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I was chatting to one of my army buddies a few years ago who happens to work for Naspers. For those of you who don't know about them they have been around since 1915 based in South Africa and are a global investor involved with global internet via online advertising and one of the worlds biggest players in future tech developments.
What he mentioned didn't make business sense as we were chatting about budgets at the time and mine was always worked out on profits. They did things differently as many of the companies they have run at losses hoping for one day to turn over a profit. They are Venture capitalists and invest wisely. They bought 46% of Tencent a few years back in 2009 for $32 million and is now valued at $1 Trillion.
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One of their companies which they own (95%) is called Takealot which is South Africa's equivalent of Amazon. If you look at both companies they both started off in similar fashion losing bucket loads of money for many years. Without constant investment both companies would not be around today as profits didn't pour in from day one or even year one.
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Amazon started off in 1994 and never saw profit for 10 years. This could be a little misleading depending on how you look at it as every cent made was reinvested back into the business making what it is today. They have huge debts reportedly in the region of $24 Billion which should drop over time. Amazon as a company is worth over $1 trillion so the 24 Billion debt is a drop in the ocean with all things considering.
Takealot started out 15 years later than Amazon in 2009 and also lost billions each year establishing the business. Naspers kept funneling the cash to grow this disruptive business as that is exactly what they were doing. Retailers should have paid heed and countered spending small fortunes to reduce the impact, but they didn't.
Last year was the first year Takealot made a profit which is the same time frame Amazon had. Lock downs would have justified their spend as the company took off. Money makes money and this proves one needs to spend big to make it big.
Nando's is another business that took time to turn a profit as their first international store was set up in Earls Court, England 1992 and I tried to get my hands on one in 1995. At this point they were running at a loss and they still denied me a franchise unless I moved to Birmingham. I should have moved but that took them 4 years to turn 1 cent profit and now look at them today.
This just shows that something new takes time and needing deep pockets to fund these ideas is a must. People take time to change their habits and even if you build it there is no immediate guarantee of overnight success. This takes time as you can see from the likes of Amazon as 10 years is nothing considering what they are worth now.