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BLUE LABEL
INTEGRATED ANNUAL REPORT 2017
13
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Increasing exposure to issues
such as data security,
breaches in technology
security or privacy
As the bulk of the Group’s inventory
is of a virtual nature, defence against
cybercrime is a top priority, as
susceptibility to hacking and the
penetration of firewalls and other
defence systems are always matters
of extreme concern.
The Group is dependent on the
systems and platforms that it utilises
to deliver its products and services, as
well as management of its merchant
base. In recent years, technology
spend has been increasing in
recognition of this key imperative, in
order to support not only organic and
acquisitive growth in the business (and
the concomitant rise in the number
and type of transactions processed),
but also to improve system availability
and resilience. This invariably includes
a major focus on the security of all
systems, both production and
enterprise, in order to suitably detect
and manage security threats, as well
as the ability to recover from collateral
damage that may be caused as a result
of cyber security breaches.
Elimination of the middle
man
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.
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 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.