Online retail start-up The Iconic has taken yet another round of funding, with Berlin-based incubator Rocket Internet handing over another $28 million to the company in one of the country’s largest e-commerce-based investment deals.
But the investment comes at a trying time for the business. Co-founder Adam Jacobs revealed to The Australian Financial Review recently the company let go about 10% of its 300 staff recently, while a report claims the business has lost over $40 million.
Jacobs told SmartCompany this morning The Iconic is not yet profitable, but said the money would be used to improve the website and add some more customer service features.
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“We have a goal and a business plan we’re tracking very well against,” he says. “It can take many years to become profitable. And we’re targeting a much faster time frame than that.”
The claim comes despite accepting $78 million in investment cash over the past two years without any profit to show for it. This money has been put into an advanced website and logistics – the site offers three-hour delivery in Sydney – and Jacobs says the business wants to focus on high-margin sales.
For now, though, there are challenges. Jacobs says labour costs are a burden, “which means we have to be productive and efficient with what we do to offset that high cost of labour”.
Jacobs also says the GST threshold is an issue, along with the growth of international retailers – UK-based ASOS is the company’s biggest competitor.
But taking on such huge amounts of cash isn’t a burden, Jacobs says. In fact, he takes it as a reassurance the company is doing something right.
“Our investors are smart people. The latest round to invest were looking at our track record and our due diligence for a while. So when someone makes an investment after doing that and coming to the conclusion we’re delivering well against our goals, then that’s a vote of confidence.”
But while The Iconic believes times are good, others take issue. Billy Tucker, the former chief executive of group buying site Cudo and now the head of several tech start-ups, told SmartCompany this morning The Iconic is in trouble.
“Players like ASOS, John Lewis and Next have incredible buying power given the size of their market and that makes competing with them over time even more difficult,” he says.
Jacobs doesn’t deny international retailers present significant competition. But again, says the company has a plan against which it is “tracking very well”.
“I think we’re in a lucky position,” he says. “We’ve been given another vote of confidence in what we’re doing.”