FlyingPig backer wants out

By KARYN SCHERER

Entrepreneur Eric Watson is considering quitting his investment in online retailer FlyingPig, amid global uncertainty about the future of shopping over the internet.

New Zealand's highest-profile online store, launched with much fanfare less than a year ago, hopes to find a new investor by the end of the month to pump more money into the business.

However, documents distributed to potential investors confirm that it is also considering bids for the entire company.

Mr Watson's hopes of publicly floating the company have been dashed by international jitters about internet-based retailers.

In June, FlyingPig was forced to call off a merger with Australian e-tailer TheSpot after the Australian company failed to raise enough money.

A few weeks later, FlyingPig laid off half its staff after Mr Watson and other investors indicated that they were no longer prepared to keep pumping millions of dollars into the business.

Originally set up by former Whitcoulls head Stefan Preston and his business partner, Adam Keller, FlyingPig is now largely controlled by three companies with links to Mr Watson: Whitcoulls, the Pacific Retail Group and Advantage.

The decision to look for a new investor comes as several e-tailers are talking to pay-TV operator Sky about the launch of interactive television in New Zealand.

The launch will enable Sky's digital customers to shop online, and Sky is believed to be talking to at least one Australian e-tailer keen to test the new technology ahead of its introduction in Australia.

The move also comes amid tentative talks between several online stores about joining forces to create a NZ supersite.

According to information distributed to potential investors, FlyingPig sold $260,000 worth of books, videos, software and stationery in July. Half the sales were books ordered through the Whitcoulls chain, which is also for sale.

FlyingPig predicts that monthly turnover will pass $500,000 by December and will exceed $1.2 million by the end of next year.

However, the figures also show that it is struggling to recoup its costs, which are running at $350,000 a month. Despite spending just $10,000 a month on marketing, it is still losing $200,000 a month.

Among the companies believed to be carrying out due diligence is Australian e-tailer Dstore. Like FlyingPig, Dstore unashamedly modelled itself on American online superstore Amazon.

Its backers include some of Australia's best-known businessmen, as well as Singapore's Goh brothers, who also own a chunk of the Stirling Sports business in New Zealand.

Dstore held talks with FlyingPig this year, but they could not agree on terms.

The Australian company originally predicted that it would launch a rival New Zealand site by May.

Dstore's 29-year-old chief executive, David Gold, said on Friday that it was no longer in a hurry "as clearly the competitive imperative has been taken out of the equation."

He confirmed he was "taking a look at partnering with a number of players" in New Zealand. He also claimed he was looking at "a couple of acquisitions."

However, Mr Gold warned he was not interested unless he could scoop up the assets at "rock-bottom prices."

Although it claims to be Australia's most successful e-tailer, Dstore has also yet to prove it is financially viable.

Its wealthy investors have ploughed more than $40 million into the company. They do not expect a return until 2002.

Mr Gold conceded that the company's main problem was sorting out how it would deliver goods in New Zealand.

"Ideally that's through a partnership and that's taking a bit more time than we expected."