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BLUE LABEL INTEGRATED ANNUAL REPORT 2016
16
Understanding material matters
continued
From inception, the objective of the Group was to become
a one-stop destination for the supply and distribution of all
of the mobile network’s offerings. This would provide both
convenience and efficiency to the retailer and customer.
Furthermore, the technology and footprint developed by
the Group allows retailers to earn additional revenue by
introducing additional products. This would make it difficult
to disintermediate the Group.
No single network can offer this complete solution.
The introduction of the sale of prepaid electricity tokens,
and its phenomenal uptake in South Africa, strengthens
the Group’s foothold as a one-stop destination that is most
convenient to the retailer. The Group’s increasing bouquet
of products and its neutral aggregation thereof will
continue to ensure that its middle-man status as distributor
is essential to the retailer and will remain entrenched. The
Group will continually develop and upgrade new,
innovative products to strengthen the foundation of its
middle-man status. Many merchants have limited cash
flow; however, utilising the Group’s vending solutions
allows them to vend products and services which they
previously could not afford. The lack of affordability was
due to various complexities, such as managing stock levels,
obsolescence, pilferage at store level, the inability to order
small quantities and access to limited stock ranges.
In addition the introduction of a growing suite of products,
necessitates that the Group not only excels in the sourcing,
management and delivery of these products and the
management of relationships in its merchant base, but
simultaneously delivering an excellent supporting back-
office capability – including the ability to deliver and
manage reconciliation and settlement on behalf of its
customers, extensive and professional merchant support
services, and deep technology support for online and
integrated systems. These competencies make it even more
difficult for the Group to be disintermediated, because of
the significant value that it provides to merchants, not only
in the products and services that it delivers, but also in
respect of the increasingly complex back-office support
functionality required to deliver such services.
The Group is an aggregator and an enabler to both its
customers and suppliers.
Without a distributor, every one of the four mobile
operators and around 200 utilities across South Africa
would need to deploy a device linked to technology at
every merchant in the country, in order to provide the same
access and level of service as that of which the Group has
to offer.
In comparison to the amount of commission the mobile
network operators afford the Group for distribution, it
would be more costly to them and they would not be able
to provide the same level of service if they were to do it
themselves. In addition the Group provides the capex, field
support, R&D and call centre services to the merchant base.
In most industries a wholesaler
is at risk of being eliminated
from the supply chain if the
supplier has the infrastructure
and capabilities to supply the
customer directly.
Elimination of the
middle man
Risk
Context
Mitigating factors