When Times Get Tough, Online Retailers Get Going

Sydney Morning Herald

Saturday October 18, 2008

Julianne Dowling

LUXURY retailers may be anxious about an impending economic downturn, but online department stores and discount shopping sites expect to hit a sweet spot in tough times.

Other retailers and suppliers should use these channels to offload stock and improve their cash flow in the lead-up to Christmas, say two leading online retailers.

Paul Greenberg, the co-founder of the most watched internet shopping site - dealsdirect.com.au - predicts 30 per cent to 40 per cent sales growth for his site in the next year.

Meanwhile Gabby Leibovich, the co-founder of the second most watched internet shopping sites - dailydeals.com.au and its sister site catchoftheday.com.au - says it is common to sell 1000 units of a product daily.

Mr Leibovich, one of two brothers who own the sites and a retail warehousing outlet, says the more pain suppliers took from rising costs, the better the supply flow for his sites.

"The whole idea of Catch of The Day is to get rid of excess stock. Everyone makes mistakes and gets stuck with items, especially IT and electronics, where there is a limited lifetime.

"We regularly sell 1000 products, such as laptops, daily. Large retailers can't sell these quantities and suppliers often like using us because we only affect the market for a short time. It doesn't disturb the retail chain in any other way.

"We don't require accounts and we will pay for those laptops on the day. So there are no [payment] terms and large volume purchases mean instant cash flow."

Unlike sites such as dealsdirect.com.au, which import much of their stock from China and Asia, the Leibovich brothers sell 95 per cent of their stock from Australian sources and feel that works better for them, especially now that the Australian dollar has dropped hard against the greenback.

The brothers use a triangular mix of clicks, bricks and TV advertising, with a large warehouse-style outlet of 4000 square metres, two websites and regular morning four-minute infomercials on the free-to-air TV networks.

The Catch Of the Day site is hot property, running high-volume daily "specials" over a 24-hour cycle, which are paid for upfront with low back-end costs.

"You can't develop traffic overnight; it's taken two years on one site and four years on another, so that's hard to replicate," Mr Leibovich says.

"It's also a concept where you need people to come to you every day to see what's selling. The customers also want to know that there's someone sitting behind the site, and the other advantage is our retail outlet which gives peace of mind.

"I wouldn't buy from anyone with a post office box, so we like to show that there are normal people involved."

Over at dealsdirect.com.au, the average basket spend is $100. "So we're not in the luxury end," says Mr Greenberg.

"The luxury retailers may be worried [about the outlook] but the online space is growing and for the multi-channel retailers, such as Wal-Mart in the US, their online sales are still growing, so we're bullish that we have enough wind in our sails.

"We set our budgets high for this year as we tend to do. We see between 30 per cent and 40 per cent growth per annum and we're only four years old. Can we do it this year? Yes. The year after that? Hard to know."

Mr Greenberg, who has three careers under his belt as an organisational psychologist, auctioneer and now retailer, is happy to see innovative entrepreneurs, such as the Leibovich brothers, enter the space and bring a good experience to shoppers.

"We know that if the customer is not happy, then they may not come back, so we're keen that competitors give the customers a fair go because ultimately we share the same pool."

He says dealsdirect's shopper profile was broad, although he believes there is an opportunity to pick up more customers through economic hard times.

"There's more women than men and it's slightly skewed to the regional areas - people in the bush are getting things that they wouldn't get normally find - and then there's a generational change and we have a solid shopper segment of those aged between 45 to 55 years, and the young singles and young families who want to make their spending go further."

© 2008 Sydney Morning Herald

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