Rough landing for Watson's flying e-tailer

By SIMON HENDERY and DITA DE BONI

The future of internet shopping took another twist yesterday as two of the country's highest-profile e-tailers confirmed changes in ownership.

FlyingPig, which has tried to model itself on American online superstore Amazon.com, has been sold to a publishing company, while online cosmetics retailer BeautyDirect has outlined plans to merge with a distribution and marketing company.

Both ventures boasted ambitious plans for growth when they were launched less than a year ago, and both insisted yesterday that their transformation did not mean internet shopping would not work as a business.

In the FlyingPig deal, several original investors have bailed out of the company, including key investor Eric Watson.

In a convoluted deal, listed appliance retailer Pacific Retail Group has bought out fellow FlyingPig investors Advantage Group, the Blue Star Group and businessman Paul Meier and sold the company to IT Media, a privately owned publishing company.

Pacific Retail, meanwhile, has taken a 10 per cent stake in IT Media - a deal that will make FlyingPig's chief executive, Mark Battles, IT Media's group chief executive.

The publishing company, which has a staff of about 30, owns several magazines, including NZ Rugby World, NZ Fishing World, teenage magazine Creme and music title Rip It Up.

Its internet ventures include an online "lad magazine," Fire Engine, and it is believed to have been considering launching a weekly business magazine. Its owner, Tim Connell, is believed to share ownership of a racehorse with Mr Watson.

Both were in Melbourne yesterday.

"I know the market doesn't favour e-commerce stocks at the moment, but like any of these things it's cyclical," said Mr Connell.

Companies Office records show Hamilton businessman Simon Perry, who was linked with Sky City's bid to establish a casino in Hamilton, is also an investor in IT Media.

FlyingPig founders Stefan Preston and Adam Keller have sold their stake in the company. Mr Preston, now chief executive of Pacific Retail, said the investment in IT Media could prove useful for future internet ventures in which Pacific Retail might want to be involved.

At its peak this year, FlyingPig had about 40 staff but after the latest deal a further five have been laid off, reducing the number of employees to 15.

Meanwhile, BeautyDirect shareholders will vote early next year on whether to merge with CS Company, a privately owned cosmetics distribution and marketing firm based in Mangere, Auckland.

Investors in BeautyDirect have watched their investment slump from a listing price of 25c to a low of 7c. It closed last night down 3c to 12c.

CS Company's three shareholders will be issued 94 million shares, giving them a 77 per cent holding in BeautyDirect.

In return, BeautyDirect will be plunged into a profitable, larger business, immediately boosting its earnings to about $2.5 million and adding turnover exceeding $19 million.

The BeautyDirect virtual storefront will become a small part of the newly merged enterprise, with BeautyDirect's $2 million to $3 million in cash assets used to expand CS Company's distribution business, mostly in Australia.

BeautyDirect chief executive Bronwen Evans denied the new deal was proof that online retailers were not viable.

"We said it would take us three years to be profitable, and we have kept to forecasts," she said. "But it has become clear that shareholders do not want to wait three years to see a return on their investments."

CS Company and BeautyDirect are understood to be negotiating with a high-profile cosmetics brand to develop the website.

Links


Flyingpig

Amazon.com

BeautyDirect