Australia’s top 20 online retailers: 2015
Sunday, March 22, 2015/
Perhaps no industry has been more transformed by the digital revolution than retail.
Online retail continues to grow in Australia with an estimated worth of $22.1 billion last year, a 7% increase on the year before.
As the market continues to grow it is also constantly evolving.
Steven Noble, senior e-commerce analyst at Telsyte, told SmartCompany the online retail market has now entered a phase of maturation.
“The latecomers to online retail in Australia have long since made the first leaps and now are establishing the kinds of organisation that they need to succeed,” he says.
“They are becoming better, but at the same time because many of these businesses were a bit late to the online retail party, they may not see the incredible rapid growth that other online retailers found in the past.”
But Noble says those retailers who got in at the start of the online revolution may be losing some of the gains they made.
“First mover advantages are sometimes overrated,” he says.
“Some of the retailers who got to this space initially derived some benefit from that, but other retailers can derive benefit from their extensive logistics network and their experience in retail.”
This year’s SmartCompany list of Australia’s top 20 online retailers includes both early pioneers and those who have gone online more recently.
It includes both pure-play online retailers and “omni-channel” retailers who straddle both the digital and bricks-and-mortar spaces.
The unranked list takes into account traffic data from Nielsen, turnover and consultation with industry sources.
Prominence has been given to retailers that are pioneers in their categories and that are leading the way in online innovation.
The list excludes auction sites, price aggregators and offshore websites.
Here are Australia’s top 20 online retailers for 2015:
1. Temple & Webster
Subscription-based homewares retailer Temple & Webster has gone from strength to strength in the little over three years since it was founded in 2011 by Brian Shanahan, Adam McWhinney, Conrad Yiu and Mark Coulter. It’s the impressive growth of Temple & Webster that has landed the pure-play retailer the number one spot on our list this year.
Shanahan previously told SmartCompany it took Temple & Webster 214 days to achieve $1 million in revenue. Now the retailer makes seven figures in sales every five to 10 days. Temple & Webster turned over $28 million in the 2014 calendar year and hopes to reach $50 million in revenue in 2015.
While Shanahan says increasing competition in online retail in Australia is great for consumers, he believes it will “become harder for startups to compete in the space”.
“Traditional retailers are doing a better job at working out where consumers want to be, so it will get harder for smaller retailers to grow without greater financial support,” he says.
It’s set to be another big year for Kogan, one of the most well-known homegrown online retailers in Australia. But the business founded by Ruslan Kogan in 2006 is no longer just known for the televisions it sells.
Having quietly launched into 15 other retail categories at the end of 2014 and the start of 2015, Kogan made a bold play at the online grocery market in February by launching Kogan Pantry.
Kogan customers can now order food items such as Nutella and Pringles, toiletry items such as razors and toothpaste and confectionery and cleaning products from the $300 million retail marketplace.
“There are only so many TVs you can sell a customer,” Kogan told SmartCompany in January.
“We’re just getting started and we expect to keep growing these categories. Any consumer, no matter what product they are after, will know to come to Kogan.”
3. The Iconic
One of the newer players on the Australian retail scene, fashion marketplace The Iconic continues to punch above its weight.
Founded in 2011, The Iconic has previously secured multi-million dollar funding rounds, including a $28 million boost in mid-July 2013, and more recently has focused on adding top international brands to its stable of Australian designers, including UK high street label Brand New.
The Iconic has amassed an impressive 500,000 Facebook fans and more than 80,000 followers on Instagram. In 2013, the retailer turned over $31 million.
4. Catch of the Day
As far as online retail success stories go, it is hard to go past Catch of the Day. Since its early days as an eBay business, the retailer founded by Gabby and Hezi Leibovich has been transformed into a $350 million powerhouse, The Catch Group.
But the eight-year-old company has not been resting on its laurels, launching into the homewares category with spin-off West Avenue in mid-2014.
Gabby Leibovich told SmartCompany at the time the group expected to have plenty of competition on its hands in the emerging market segment.
“Yes there are a number of established players out there, however, where we have a unique advantage is in our extensive 3.5 million membership base,” he says.
“This allows us, at launch, to tap into an established and engaged market for our offer.”
The Catch Group, which also owns deals site Scoopon, has previously received backing from James Packer and Seek’s Andrew Bassat. The group sells on average one item every second, with 7% of orders now coming through social media platforms including Facebook and Twitter.
According to Telsyte’s Steven Noble, we can expect to continue to see the Catch Group grow rapidly, thanks to the retailer’s investment in robotic warehousing.
“Their ability to execute rapidly at scale is unparalleled,” Noble says.
Online bookseller Booktopia celebrated its 11th birthday in February by moving into a bigger headquarters and distribution centre in Sydney. It was just the latest in a series of moves to bigger premises by the retailer, which turns over more than $40 million each year.
Booktopia co-founder Tony Nash, who launched the business on a $10 a day budget from his home in 2004, has a background in IT and this expertise shows through to the Booktopia site, which is designed with an ease of navigation in mind.
And despite not having a physical store footprint, Booktopia takes its commitment to the local community seriously – a quality that earned the retailer SmartCompany’s Smart50 Community award in 2014.
6. JB Hi-Fi
JB Hi-Fi appears to be somewhat of an odd breed in Australian retail: a bricks-and-mortar retailer who has been able to translate their success in-store to the online environment.
JB Hi-Fi’s online revenues increased by 13.9% in the 2014 financial year to total $75 million, accounting for approximately 2.2% of total sales. Unique visitors to the JB H-Fi website reached an average of 1.3 million per week during the period, an increase of 9.9% over the previous 12 months.
JB Hi-Fi also invested in a digital content platform, JB Hi-Fi Now, in July 2014. The platform sells digital music, movie, games and book content and fits in with JB Hi-Fi’s goal to provide customers “with a choice on how they wish to shop at JB Hi-Fi for both physical and digital content”.
7. Red Balloon
Speaking at a Business Chicks event earlier this month, Red Balloon founder Naomi Simson recalled how it took two months and four days to sell her first Red Balloon experience. That was 2001 and Simson had just spent $25,000 of her family’s savings on building the first version of the Red Balloon website. Within two years, Red Balloon had sold a million experiences.
Red Balloon is now estimated to turn over $60 million annually, offering 3000 different experiences from around 1000 suppliers in Australia and New Zealand.
Expect to see the company’s marketing efforts ramped up this under the leadership of former Tourism Australia marketing chief Nick Baker, who took over the role of Red Balloon chief executive from Kristie Buchanan on March 16.
8. Dan Murphy’s
As part of the Woolworths group, Telsyte’s Steven Noble says alcohol retailer Dan Murphy’s is part of one of the only retail conglomerates with online operations “that have really got the moves on in this country”.
“What Woolworths lacks in speed it more than makes up for in scale,” Noble says.
“If you look at Dan Murphy’s it’s polished, it ticks all the boxes. What Woolworths is good at is pioneering certain techniques in one brand like Dick Smith and then rolling it out across all its sites. Woolworths’ scale allows it to innovate.”
Together with BWS and The Wine Quarter, Dan Murphy’s contributed to $7.4 billion in sales for the Woolworths Liquor Group in the 2014 financial year. The retailer said in its 2014 annual report the Dan Murphy’s website attracts around 2 million visits per month and recorded a 55% jump in sales in the 2014 financial year.
9. Lorna Jane
Now in its 25th year, active wear retail brand Lorna Jane continues to enjoy rapid growth, especially when it comes to online sales.
Online sales for Lorna Jane grew by more than 30% in the past 12 months and now accounts for 14% of the company’s total turnover. The retailer has also amassed a big social media following, with more than one million fans on Facebook alone.
Lorna Jane is on track to hit $200 million in revenue this year, which is no doubt also fuelled by the addition of 40 new international bricks-and-mortar outlets to its network in the past 12 months. A partnership with US fashion chain Nordstrom, announced this month, will extend the reach of this homegrown brand even further.
10. Shoes of Prey
Bricks-and-mortar retailers expanding by opening an online store is a familiar story. Less familiar are online retailers like Shoes of Prey, which use their strong online credentials to open physical stores.
The once online-only retailer, which enables customers to design their own shoes, secured $US5.5 million ($A6.5 million at the time) in venture capital in December to open more physical stores, including in the US as part of a deal with retail giant Nordstrom.
But co-founder Michael Fox told SmartCompany at the time, online remains Shoes of Prey’s primary sales channel.
“We still sell most of our shoes online but we have realised that there is life left in physical retail,” Fox said.
“It offers a great opportunity for customers to come in and interact with the brand.”
11. Dick Smith
Electronics retailer Dick Smith appeared on SmartCompany’s list of top Australian online retailers in 2013, but at the time it was a controversial move, given the company’s past financial troubles.
Two years later it is a different story for the now public company, which chief executive Nick Abboud led through a rapid turnaround with the help of private equity outfit Anchorage Capital.
Integrating Dick Smith’s 380 physical stores with the retailer’s online presence has been a key focus of Abboud’s, who said in September last year the addition of Dick Smith stores on eBay and Catch of the Day has been a step in the right direction.
Online sales make up just 5% of Dick Smith annual revenues, accounting for $693 million in revenue, but tying the Dick Smith online presence closely to the physical stores through a “click and collect” model is paying off for the retailer. Dick Smith reported 55% online revenue growth for the 2014 financial year as a result of the model.
“The best retailers will have traditional retail, they’ll serve stock out of their stores and have multiple channels,” Abboud said in September.
“Consumers just want convenience. We shouldn’t be afraid to offer them a menu of options.”
12. Appliances Online
Appliances Online has proved that Australians are willing to buy just about anything online, even large, bulky white goods.
The online retailer was founded in 2005 by John Winning, as part of his family’s 108-year-old company, Winning Appliances. A former Smart50 finalist, the retailer employs 500 staff and has annual turnover of more than $150 million.
Winning previously told SmartCompany being one of the first retailers in Australia to attempt to sell appliances online “just made sense”. And Winning’s key to selling online? Good old-fashioned word-of-mouth.
“When you’re delivering to hundreds of thousands of customers a day and they’re all happy, word of mouth is your biggest asset,” Winning said last year.
“If you have good customer service, there’s not better advertising than that.”
There are many online fashion retailers out there but much bigger retailers can only look on in envy at ShowPo’s loyal community.
Instead of an online store, ShowPo has a “community” portal with lookbooks, YouTube videos, bloggers, recipes, information about photos from events, images from fashion shoots and a collection of media articles featuring the store.
The retailer has over 350,000 Facebook followers, more than both Myer and David Jones.
“I just do really love social media and it is a way for small businesses to push themselves forward at a really low cost,” Lu says.
“To succeed in social media you need to have a voice for your company. With bigger companies, I think they try to relate to everyone and in doing so they don’t relate to anyone as it is too broad. You need to understand your market and post good content and not make it too sales-driven.”
Scoring a deal with retail giant Lululemon is all in a day’s work for Stylerunner founders and twin sisters Julie Stevanja and Sali Stevanja
The collaboration with Lululemon comes only two years after the pair founded the online activewear retailer.
Julie Stevanja told SmartCompany the business was global in its ambitions from day one and pushed hard to get a first mover advantage.
“I was living in London when we started Stylerunner with my twin sister and we realised this was a global problem, so from the first day we knew it would be a global company,” she says.
“We worked hard to be first to market. We launched three months after first seeing the opportunity.”
In a short time, Stylerunner has already notched up $2 million plus in turnover and now ships to 65 countries.
15. Pet Circle
The pet industry was one sector in which it was widely believed e-commerce wouldn’t work as the items are bulky and the margins are low.
But Mike Frizell has proved the naysayers wrong with the success of his online business Pet Circle, which was only started in 2011.
In a few short years Frizell has grown turnover to $12 million enabling Pet Circle to take out the coveted number one spot in SmartCompany’s 2014 Smart50 awards.
Frizell has succeeded by creating a smart logistics chain that is profitable.
He attributes the success of Pet Circle to a philosophy of championing customer relationships, a philosophy that applies to bricks-and-mortar and online retailers.
“Putting our customer’s needs first forces us to focus on the efficiency and effectiveness of our supply chain,” he says.
“It is a win-win outcome.”
16. Adore Beauty
“Internet years are like dog years,” according to Adore Beauty founder Kate Morris.
When she started the e-commerce cosmetic business back in 2000 as a 21-year-old, online shopping was still largely viewed with suspicion.
Morris says the earlier adopters of internet shopping were all about prices and were just out to get a bargain.
These days, she says, customers recognise there are a lot of benefits to shopping online, including convenience, access to a broader range of products and freedom to choose on their own terms rather than high pressure sales environment.
Adore Beauty continues to grow strongly, making the 2014 Smart 50 with turnover of more than $7 million.
Looking ahead, Morris isn’t fazed by the entry to the Australian market of international cosmetic heavyweight Sephora.
“It’s not that big a deal. As far as we’re concerned, it’s been global for us from the start,” she says.
If you need any more indication that online deals site OzSale is onto something, look no further than Sir Philip Green’s investment in the business last year.
The British billionaire behind TopShop, Green, bought a 25% stake in the business.
While OzSale’s plans to list on the ASX never eventuated, the Aussie company now looks set for an initial public offering on the London Stock Exchange.
The online deals site, which began in 2010, is currently estimated to be worth about $500 million and has an annual turnover of about $180 million.
There are sure to be further growth opportunities now that TopShop’s Top Man has given OzSale his vote of approval.
Klika co-founders Ian McLellan, Boris Zaitsev and Scott Gladstone are not your stereotypical Gen Y digital pioneers – the trio who launched their online home and outdoor retailing business when they were in their mid-50s.
Ten years later, at 65, 60 and 50 years old respectively, the three are still actively involved in the $15 million e-tailer, which sells everything from gazebos to chainsaws to home dance poles.
McLellan says his previous experience in wholesale retailing stood him in good stead to lead Klika.
“It was very easy to slip into e-commerce from wholesaling,” he says, believing there is a natural affinity between the goal of a wholesaler and that of an online retailer to “cut out all the middle people”.
Online wine retailer Vinomofo has really shaken up its market in its three year in business.
Vinomofo grew out of a social wine blogging site, Qwoff, and is now a fully-fledged online retail business.
The retailer is proudly independent again after a one year period during which it was acquired by the Catch of The Day group.
Co-founder Andre Eikmeier told SmartCompany the founders missed their independence and saw an opportunity to grow beyond the daily deals model.
On the plus side, he says the Vinomofo crew learnt a lot helping spur them on to over $10 million a year in turnover.
A background in glossy magazines led Erica Stewart and Trudi Jenkins to start up curated online marketplace HardToFind.
“As working mothers with little time for shopping beyond the basics, we realised that there was a gap in the online market for a quality, curated website where you could rely on finding only the best available,” Stewart told SmartCompany.
What Stewart and Jenkins have created is a beautifully edited site and the pair work hard to continually make small, incremental changes which they say “make all the difference to conversion rates and sales”.
HardToFind is one of the online pioneers, founded in 2008 and Stewart reminisces about when customers were too scared to use their credit cards online and wanted to place phone orders instead.
The online retailer continues to grow strongly, making the 2014 Smart50 with over $10 million in turnover, and has plans for a redesign to make the site responsive and a HardToFind app.
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