5/29/12

An Australian e-retailer credits its fast start to the sluggish economy

Catch of the Day’s sales are expected to double this year as the e-retailer expands.

The global financial crisis was the growth catalyst for Catch of the Day, an Australian e-commerce site that offers a new deal each day.

“The recession was the best thing that happened to us; people recognized that the best place to go for a bargain was online,” Gabby Leibovich, co-founder and director of Catch of the Day, said last week in a presentation at Cebit’s Online Retail conference in Sydney.

Analysts acknowledge that Australia has never had a catalog sales culture, making the transition to online retail slower than in some other countries. But the recession, coupled with the strong Australian dollar, sent consumers to the web seeking international bargains, Leibovich said.

According to Forrester Research Inc., Australian online retail sales will rise from A$29.7 (US$29.2) billion in 2011 to A$34.8 (US$34.3) billion by 2013.

Catch of the Day, founded in 2006, is riding that wave of demand. In the last 12 months the web retailer has tripled headcount from 100 to 300, and more than doubled revenues from A$120 (US$118) million in 2011 to an anticipated A$250 (US$245.8) million in the 12 months to June. In May 2011, Leibovich and his brother Hezi sold a 40% stake in the business in a deal that valued the private company at A$200 (US$196.6) million. The brothers are now considering taking the company public.

Despite this growth Leibovich characterized the Australian retail market as remaining something of a “war zone.” Regular skirmishes, often played out in daily newspapers, often see traditional bricks-and-mortar retailers attack online retailers—especially retailers based abroad that don’t have to charge Australians a goods and services tax for items under A$1,000 (US$983). Leibovich says 50% of manufacturers still refuse to sell their products through web sites such as Catch of the Day to preserve their relationships with traditional retailers.

Nonetheless, the Catch of the Day portfolio of online ventures continues to expand beyond the original discount retail web site. The company added the coupon business Scoopon in 2010, started selling groceries online in 2011 at GroceryRun.com.au and this year bought a controlling stake in online wine retailer Vimofo. Leibovich said it plans to open a new e-commerce site called Mumgo in July targeted at mothers with young children.

Leibovich stressed that Catch of the Day has grown largely through word of mouth, with little investment in search engine marketing. The company has collected e-mail addresses of four millions consumers (out of a total Australian population of 22 million) and sends each customer three emails a week.

Leibovich says the strategy is working. He said the company had recently sold A$1 million (US$983,000) worth of TVs in a day, 675,000 burger and fries coupons through Scoopon, and A$1 million worth of dry groceries each month through its 10-month-old startup Grocery Run.

Although the company originally imported only 10% of the goods sold through Catch of the Day, it now imports 60% of its products because “local suppliers can’t give us the volume we need any more.”

He claimed that the company had become Australia Post’s largest single customer, shipping up to 10,000 parcels each day.