Troubled FlyingPig sacks half its staff

By KARYN SCHERER

The future of internet retailing in New Zealand is under a cloud after the decision by the country's most high-profile e-tailer to lay off half its staff.

FlyingPig, which has unashamedly modelled itself on American online superstore Amazon.com, laid off around 20 of its 40 staff this week, citing mounting losses.

The site, which claims to be New Zealand's leading internet-based retailer, is believed to have chewed up more than $4 million since its launch at the end of last year.

The business is owned by Orion Ventures, a private company set up by 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 - also have a stake, along with former Prestige Marketing executive Paul Meier.

Mr Preston confirmed yesterday that he and Mr Keller were scaling down their involvement. Although both will stay on in non-executive positions, day-to-day running of the company has been handed over to finance controller Mark Battles.

The job losses follow the collapse last week of a merger between FlyingPig and Australian e-tailer TheSpot.

The merger, intended as a precursor to a public float, is believed to have been abandoned after the Australian company failed to raise enough money.

Continuing global gloom about the future of internet retailing is seeing e-tailers worldwide struggling to raise money to finance ongoing losses.

Mr Preston stressed that he believed FlyingPig would survive, despite the decision by its backers to "dramatically downscale" the amount of money they were prepared to put in.

The site is believed to be selling 350 to 400 books a day, largely due to its deal to handle internet orders for the Whitcoulls group.

Mr Preston said orders were growing by about 15 per cent a month. However, plans to expand into music, travel and other categories were now on hold.

While he was "100 per cent confident" books and other media had a future on the internet, he admitted having "grave doubts" about whether other products would prove profitable.

"It's not necessarily that they won't ultimately work - it's more a case of time. Maybe the right time to start a business is in three years, not now."

One former staff member, who did not want to be named, said those laid off were upset.

Staff had been led to believe that the company's investors were prepared to lose money on the business for the first couple of years.

"On Tuesday they said they were going to come round and talk to us about the share float and on Thursday they said they were sacking people."

Mr Watson said yesterday he was "100 per cent committed" to FlyingPig.

"There's no question it will be profitable. It's just a question of whether it will be as profitable as fast as we want to invest money in it ... If the capital markets were hot for such a business we'd go faster. But we'll just take it as it comes."

He said Mr Preston had not been pressured to step down.

Links


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