Logo of Grocery Run.

CHAPTER 8
Running fast

You may have noticed we slipped in that small matter of adding four new websites in one year to the business. We could dedicate an entire book to how we built those four start‐ups but here's the short version.

The launch of Grocery Run

Kalman Polak had worked in various retail stores, including Panasales and The Good Guys, so when a buying role came up at our short‐lived bricks and mortar store, we were thrilled to offer him the role.

Over the next 18 months, Kalman started spotting possibilities for future growth for the business. He moved from the shop floor to joining the Catch of the Day buying team. And at one of these meetings he pitched the idea of selling groceries online as no one was doing it. We loved the idea and GroceryRun was born.

How Grocery Run Started

Exciting, ground‐breaking and successful, Grocery Run was a booming business that shook the Australian retail industry and gave the Australian market a new way to shop. Here’s Kalman to tell you the story.

Thanks to Kalman's initiative and persistence we became a real force in the grocery space. During the COVID‐19 period of 2020, Catch dramatically increased its market share simply by letting its customer base know we were a source of hard‐to‐find products such as toilet paper, tinned goods, pasta, pharmaceuticals, cleaning products and more. A crisis such as COVID‐19 will always present an opportunity for those who are awake and alert.

The success of Grocery Run made us ask, ‘What other verticals could we move into?’

We'd accidentally stumbled on a winning formula of launching vertical businesses using the resources of what became known as the ‘Catch Group’ in that we had what many start‐ups trying to enter the sector didn't. We had:

  • a warehouse for receiving stock
  • a healthy bank balance and cash flow
  • a solid reputation (courtesy of the thousands of suppliers we'd done business with)
  • a management team that was hungry to grow
  • thousands of customers who trusted us.
Photograph of Kalman Polak (front left) and the original Grocery Run team were always up for a pyjama party or two.

Kalman Polak (front left) and the original Grocery Run team were always up for a (pyjama) party or two.

Mumgo. It's where mums go

Logo of Mumgo.com.au.

The success of the niche site Grocery Run opened our eyes to new opportunities. We kept an eye on Baby Bunting and knew that the baby space was hot and could be a great area for us. It made sense. Our Catch customer base was 65 per cent women so it seemed obvious to launch a baby products site. The Catch website had become a valuable launch pad for testing other businesses—a perfect ‘laboratory’ where we could experiment with, and grow, new ideas and businesses—so we decided to use it to test the launch of this new site, and in July 2012 we launched Mumgo with a team of three people.

It started so well …

To build anticipation for the launch, and also to direct the right segment of our existing database to the new Mumgo site, we ran a competition to give away a Jeep (which they kindly gave us for free!). Within just a few weeks we had amassed huge interest, with more than 300 000 unique accounts registered before we even launched. To put this into perspective, it took Catchoftheday 18 months to reach 100 000 accounts.

The issues we had with attracting quality suppliers to Catch and then Grocery Run were not a problem for Mumgo. Unlike Catchoftheday, which was known for offering killer prices, Mumgo didn't look cheap or cut‐price, which really helped brands such as Bonds, Heinz and Pampers (brands we'd coveted for years) to finally come on board.

Once Bonds came on board, other big brands such as Tommee Tippee and Playgro followed and when they started dealing with us (and liked us), they warmed to the idea of using Catchoftheday to list their products. Once the suppliers became aware of the vast volumes they could move on Catchoftheday, the question of supplying to us was never discussed again.

By the end of 2012, Mumgo had 20 staff, but while Mumgo was a fun addition to the group, it added a lot of supply chain complexities that created pressure for the team.

One unintended consequence of moving into the baby market was that we started to mess with the model of what made us so successful. Product selection is everything in the deal‐buying world, and now we were selling something we'd never sold before—kids’ and baby apparel—and, let us tell you, it's not easy for a stack of reasons. Clothes come in lots of sizes and colours and need to be handled with a lot more care than we were used to (as most of our products were housed in cardboard packaging), which slowed down the picking and packing process.

There were seasonality considerations too, and once a fashion trend had moved on, we often had leftover stock that we could never sell again. Add to this the complexities around the sorting, folding and storage of delicate garments, and you can see how quickly what was once a streamlined operation could blow out and cause bottlenecks throughout the entire warehouse operation. In addition, we also had to dedicate more space in the warehouse to storing this vast array of stock, and with space and dollars already constraining our growth, this new line of business only exacerbated our stress. In short, this supply chain was complex and complicated, it wasn't what we were used to and it was very disruptive.

Just as we ‘decide by midnight and execute by midday’ to start a business, the same applies when we stop a business, or in this case slow one down. So we made the hard call, and in 2013, only seven months in, scaled back the Mumgo business and refocused on our other core businesses. In theory, Mumgo was a great business concept, and if we hadn't been so busy, we could have given it the love and care it needed. But 2012 was a massive year of growth and expansion, and we just didn't have enough love to go around. We didn't completely shut it down. We kept it on simmer and at a size we could manage without it distracting the main business. Mumgo was operational until 2017 as a sub‐site, offered a select range of deals already sold on Catchoftheday and provided mums with a one‐stop‐shop from which they could access the best brands at the best prices.

The reality for all entrepreneurs is that when you have 10 great ideas, nine of them will be the enemy of the best one.

Mumgo just had to go. Knowing when to keep going or sacrifice a business is critical to success. On this occasion, we had to put the brake on growth, and while it was painful for everyone concerned, it was the best decision for the business overall.

The launch of Vinomofo

Logo of Vinomofo.

Mumgo wasn't our only distraction that year. We made an investment in the high‐end wine e‐tailer Vinomofo, acquiring a 70 per cent stake in the Adelaide‐based start‐up run by three wine‐preneurs: Andre Eikmeier, Justin Dry and Leigh Morgan. We loved the way they turned what we thought was a boring box of bottles into something sexy and we felt we could help them shift a lot of boxes.

The deal was done swiftly, and we were soon making waves as a serious player in the wine and spirit category. But despite our best efforts, it didn't work.

What went wrong? Three things:

  1. Gabby, Hezi and Anees don't really drink, care about or understand wine and therefore couldn't tell the difference between a $5 bottle of wine and a $50 bottle of wine. And as such we couldn't really assist Vinomofo in growing the business because we just didn't understand their product.
  2. The mofo founders (you can guess what that stands for) were fun guys to work with, but we seemed to have a difference in vision for Vinomofo. They preferred selling more high‐end wines to wine‐snobs at fair prices while we believed in the Dan Murphy style of ‘stack‐them‐high‐sell‐them‐at‐killer‐low‐prices’ school of retailing—the kind that appealed to a wider audience. You can see why this business relationship didn't work out in the end.
  3. There was a lot going on in the business at that time. Even though we'd helped Vinomofo acquire several hundred thousand members and generate revenues of $250 000+ per week, we found that it required quite a lot of management time and resources to keep it growing, and since our visions for the business weren't aligned with those of its founders, it made more sense to allocate more of that limited time and those resources to the business units that were strategically aligned.

So, it was no surprise when the founders approached us and asked to buy the business back.

The second deal was done just as fast as the first one. We were nice guys, they were nice guys; we just weren't meant to get married so quickly and we were both too young to realise it. So, in June 2013, exactly a year after joining us, the mofos departed with a business five times larger than what they arrived with, moved into a funky office in the hipster suburb of Richmond, Melbourne, and continued to successfully build the business. We'll drink to that!

Kissing frogs

The stories of Mumgo and Vinomofo can be viewed as stories of failure (or more specifically, a lack of focus), but failure is part of the entrepreneurial journey and it's the only way to learn. Being able to admit you made mistakes, and then being able to make fast decisions to stem the losses, is part and parcel of what being a successful entrepreneur is all about. To find entrepreneurial success, you've got to kiss a few frogs and hope one turns into a princess. We certainly had a few in our pond.

While we had enormous success with Catch, Grocery Run and Scoopon, and limited success with Mumgo and Vinomofo, we had no success with:

  • Yumtable: a last‐minute restaurant table reservation, table ordering and payment app (a great idea but ahead of its time)
  • Didgio: a platform for buying and playing movies, video games and other software titles (another great idea killed by streaming players)
  • Atlas.com.au: our first attempt at a marketplace, but it was too early for Australian retailers to understand and embrace.

Ever heard of any of these? We didn't think so. For one reason or another, mostly timing and resources, these ideas didn't fly. That's not to say we didn't try. We gave all these ideas 100 per cent of our energy and commitment. We spent millions trying to breathe life into them and hired talented teams to bring the concepts to fruition, but for a range of reasons, the ideas just didn't work. Simple as that.

And then came our Cinderella. The Fair‐Etail continues …

It all started with pizza

Logo of Eat Now.

If we told you that we could launch a start‐up in the uber‐competitive field of food delivery, merge it with the market leader and sell the whole shebang to a global conglomerate less than three years later for $855 million, you'd tell us ‘you're dreaming’.

But that's exactly what happened when we launched EatNow.

We still pinch ourselves sometimes and wonder how we managed to make it happen. It's a long story, but we'll just give you the highlights.

Success was almost immediate

In less than a year EatNow went from 800 orders a week to 12 500 orders a week. From around thirty‐thousand dollars a week in turnover to half a million dollars a week! We grew fast, won awards and started to frighten Menulog, the market leader.

Unfortunately, however, around the time we launched, so did Delivery Hero, one of the most cashed‐up operators in the global sector. They certainly didn't make life easy for us when they started handing out millions in cash credits to entice customers to use their service. But the spirit of David against Goliath kicked in and the memory of Groupon trying to usurp Scoopon all those years ago emboldened us to believe that we could beat these suckers at their own game. Sometimes it's not the size of the dog in the fight but the size of the fight in the dog, and we were nothing if not hungry and pulling at the leash to take the lead on this one.

We certainly couldn't beat them with our small budget and tight resources so we knew we had to find their weakness and do what we do best: outsmart them, work harder and keep moving fast. While it was hard going, we just kept ploughing on and eventually they decided this yappy little dog was going to cause them too much grief, so they just packed up and went home.

One down. One to go.

Doing the right thing

Logo of Scoopon.com.au.

To say we had multiple irons in the fire at this time would be an understatement. We were trying to juggle several new businesses for the group, each growing fast but needing more focus and resources than we could sometimes give them. As every juggler knows, one distraction can make the whole thing tumble and crash. What came next wasn't just a distraction—it was like seeing a truck (or as it happens, a plane) about to fall on you while keeping all the balls in the air.

A serious matter at Scoopon Travel needed our urgent attention and called into question everything we as a group stood for.

Here's what happened.

Scoopon was firing on all cylinders (we'd just sold 675 000 Hungry Jacks vouchers within a few hours) and we'd just started getting traction in the travel sector.

As always, we were open to opportunities, so when Strategic Airlines came calling to offer us discounted airfares to exotic locations, we were interested. The deal was compelling. A return airfare to Phuket, Thailand, for around six‐hundred dollars including meals, drinks and more! We were in.

Within 24 hours, we'd sold deals netting almost $1.2 million in revenue. We were so excited at how this deal had ‘taken off’, we ran another one, and this one sold out in less than 24 hours too. These were hot deals our customers loved!

Snapshot of Scoopon sold 675##000 $2 meal deals from Hungry Jacks in a few hours.

Scoopon sold 675 000 $2 meal deals from Hungry Jacks in a few hours.

A few weeks after the second deal went live, Strategic Airlines changed their name to Air Australia, to represent a stronger ‘brand alignment’ with Australian travellers. Or so they said. This branding‐on‐the‐run activity raised alarm bells.

On 17 February 2012, the worst‐case scenario happened. Air Australia went bankrupt and they couldn't even pay for the fuel to get their planes from Phuket back to Australia. No amount of due diligence on our behalf could have foreseen this event occurring. It was a once‐in‐a‐million risk and yet it happened, and we had to deal with it. We scrambled to comprehend the complexities of what it meant to us and more importantly, to our customers.

As you can imagine, our travellers, who were either in the middle of their holiday or planning one, panicked, wondering if their deal would be honoured (or even if they could get home to Australia!). Technically speaking, we weren't obliged to honour the deal as we had already paid Air Australia for the tickets; we were not holding the customers’ money and the obligation to refund their fares sat well and truly with Air Australia, or their insurance company.

But of course, the traveller, who bought the deal from Scoopon, could be forgiven for thinking that Scoopon should honour the deal. We'd sold 4000 deals and 2000 of them had yet to redeem their deal so we were looking down the barrel of refunding $1 million in airfares for a disaster that we had no hand in creating. We had to make a decision, and it's times like this the core values of a company come into play.

We had two options: cut the travellers loose and let them try their luck with getting their money back from Air Australia. Or, refund the customers, take a hit of $1 million and help expatriate them back to Australia as quickly as we could.

We chose the latter. Even though it wasn't, technically speaking, our problem to solve, we made it our problem to solve. Our DNA has always been ‘customer first’ and this was no different. Financially speaking, it was a tough decision to make. Morally and ethically, it was an easy decision to make. We felt obliged to ensure none of our customers were left stranded.

Once the commitment to help our customers had been made, we immediately set up a taskforce to deal with the situation. We boosted our customer service team to work around the clock to take any calls from customers; sent Scoopon representatives to Phuket airport to help our customers; booked them on alternative flights; and offered them free accommodation if a flight was not available. It's worth noting, we believe we were the first travel company to offer our customers full refunds—and this from a two‐year‐old start‐up—while other travel companies (worth billions) chose not to.

Doing the right thing is easy when it doesn't cost you.

But when the price tag is $1 million (or $2 million really, as we'd already paid Air Australia $1 million for the airfares, and were now refunding the customers another $1 million out of our own pocket) and you're bootstrapping a fledgling start‐up, doing the right thing can become a very painful and expensive exercise.

But as we discovered, sometimes doing the right thing isn't just good for the customer, it can be good for the company too. This experience taught us a lot about what it means to honour your values. By doing so, we built trust with our travel customers, which took our relationship with them to a whole new level.

Although unintended, this action to refund our customer base, which received unprecedented media coverage, elevated us from a little‐known entity in the air travel sector to becoming a household name for buying travel. What could have been our biggest setback became our greatest asset. This incident signalled to our customers and suppliers that even if the shit hits the fan and the deal falls over, we will do the right thing by them. Trust. It's a valuable currency that we take seriously and it's another reason why we've been able to weather the retail storms for so long while other, larger, more established brands have fallen by the wayside.

Scoopon ended up growing throughout the rest of the year and finished FY2012 with revenues of $80 million, which wasn't bad for a two‐year‐old business.

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