The Warehouse Group's newest venture, TheMarket, is launching today after 14 months under development.
The online marketplace, similar to the likes of popular e-commerce retailers ASOS or The Iconic, specialises in selling niche Australasian, British and American brands. Warehouse Group chief executive Nick Grayston said TheMarket was part of the NZX-listed retail company's strategy to invest in "the digital future".
The bricks and mortar chain store operator invested $12 million to start the platform, which offers more than one million products from 1500 brands.
A subsidiary, TheMarket, will be kept separate from the group's core The Warehouse, Noel Leeming, Warehouse Stationery and Torpedo7 business, with its own governance board, and a separate office and team, but will utilise company assets.
Justus Wilde, chief executive of The Market, said the group decided it would enter the e-commerce space with a new digital venture in 2016.
"We operate independently, the overlap is around physical infrastructure; we use the store network, some supply chains that gives us access to great buy rates, and logistics," Wilde told the Herald.
"We did that so we can move and scale rapidly and not distract the core business."
Wilde was hired to lead a digital venture for the group at the start of 2018. He worked on the strategy and put forward the business case for TheMarket, which is now based in Newmarket in Auckland, with a team of 55 people.
"Our model is all based on third parties. We are essentially a platform to intermediate the transaction between buyers and sellers. TheMarket itself doesn't hold or buy and inventory product," he said.
The Warehouse to tackle Asos with new shopping website
Rival sites ASOS and The Iconic have a mix of brands and their own inventory. Wilde was unable to discuss whether TheMarket would develop its own product for the platform.
TheMarket has been under development since June last year. In additional to international brands, it will sell Torpedo7, Warehouse Stationery, The Warehouse and Noel Leeming inventory on the platform.
Wilde said the group had "big ambitions" for the platform and anticipated it would contribute significantly to the company's earnings in the long term.
New Zealanders spent $4.2 billion online last year, which accounted for 9 per cent of total retail sales in this country.
Marketplaces represent between 25 to 80 per cent of online retail spending in major markets including in the United States and Britain. The Warehouse anticpates marketplaces in New Zealand to reach 25 per cent by 2025.
"This type of business model requires scale, and we want to take a big share of the market," Wilde said.
"Globally, marketplaces are taking a really big share of the e-commerce spend but in New Zealand that's not so much the case yet, so we think that will change and we're positioning ourselves to be able to take advantage of that."
TheMarket launched with 30 order pick-up and return drop-off "MarketPoint" sites and plans to expand this to 300. Currently, 19 of the group's retail stores are MarketPoints, along with Fonterra Farm Source stores, to support order collection returns in regional areas. It will also offer buy-now-pay-later payment and free returns.
Grayston said TheMarket was the next phase for The Warehouse, and part of the group's "strategy to invest in the digital future".
"The world is changing rapidly and becoming much less binary in terms of how we shop and engage. Successful businesses globally are innovating the customer experience and integrating digital, social and physical together in their omnichannel business models," Grayston said.
"The introduction of TheMarket is the next step in our journey – expanding our reach beyond the products we sell directly, giving people the opportunity to discover products in a deeper and more engaging way.
"TheMarket offer aligns with the wider group, and, over time, will leverage our distribution, supply chain and logistics capabilities."
Grayston said the company looked to expand its business to include TV streaming, microfinance, micro insurance, mobile wallet and personalised pricing and promotions.
TheMarket is the company's first significant investment into the online space, though it already operates e-commerce only businesses 1-Day, and Number 1 Fitness through the Torpedo7 brand.
TheMarket platform features a "shop social section" of the site and an influencer registry which aggregates social media content the brands TheMarket represents and links it to products on the platform to make it "shopable".
A subscription service for platform was on the horizon, Wilde said.
Grant Cotty, senior equity analyst at Hobson Wealth Partners, said TheMarket signalled where the company was headed.
"If this business is intended to be the online landing pad for New Zealanders, it makes sense to move as soon as possible, and stake out that digital landscape. There is always a first mover advantage for this kind of aggregator website; however, this has to be balanced with having a quality platform and sufficient number of brands to pull consumers in on day one," Cotty said.
Cotty said TheMarket had the potential to become a key-earner for the group in the long term. "The Warehouse Group is at around 7.5 per cent online penetration so it doesn't seem it will drive significant online penetration over the short term. It does provide the business with some optionality and could drive incremental margin and sales growth."
The Warehouse reported retail sales of $714 million in the third quarter ending April 28, an increase of 13.2m or 1.9 per cent compared to the same quarter last year. The Red Shed posted sales of 386m in the quarter, up less than 1 per cent, while Torpedo7 sales were up 6.9 per cent.
Online sales for the group were up 18.7 per cent year on year in the quarter.
Company shares were trading at $2.29 at 2pm yesterday.