Net profit hopefuls warned: there's room for only one

By Karyn Scherer

The battle for the New Zealand e-dollar is finally hotting up, with the latest hopeful launching its plans in Auckland yesterday with lashings of gourmet pizza, smart drinks and real coffee.

As revealed by the Business Herald last week, two of New Zealand's biggest retailers, Whitcoulls and the Pacific Retail Group, have decided to join forces to create what they hope will eventually become the country's biggest internet department store.

The company behind the site, Orion Ventures, is the brainchild of former Whitcoulls head Stefan Preston and his business partner, Adam Keller.

Three companies with links to Eric Watson - Whitcoulls, the Pacific Retail Group, and Advantage Group - have taken a stake in the company, with former Prestige Marketing executive Paul Meier.

The launch comes just two weeks after Sky TV founder Craig Heatley revealed he is looking for staff for a similar venture - a local branch of international internet player eVentures.

Both companies are talking about eventually listing on the stock exchange and competition could get fierce if they decide to go head-to-head, with Mr Preston warning yesterday there was space in the market for only one "serious player."

eVentures expects to have its first New Zealand web site - an internet mortgage broker - up and running by early next year.

FlyingPig, which looks remarkably similar to American on-line retailer Amazon.com, is aiming for late November. It will initially offer more than one million book titles, as well as videos, software and stationery, and is promising prices 5 to 15 per cent cheaper than "bricks and mortar" stores.

It plans to expand into music, computers, electronics and appliances and, like eVentures, is also eyeing services such as consumer finance, sharebroking and insurance.

One potential rival, online music retailer CDStar, has welcomed the competition, saying it believes it will encourage more people to shop online.

The business, which is a subsidiary of e-commerce company EStarOnline, at one stage talked with Orion about its plans.

However, CDStar chief executive Matthew Darby questioned whether the New Zealand market was big enough to make any internet retailer viable.

EStarOnline has set its sights on international expansion, and is currently trying to raise around $1 million through a share offering. It hopes to list on either the New Zealand or Australian stock exchanges next month.

The company claims to have helped drive down CD prices in New Zealand, but Mr Darby conceded it had made only a tiny dent in the local market.

CDStar's five-year plan is to capture just 3.7 per cent of all music sales in Australasia. It does not expect to make money until next year and its parent company does not expect to make money for another four years.

Mr Preston acknowledged setting up an internet retail business in New Zealand was a "very, very expensive proposition ... A business like this is unlikely to make a profit for quite a while."