Margin squeeze in market

hurts Dick Smith

Michael Evans

January 25, 2011

WHEN your business is turning over $1 billion a week, a few issues in a small part of your portfolio exposed to discretionary spending is a nice problem to have.

With his supermarket and liquor businesses motoring on in a cosy duopoly, the boss of Woolies, Michael Luscombe, went out of his way yesterday to point out the electronics industry has bigger problems than those being emphasised by Gerry Harveys’ situation.

The Harvey Norman boss may argue the lack of a GST on online goods makes for an unfair playing field. But Mr Luscombe, who counts Dick Smith in the Woolies portfolio, pointed out that the hotly contested consumer electronics industry has a big problem with profit margins.

What is more, he underlined the threat to bricks and mortar retailers in the industry, saying the economics of selling goods online makes good sense.

Dick Smith, the one-time wunderkind of the Woolies empire, was the focal point of investor concern yesterday, reporting a rise in sales turnover but a fall in margins from heavy discounting that is eating away at the profits.

The high Aussie is making goods cheaper and combining with tough competition to hit margins. ”The Australian dollar means everything’s cheaper to buy,” Mr Luscombe said.

”There is intense competition to sell those products in the Australian market place and that has driven prices down even further and it’s just meant that the profit that you made out of selling a TV is less than you made even last year.

”The selling price is down by around 30 per cent. More and more they are only sold on special. There’s no doubt we are all finding it difficult to get that growth margin.”

Dick Smith is steadily building an online sales portal, he said, because ”that’s where people want to shop”.

Sales are up 75 per cent for the half, he said. And the economics are better. ”You don’t have to carry the stock. To sell one TV online you need one TV in stock but to sell one in 400 stores you need 400. So the mathematics of the working capital are far better. It’s the way that a lot of people want to shop.

”No doubt when the Aussie dollar returns to [the] historical level with the US dollar it will become less attractive to do it overseas.”

Mr Luscombe’s other discretionary business, Big W, faces a similar story from price deflation. ”We’re not getting the dollars out of [customers]. We are selling things much cheaper than last year, 6 or 7 per cent.”

Sourced & published by Henry Sapiecha

Groupon entering Australia

& daily deals sites ignite

• Why daily deals is the next internet gold rush

THE world’s largest daily deals website, Groupon, which Google tried to buy this month for $US6 billion, has confirmed it is entering the Australian market.

The company is recruiting people to sign up to its email database before a launch next month into a market that is becoming crowded. The No. 2 player, Living Social, abandoned plans to start from scratch in Australia, opting instead for a joint venture with an existing company, Jumponit. 

But because an existing Australian deals company has had its application to use the Groupon name in Australia approved, the Chicago company has been forced to use the domain name of Stardeals in Australia.

Groupon has engaged the lawyers Clayton Utz to take action against Scoopon, a Victorian company that has been offering online deals on products and services in Australian cities for more than four years.

Groupon lodged an intellectual property action in the Federal Court in Victoria in August and is due to go for mediation on January 21 or, failing that, to the courts on February 4.

Groupon is also taking Scoopon to court in its home state of Illinois, claiming federal trademark infringement, unfair competition and deceptive trade practices, even though Scoopon’s business is limited to Australian shores.

Do a deal a day websites offer discounts from local retailers, merchants and leisure operators, thereby restricting their operations to local businesses and consumers.

A Groupon spokeswoman, Julie Mossler, said: “The [Stardeals] site is live to accept subscribers but we are not yet offering deals currently. We hope to do so in the next month.”

An intellectual property lawyer, Trevor Choy, said Groupon was paying the price for failing to register its trademark or name as it expanded globally. The US case was doomed to fail, he said. “Groupon’s lawyers should have known that US trademarks can’t be enforced outside of the US against a company not doing business there.”

Sourced & published by Henry Sapiecha

Amazon’s free-shipping secret David Carnoy

Planning to do a lot of last-minute online shopping on Amazon.com this year? Then here’s a little tip. If you own or are considering purchasing an Amazon Prime membership, which enables you to get free two-day shipping on a host of items in Amazon’s catalog, you can actually share your Prime membership with up to four “household” members. Read more

Sourced & published by Henry Sapiecha

RAGS TO RICHES STORY

Bio of Mike O’Hagan – Mini Movers

Sponsored by the Maryborough Chamber of Commerce Qld

www.maryboroughchamberqld.com.au

For the first 10 years of Mikes work life he worked for 35 different employers. In his words “I’m a product of the many really bad, and the few good, employers I worked for”.

This background helped to influence Mike to “do it differently” in business.

His business career started with buying and selling goods as a second-hand dealer. 8 years later the entrepreneur in Mike surfaced when he launched a short distance furniture removal business. This evolved into MiniMovers. MiniMovers is today an innovative market leader, growing from an initial investment of $200 and a Ute,

www.youbeautute.com www.minimokes.com www.www-trader.com

to an annual turnover exceeding $30 million with over 450 employees. Today, Mike Chairs the Board of Directors with an experienced CEO running the Business.

Mike has recently been on various Government committees including a Small Business Advisory Panel to the Governor of the Reserve Bank of Australia. He is currently a Commissioner on the Australian Fair Pay Commission, charged with the responsibility of setting the minimum pay for workers in Australia. He is also on the Board of Directors, of the Australian Institute of Management (AIM) and the National Board of the Duke of Edinburgh Awards.

To keep “on the edge” he is also attending the EO/MIT Entrepreneurs Masters Program in Boston USA. He is a sought after key note speaker who shares a variety of business and thought provoking views over a range of topics. He can answer the questions while keeping you interested, inspired and empowered.

“My education at the very best school (of hard knocks) guarantees I’ll challenge many commonly held beliefs”.

Mike is a true entrepreneur and a business innovator, and you’ll find that his down-to-earth style is both compelling and contagious.

WHAT’S YOUR STORY?

Posted by Henry Sapiecha 28th Sept