Flying Pig faces crowded e-tail skies

By Rod Oram

Between the lines


As Flying Pig prepares to trot down the runway next week, launching New Zealand into the blue skies of e-retailing, it's worth considering two cautionary tales from the United States this week.

The first, the stock market float of United Parcel Service, is about the cost and complexity of physical delivery of goods ordered over the internet. The second, the disastrous results of Lands' End, is about established retailers' traumatic transition to the internet.

Both topics apply to Flying Pig, a new internet retailing venture involving Whitcoulls and Pacific Retail, owner of the Noel Leeming and Bond & Bond chains.

To fly, this Pig will have to find ways to build e-sales without cannibalising trade from its backers' stores. Some additional sales are easy but getting big volumes to justify the investment is harder, as traditional retailers in the US have found.

Lands' End, an upmarket clothing company, is a leader among mail order retailers migrating to the internet. Yet its e-sales will be under $US100 million this year out of total sales of $US1.3 billion ($2.53 billion).

Its e-sales are growing by only 10 per cent a year yet it will invest another $US50 million next year in the technology.

It's already pretty flash. Interested in how a garment might look on you? Type in your dimensions, skin and hair colour and up pops an animated 3-D model to show you.

Flying Pig will be up against equally sophisticated sites since to some extent its competition is truly global because it will offer some foreign goods.

No doubt Flying Pig can buy abroad at sharp prices but offering customers economical transport to New Zealand is another matter. As customers of Amazon.com know, its books are cheap but delivery is costly.

To dramatically cut delivery charges, UPS and other parcel companies such as Federal Express are investing heavily in reinventing the entire distribution chain.

Their aim is to make warehouses obsolete by offering retailers seamless management and transport of goods from factories to customers.

UPS began delivering parcels 92 years ago in the northeastern US. Today it spans the globe using 330,000 employees, 149,000 vehicles and 500 aircraft to deliver 12 million packages a day. Last Christmas, it delivered 55 per cent of the consumer goods ordered in the US over the internet.

But it has only just begun. To fund its investment in new systems and equipment this week it sold 9 per cent of its shares for $US5.5 billion.

"There is a technology arms race in the small package market," said one Wall Street analyst.

Whatever strides UPS makes, getting goods to distant New Zealand will still be relatively costly. And the best transport deals presumably will go to large foreign e-retailers, or e-tailers in the jargon.

Flying Pig says it will be cheaper than Amazon but it won't yet say how. If it fulfils that promise, it will take a giant leap for kiwi e-commerce.