted E-tailer of the Year by readers of magazine PC Format, and claims that TSM’s 2001 turnover had jumped to R15,5 million from R5,5 million the previous year.  

Its demise is more generally attributed to unsustainable practices, such as, in TSM’s early days, all purchases including free delivery.  Such practices reflect a business model ill-suited for South Africa’s high-risk infant e-commerce arena, where online shopping ventures, like TSM, are expected to barely skirt profitability while luring consumers, and covering high set-up and maintenance costs. 

Hein Pretorius, ceo of TSM rival, Kalahari.net, agrees.  ‘E-commerce still has huge growth potential in SA, as long as the players have very sound business models on which they are based.  We remain committed to our customers and our service-centric approach.’

As for TSM, online shoppers need not bemoan its closure just yet.  Interested parties, attracted by the notion of e-commerce, have already contacted YTech Holdings looking to re-open the e-tailer.   

Says Engelbrecht, ‘We will resurface in 2003 with awesome selection, service and logistics planned.  Bigger, stronger and better than before.’