Justus Wilde on Warehouse subsidiary TheMarket's first year in business

Justus Wilde, chief executive of TheMarket. Photo / Supplied

The Warehouse Group's response to the popularity of shopping sites ASOS and The Iconic is still two to four years away from profitability.

Covid-19 had proven to be a blessing in disguise for TheMarket, says Justus Wilde, chief executive of the platform.

Wilde, who was hired to head the NZX-listed retail group's e-commerce venture in early 2018, says the pandemic had accelerated the uptake in online shopping significantly - a large portion of which had become permanent business.

The shopping and lifestyle website, often compared to the likes of ASOS or The Iconic, experienced spikes in revenue increases of between 70 and 130 per cent during lockdown and in the month that followed.

Retail NZ estimates that New Zealand's penetration of spending online has settled at about 20 per cent of retail sales after a massive spike and up from about 9 per cent prior to lockdown and Covid-19 hitting home.

Despite its growth, Justus said TheMarket was still two to four years away from profitability and delivering material earnings for the wider group.

The site had doubled its range over the year, now selling almost 2 million items, and has continued investment into scaling the platform by an additional $14-17 million, taking the estimated total investment to $26-29m to date.

It initially invested $12m to launch the business in August.

Wilde says revenue in the second half of the year had increased by 160 per cent on the first half, with beauty and health and sports and outdoor categories both up more than 300 per cent in the third quarter.

"We've grown a lot and we've had the kicker of Covid - that really accelerated the consumption of online; in terms of new audiences and also people shopping more for needs rather than wants online," Justus told the Herald.

"There's still been growth post-lockdown despite stores opening again so I think there is a permanent shift, definitely for a good segment of consumers."

Food and alcohol was a small category for the site prior to lockdown, single digits for total turnover, this grew to about 70 per cent of total sales during alert level 4.

Wilde said he did not expect the site to sell food during its first year of trade but had done so in response to grocery demand during lockdown.

TheMarket gained 30,000 new customers during lockdown and now has about 100,000 people using the site, Wilde said.

Fashion, homeware and electronics were the most popular shopping categories upon launch and in its first few months in business, now, health and beauty, food and alcohol and were its most popular categories, along with electronics.

Wilde said the pandemic had also changed the times people shopped on the website, with peak trading times on the site between 5pm and 10pm, now earlier than the 8:30pm to midnight previously.

"We've been trading ahead of our model," Wilde said in response to questions about the company's financial position. He could not share any figures of its trading performance.

Despite the platform's growth, Wilde said TheMarket was still a way off from delivering material financial earnings for The Warehouse Group.

"We're only really one-year in, we feel we're still in an investment curve at this stage."

Whether the site becomes profitable in two or four years' time will depend on the economic climate in the "next few quarters", if the momentum of online shopping would be sustained and how fast it could scale up, he said.

The Warehouse Group chief executive Nick Grayston said TheMarket had proven it was a "valuable part of the group stable".

He, too, said the platform would not return a meaningful return to the company for at least another two years: "Despite a very unique year with Covid, TheMarket proved its adaptability during the alert levels and was able to pivot quickly and provide its customers with key goods needed at the time such as food boxes.

"All going to plan, TheMarket is expected to provide a meaningful return to the Group in another 2-4 years."

TheMarket launched this time last year after 14 months under development. Photo / Supplied

Wilde expects New Zealanders would continue to shop online in the months ahead, albeit conscious of value, providing a boost for e-commerce-based businesses.

Consolidation of physical shops in the sector would open up more opportunity for online transactions, he said. "Stores will become more of an experience and online will become more of a transaction channel.

"I don't think stores will ever go away, there's definitely a place for stores, but their role is going to evolve more quickly than it would before [Covid-19]."

Retail analyst Chris Wilkinson, managing director of First Retail Group, said The Warehouse's move into the e-commerce space with TheMarket's launch was borne out of Amazon's anticipated launch into New Zealand.

"The Market has been an ambitious and strategic move to 'own' the space as a dominant," Wilkinson said.

"The concept was almost certainly borne out of Amazon's anticipated launch into this market - and the threat that would have had to its brand stable.

"The channel will be an additional conduit to The Warehouse, Warehouse Stationery, Torpedo 7 and Noel Leeming ranges - so this will almost certainly have boosted visitation and sales conversion from consumers who hadn't originally headed their direction."

While the threat of Amazon for New Zealand retailers had yet to materialise, Wilkinson said it was still only a matter of time before it launched a local domain as it increased capacity in Australia.

Wilkinson said this threat had been "useful" for local retailers who had improved their online presence and capacity in response, which paid dividends for many when Covid-19 hit.