Retail sales in NZ

Retail sales in NZ have been quoted a few times as $60bn NZD. Let’s dig into that a little.

The latest stats from Govt.stats.nz show $60.5 bn for the year to the September quarter, 2006.

The big spends are $13bn in supermarket, groceries and produce, $5.8bn in fuel and $7.8bn in motor vehicle retailing.

If we just select the categories that are offered for sale by Ferrit, we see that their addressable market is about $18bn (the yellow bars).
Trade Me also addresses the Motor Vehicle retailing ($7.8 bn) and the auto accessory markets (call it $2 bn) for a total of $28bn of addressable market, excluding property.

Missing from the list of retail services is, as pointed out in comments, airline tickets – which is probably $3-4 bn (Air NZ had $4bn of domestic and international revenue last year), property, and it is unclear whether 2nd hand sales of goods are included. (They should be – large second hand retailers submit GST returns like everybody else.

Retail sales in NZ to Sept Quarter, 2006

NZ Online retail – the market

Some interesting comments on the previous posts – worth a look at. I’ll redo some numbers in a while, but in the meantime here are some charts…

This is daily unique domestic browsers to the big online shopping sites. (except Gameplanet sorry, which I inadvertently left off). The point of the chart is to show the dominance in NZ of one site. The Page Impressions version of this chart is even worse.

UBs dec 2006 shopping NZ

Here is the same chart, with Trade Me UB’s plotted on the second axis. The point of this chart is to show the gradual relative increase in Ferrit UB’s until last week, after which it seems to be tracking with Trade Me. That’s not a huge result for the advertising spend.

Farmers traffic is interesting with the 2 spikes. I’m not sure why, but that sort of traffic pattern is a symptom of a site that isn’t working and/or over-promotion – else the traffic would stay.

unique browsers Dec 2005 NZ shopping 2 axis

Finally – so we can see what is coming, here is the traffic profile from last year for Real Groovy and Trade Me. Unsurprisingly online retail drops sharply from just before Christmas.

2005 UBs for dec RG and TM

As always these are the Net Neilsen stats, domestic IP addresses only.

why “ecommerce has flopped in NZ”

That article again – right at the bottom, from out of nowhere, come “five reasons ecommerce has flopped in New Zealand”.

“1. Mall mania. Trips to the shopping centre are a top Kiwi recreation.
2. Security fears. Kiwis are paranoid about giving credit card numbers online.
3. Bargain hunting. If it’s not cheaper online, why bother?
4. The Trade Me factor. The auction site dominates the time we spend online.
5. Delivery costs. US research shows free delivery is a big attraction for online shoppers.”

Let’s deal with these in turn.

1: Shopping in NZ malls is nothing compared with the USA. I’m not even going to bother looking up the numbers.

2: Well over a quarter have done so. There are 1.4m Trade Me customers and seeing as you have to pay something to list or bid, you can guess that most have paid. Meanwhile there are those AirNZ customers and the fact that we have been paying our bills through the phone and banks quite happily for years and years now.

3: Wrong way to look at it, but basically there is a scale problem. In New Zealand an online shop would struggle to have enough scale to make holding a wide inventory at cheap cost doable. Having a limited or expensive inventory is killer for online shopping. The alternative is to drop ship from offshore, but that means you are competing with the offshore giants.

4: 40% of Trade Me sales are for new stuff (and a lot use the Buy-Now feature) – there is your eCommerce.

5: Red herring – free delivery is and was offered by some, not by others. Total cost is what matters, and for that you have to look a#3

Now let’s look at another 5 reasons. I’m not saying these are the right ones, or all of them. However I’m pretty sure they are better than the above which, look like they were written by a Telecom apologist.

1: Expensive and limited Broadband. It is really hard to start a business when you cannot even get reliable and cheap broadband to the home (or even university). Anomaly Trade Me used the awesome Wellington Citilink – fibre strung on trolley-bus wires – to start up, and focussed on making their site sleek enough for dial up.

2: Dollars going overseas: the early adopters in New Zealand were well aware of the eCommerce offerings from (mainly) the USA. Why bother with childish home-grown booksellers when you can parallel import (thanks to great unrestrictive laws) from Amazon for cheaper?

3: Population density and placement of shops. The young wealthy people in New Zealand live in the cities – and our cities are far more dense (Auckland excepted) than their US equivalents. We are far behind on the rollout of the big box stores (I am guessing), and Wellington in particular is very centralised. Buying books online makes less sense if I walk past a bookshop every day.

4: Scale of opportunity – while the internet is home to billions, New Zealand is home to just 4 million, and we are much poorer per capita than lots of places. Kiwi entrepreneurs don’t want to constrain themselves to this country, and so launched services (such as search) for the world, or emigrated to work with the best.

5: limited reward culture – The kiwi tall poppy syndrome seems to have been curtailed for now – and having business leaders that are nice guys helps. But we still have a way to go before we get a Netscape or Google – where all of the staff become incredibly wealthy and spawn new start-ups. The Trade Me sale and Rod Drury’s sale earlier this year did finally create a handful of wealthy individuals, and some (2? 3?) have become second stage investors. What we need is a big sale where huge dollars go to all of the staff, and then we can watch the second stage investments go wild as 24 year olds give money to their smart mates.

Ferrit. Incompetent. #3

Ferrit boss Ralph Brayham says that Ferrit is “aiming for around 300,000 unique users this month, with 2 per cent of visitors buying something.”

That’s just 6,000 buyers. Let’s assume they each buy goods worth $150 (I am being  generous), and that Ferrit takes 5% of that (generous again). That’s $900,000 worth of sales, and income for Ferrit of $45,000.

Income – that’s something new for Ferrit.

Sadly it cost them $5 million in recent advertising to get those customers. That’s an acquisition cost of $833 per paying customer, and a loss of $5 million, near as have it.

Now – I’m being pretty generous with the numbers. Brayham’s numbers are aspirational, and will fall short. Ferrit had 121,000 Unique browsers (Net Neilsen) to Friday the 15th, and there are just a handful of shopping days left.

Moreover the  300,000 “unique users” quoted is probably referring to unique browsers, which clock in at 2 or 3 per person these days, so the 121,000 unique browsers to date is probably 40,000 to 60,000 actual people.

$150 average sales price is also pretty generous for a site that nobody uses or trusts – people like to start low and build up.

and 5% – well  I think that’s overly generous, and it could well be 0% at the moment…

Meanwhile I’ve heard estimates from $30m to $50m for the amount of money dropped on Ferrit so far. At $40m, and given the 150,000 UB’s, or say 75,000 actual people that visited the site in November, that’s $400 to $660 acquisition cost per visitor, or $20,000 to $33,000 per paying (at 2% of actual visitors rather than 2% per UB) customer.

If a customer costs $20,000 to acquire then they would have to spend $400,000 to $660,000 each on Ferrit (@5% take rate) for Ferrit to make their money back. Before discounting for time value.

Give it up.

Ferrit. Incompetent #2

The Herald’s coverage of eCommerce leaves something to be desired – imagine surveying NZ’s eCommerce space and forgetting the biggest site is Trade Me, not, umm, Ferrit.

Perhaps Peter Griffin is a columnist shilling for Ferrit… regardless – we should blame him, as well as the NZHerald editors, and give kudos for whoever did the PR for Ferrit.

In another article from the Herald, we see a classic quote from hapless Ferrit boss Ralph Brayham, who says that he “estimates that currently only about 0.3 per cent of spending [in NZ] is done online…”

Actually, as later in the article shows, NZ has about $1.5bn worth of online retail sales each year and as the article also points out, $60bn of total retail sales. That’s 2.5% Ralph – you are out by about an order of magnitude.

It’s not as if this stuff is hard to find. Air New Zealand state in more than one place that they will hit $1bn in online sales in the June 2007 financial year, and they hit $840m in the June 2006 financial year.

Meanwhile perusing the NZHerald is one way to find that Trade Me sells (excluding cars and real estate, and back in October 2005) $300-400m worth of items each year. So Mr Brayham, with a modicum of surfing, could have found two company’s who stated in public that they have online sales worth collectively over $1bn. And that was half a year ago.

new news sites

Stuff and NZHerald upgraded late last week. I should really, and much before now, have commented on the new design of both. Frankly neither of them really do it for me and I have simply stopped looking at them. The sunny days probably have something to do with it…

Friday page impressions were up against the previous Friday for Stuff but well down (-18%) for NZHerald. Unique browsers were also down, while average page durations and average session durations rose. Stuff saw a big increase (+13%) in pages viewed per session, while NZHerald saw a decrease (-10%). Stuff visitors saw 10.7 pages each on average, while NZHerald’s made do with 7.4.

So – round 1 of the stas goes to Stuff, and yes their site is easier to navigate than NZHerald’s.

Meanwhile it’s close up time for the next month in New Zealand  – so comparitive traffic
stats are pretty useless when everyone is watching cricket, at the pub or on a beach.

Rod Drury sees the Yahoo!Xtra (what an unwieldy name) tie-up as creating opportunities for other players. He asks:

What does Microsoft do?

The choices are go it alone or tie up with a media company – pick one from TVNZ, TV3, APN or Fairfax. My pick is TVNZ, followed by APN.

What is the homepage transition strategy?

It will be a switch on March 1st – I don’t see MSN and Yahoo! playing well together for a transition. But where will the xtraMSN page redirect to? I believe it will go the the new Yahoo!Xtra page, as MSN seems the junior partner in the current offering, so Xtra most likely controls the domain name.

What gaps result from the Telecom/MS spilt ?

The MSN franchise will be picked up by someone else.

The Hotmail users will now be torn between their ISP’s site and their mail site. No contest there, though personally Yahoo’s offering is far better than MSN’s

What Browser will be pushed?

None – why should Yahoo!Xtra push a particular browser? Only Microsoft has incentive to do that, and I don’t see anything in particular pushed by Yahoo! in Australia or the UK.
What happens with Hotmail/Live in NZ

This is a really good question – all those xtraMSN customers have Hotmail accounts, while Yahoo!Xtra will push Yahoo! accounts. I don’t see a wholesale migration from Hotmail to Yahoo! mail, so as mentioned above half the xtraMSN value will stay with MSN.

Reselling tickets takes a step backwards

Two disturbing articles today – one that eBay UK will not allow reselling of tickets to the giant Concert for Diana, and the second that New Zealand is introducing laws restricting re-sales of tickets to “big events” to a maximum of face value.

People – you cannot fight economics, and you will lose in the long run. Resellers will just find another way to sell their tickets, and it will be a lot less safe than sale through online auctions, where sellers leave a wide trail.

If I want to buy a ticket to the Diana concert then let me.

If I want to go to the rugby world cup then let me.

If you are concerned about people making excess profits then put in place a process where you make the excess profits yourself. Be prepared, however, to take on the same risk that the scalpers do – but at least you won’t have empty seats.

46% of Asian internet users have a blog…

The blogging stats get bigger and bigger it seems, but this one comes via an online survey from Microsoft MSN & Windows Live  in seven markets in Asia – notably excluding China.

With a self selected respondant set – it isn’t surprising to see bloggers over-respond to a survey on blogging –  these numbers have to be  sharply biased. I’m still waiting for a methodologically sound survey..

The online dating timeline…

A great dating site thought starter from Fred Stutzman via David Evans at onlinedatingpost..

“Situational relevance and the patterns of decay based on the lifecycle of users.” Dating sites should take notice of this. A member during the first week or two does not have the same needs as a one year member. Most sites don’t treat the two any differently, which is a) leaving money on the table and b) not providing members with the help and guidance they need to find the right person for them. What is your site doing to work with members along the dating timeline?

What indeed…

Yahoo!Xtra

Yahoo!7 has officially tied up with Xtra- to create Yahoo!Xtra for New Zealand, launching March 1, 2007. With Yaho0!7 owning 51% of the JV there is hope for a great site.
But early signs of the continued amateur hour are a non-existent yahooxtra.co.nz site, although at least AJ PArk has registered yahooxtra.co.nz and yahooxtra.com (and xtrayahoo.com). Meanwhile Yahoo!7’s Australian site is pretty good.

One down side of this is that Yahoo!7 Australia does not subscribe to the Net Neilsen traffic statistics – something that all the major online players in New Zealand do. They may find it difficult to sell advertising without the Net Neilsen tracking, so we could be seeing an attempted shake up in the way we measure traffic here. I really hope that Yahoo!7 plays ball – the alternatives such as Hitwise and customer panels are appalling, and the accepted tracking methodology makes one less thing to worry about.