Retail

“Recession proof”: Booktopia beats the retail blues, looking for $300 million in five years

Matthew Elmas /

Booktopia

Booktopia's Tony Nash. Source: Supplied.

Booktopia chief executive Tony Nash is hoping customers will be in the market for wisdom as the economy worsens, outlining plans to beat back the retail blues with ambitious growth targets over the next five years.

While the longstanding cloud over the consumer spending crystalised last week with the declaration of a retail recession, Nash is shrugging off market pessimism as he moves into negotiations to bring in $20 – $30 million in new capital.

“Books are recession-proof,” the e-commerce entrepreneur tells SmartCompany.

“When things get tough people read to reinvest in themselves when things are good people use books to escape – it’s a very resilient industry.”

Its been a tumultuous seven months for Booktopia, which has been in the market for outside investment for some time and announced plans to pursue equity crowdfunding late last year.

At the time Nash, who in 2016 abandoned a run at the ASX, spruiked the increasingly popular funding method as a way to get customers to invest in the business.

But corporate regulator ASIC intervened, prompting Booktopia to amend its disclosure statement amid concern risk awareness among unsophisticated investors was lacking.

Fast forward six months and Booktopia only managed to attract $900,000 in commitments through platform Equitise, far short of its $3 million floor target.

Now Nash is looking elsewhere, while the money already committed is being held in a trust and will be refunded.

“If we would have been completely subscribed we wouldn’t be looking at anything else, but unfortunately there wasn’t,” Nash says.

“Once we got in motion it triggered the interest of larger investors, and that’s much more appealing to us.”

Nash says Booktopia had a $1 million commitment in the wings and “probably” would have been able to hit the target if it marketed the investment deadline, but viewed the prospect of outside investment more favourably.

He remains tight-lipped on the “high net-worth” investor he’s negotiating with but says talks have yet to progress to an evaluation of the business.

Booktopia was offering customers 8.1% of the company at $1 a share, but a larger investor will likely pay less.

Business doesn’t need the money

Nash contends Booktopia actually “doesn’t need the money” though and will remain well placed to hit its growth targets without any additional capital, albeit over a longer timeframe.

“We just know with a large chunk of cash we can do it much faster … it’s about accelerating that growth,” Nash says.

Revenue growth isn’t an issue for the e-commerce business, growing from $50 million in 2015 to more than double that figure ($130 million) in the current financial year.

E-commerce is a low margin game though and Booktopia wants to increase automation within its distribution centre, improve its stockholding capacity and support it’s up and coming publishing arm.

Through its book club and publishing services business Booktopia is looking to take a bite out of the business-to-business (B2B) side of the market, a move Nash says will help keep the ball rolling.

“The book industry doesn’t work off particularly large margins, so by us leveraging the logistics we’ve built to do the distribution enables us to offer far greater stock holding that’s faster for the B2B business,” Nash says.

Despite having a less than successful experience with equity crowdfunding, Nash says he’d still recommend the process to others.

“There’s really nothing you can lose, it’s not too expensive, you can use that money to grow your business and at the same time you are binding yourselves to your customer base.”

“There’s no negativity, at all.”

NOW READ: Raising $10 million: Why Booktopia wants customers to become investors

NOW READ: Rejected by the banks: SMEs turn to equity crowdfunding after failing to secure business loans

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Matthew Elmas

Matthew is the news editor at SmartCompany. You can contact him at [email protected].

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