The nationwide embarrassment. The site we love to, err, dislike. Ferrit.
Paul Reynolds answered two questions on Ferrit (they were not mine but from BarnacleBarnes). How did he do?
Q. One word: Ferrit. With an investment north of $30 million dollars and traffic that is less than a deal-a day site and only slightly more than a shop selling parallel imported sports gear how can Telecom keep supporting Ferrit?
Dr Paul Reynolds: Telecom is investing in Ferrit as part of a longer term strategy. The growth and potential revenue opportunities from online retail and for Telecom are significant if New Zealand follows trends in the US and UK. In the UK online retail is in excess of 15% of all retail and is expected to grow an additional 50% this year. By helping to develop New Zealand’s online retail market from around 1% to US/UK levels, Ferrit believes it can establish itself as a valued partner to help bring a large portion of New Zealand retailers online in a trusted one-stop online retail mall for consumers. A key challenge to achieving this goal is educating New Zealand retailers (other than the handful who already do online exceptionally well) about what is needed to succeed online and providing tools to help them do this.
Q. With a charging structure that can hardly bring in much cash at current traffic levels and no sign of any forward momentum it doesn’t seem to add up. I would be really interested to know how you think Telecom can make Ferrit profitable in the medium term.
Dr Paul Reynolds: By helping equip New Zealand retailers to succeed online, Telecom helps open up worldwide retail opportunities for these retailers, as well as helping them effectively compete with overseas sites who have invested millions if not billions of dollars on their online capability and who are quickly growing their share of New Zealand retail spend (at the expense of New Zealand bricks and mortar businesses).
The one thing Dr. Reynolds did not answer was the question of profitability, and probably with good reason. Dr. Reynolds does say three things:
1: Potential retail revenue for NZ & Telecom is strong if NZ follows trends in USA and UK
2: Educating NZ Retailers is the key challenge to getting from 1% to 15% of all retail online
3: Ferrit will help NZ Retailers sell to the world by “equiping NZ retailers to sell online”
I have a different point of view.
Firstly, the potential revenue question. I agree that the online market in NZ is, Trade Me aside, poor.There is no Amazon, no Best Buy, no Yahoo shops and so forth. However Trade Me is a standout – delivering far beyond eBay would be, including elements of Amazon, match.com, along with the motors, property and jobs sites.
On the number side I find the online share of retail sales in the USA, according to to US Census Bureau, to be just 3.3%. That excludes “Online travel services, financial brokers and dealers, and ticket sales agencies” which are are not classified as retail. Notwithstanding the popularity of sites such as Amazon and eBay this feels about right. It’s just numbers though, and as long as we stay consistent then that’s ok.
Estimated Quarterly U.S. Retail E-commerce Sales as a Percent of Total Quarterly Retail Sales:
4th Quarter 1999–2nd Quarter 2008: Source Census Bureau
Secondly in NZ we are not doing so badly. Trade Me has 1.23 million items for sale right now. If the average time to sell is a week, average sale price is $60 and sell through rate is 20% (all top of head without looking at any real numbers) then Trade Me has about $64m in sales each month, or $770m per year. That’s excluding cars (55,000 cars listed, at say $12000 each and say 3 months to sell that’s $220m per month) and Property (57000 @ say 400,000 and 4 months = $5.7 billion per month).
The last twelve months NZ rolling retail sales were about $66 billion (Stats.govt.nz), or $58 billion excluding motor vehicles. At $770m Trade Me there for would have about 1.3% of NZ’s non motor vehicle retail. At ($770m+$220m*12 = $3.41 billion) Trade Me would have 5.2% of total NZ retail spending including motor vehicles. Both are staggering numbers. How much is Ferrit selling?
Meanwhile my guess is that if we include air travel in the stats then much of it (80%+) will be through online, lifting the overall online sales percentage even higher.
Thirdly, Ferrit is not really equipping NZ Retailers to sell online, nor educating them, nor competing overseas. The retailers should ideally be putting up their own sites and marketing to the world, but they are trapped behind Ferrit’s branding and technology. Ferrit does not offer shipping outside of New Zealand so there is no international sales potential. It would retailers much more good to not only create their own site, but also to get on eBay, Amazon or Yahoo! shops for international sales and of course Trade Me for domestic sales.
Happily there are plenty of other efforts going on in New Zealand to help eCommerce aside from Trade Me – Torpedo7 shows how it can be done, Silverstripe provides free tools, FishPond is grabbing the Amazon space, there are some great design firms, excellent search and SEO companies and even Telecom has been doing some good things.
We are seeing some interesting stirrings at Telecom. Fixing Ferrit will be a sign that things have really changed.