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Distribution wins return sales online

Simon Evans (via AFR) | July 16, 2013
Online retailers are building glittering websites as they attempt to claw away a higher share of the $225 billion spent by Australian consumers in the retail sector each year.

"The beauty of online is when a ­customer thinks you're great and they're incredibly loyal so they tell their friends.

"But the moment you let them down they will do the opposite," Taylor says.

He says online businesses need to be making substantial investment in IT systems, warehousing and infrastructure and constantly improving them, and these are costs that customers are oblivious to, unlike when they walk into a retail shop.

"We do need to continue to invest in things the customer can't really see."

It's not just in fashion and wine where there is hot competition between online retailers and the traditionalists. Paws for Life is trying to muscle in on the $8 billion pet care sector, with a specific focus on selling pet food online.

Michael Frizell, the founder and chief executive of Paws for Life, established the company in 2011. He says between 10-20 per cent of total revenues go into warehousing and logistics. "It's our second largest cost behind labour," he says.

Paws for Life now has more than 20,000 customers and claims its prices are on average 20 per cent cheaper traditional shops. "We're still in investment phase," Frizell says.

It is currently seeking an extra capital injection of between $4 million to $5 million to expand its operations, and with that additional investment on building additional scale and taking on more employees, it will be another 18 months before it hits its projections of being profitable.

Paws for Life uses a firm called Couriers Please for the vast majority of its metropolitan deliveries, and Australia Post for its deliveries in rural areas.


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