CHAPTER 15
The marketplace beckons

For the uninitiated, a marketplace is a website where sellers congregate to offer their goods to an aggregated audience. Amazon, eBay, Alibaba, Airbnb and Uber are all marketplaces, and you could say they've all been reasonably successful. We had our own marketplace with Menulog, and that worked pretty well for us, too. In 2020, the word on every marketer's lips was ‘marketplace’. Other than COVID‐19, it was the hottest topic in town. Every industry needs a marketplace and every entrepreneur wants to own one. The only trouble is, you need big bucks, and even bigger balls, to build one. They're not for the faint‐hearted. Creating a marketplace made sense for a multitude of reasons. It stacked up strategically and solved a lot of issues. It was a:

  • capital‐light model. This meant we could offer more products without needing to buy more products, add more warehouse space or hire more packing staff.
  • scalable model. If we didn't need to buy the goods, we didn't need to photograph, pack and ship them either. We could add millions of new products without adding overheads, and run the entire marketplace operation on a shoestring.
  • compelling offer. If we offered more products, we attracted more shoppers, which generated more traffic, which increased sales. If we increased sales, we attracted more suppliers, at which point, the network effect* would kick in.
  • destination website. After a decade of attracting the shopper with ‘surprise’ deals, we could now attract the ‘intent shopper’ (a customer who comes to you searching for something specific).

For these and many other reasons, the three of us debated long and hard and agreed that we'd step off the cliff and commit to what would be one of the riskiest, most complicated and expensive decisions we had ever made. We would launch a marketplace. In business parlance, making critical decisions like this is known as ‘pivoting’. This was a big one. We made it in June 2016 and we knew it would be a massive inflection point in our business.

Amazon is coming

On the cusp of committing significant dollars and energy to the launch of our marketplace, we heard a very disturbing rumour that the Goliath of them all—Amazon, no less—was coming to Australia. Amazon! The number one marketplace in the Western world was coming here. We contemplated the enormity of what we were doing—going head to head against Amazon—and we'd be lying if we said we didn't consider giving up on the idea. But as we've always said, if we have an idea by midnight, we execute by midday, and this was no different. We figured we might be tiny by comparison, but on this occasion, we were the incumbent, our customers and suppliers loved us, and we had a database of millions of happy customers who (we hoped) would choose us over our American counterpart.

But we knew we'd have to act fast. Amazon was in our rear mirror, closing in fast and the clock was ticking. Having the ‘first mover advantage’ is an asset, but as everyone knows when it comes to Amazon, anything can happen.

The race is on

In theory, launching a brand‐new marketplace sounds easy. In reality, it's extremely complicated. Just finding a team to build the marketplace itself was challenging. Our first instinct, as always, was to build it in‐house, but our team of 30+ IT professionals told us in no uncertain terms, ‘No way! We're too busy building the Bon Voyage website. Go away.’

We searched high and low to find a software company that could manage this mammoth task, and preferably one that was already building marketplace platforms. Why reinvent the wheel, right? We moved quickly, and after an intensive global search, located a SAAS (Software as a Service) company called Mirakl based in France that specialised in building retail marketplace software. What a miracle! Within 48 hours, we had signed the contract. Adrien Nussenbaum, the CEO and co‐founder, was shocked we made such a major decision so quickly. He said, ‘Working with Catch has been a wonderful experience from day one. Their trust in Mirakl recommendations and high ambitions made for a powerful combination’. We were as happy to find them as they were to find us, and we celebrated into the night with a few drinks. Très bien! Nati swears his school‐boy French helped clinch the deal. We're not so sure.

Make no mistake. This move was a big gamble for us. Some people around us said, ‘Don't do it! You're mad! You can't win!’ We realised that pivoting the business model was a massive risk. Business builders often find themselves in situations where they need to make 80 per cent of their decisions with only 20 per cent visibility. Being an entrepreneur is about playing the odds. We'd done it before, we could do it again. This newly formed management team of three were on a mission to prove everyone wrong, to turn this business around and to make this marketplace a success.

More questions than answers

In the spirit of our newly‐found culture of collaboration and open discussion, we asked the team for their input. We gathered all the relevant people around the table to discuss the operational components of adding a marketplace to the Catch business, and while we had their interest and enthusiasm, we certainly didn't have everyone's support. All decisions as crucial as this are accompanied by vigorous debate and discussion, and this was a critical decision that everyone had an opinion on. We remember these meetings as being pretty explosive because everyone was concerned about how this new development would affect them. We compiled a list of questions, concerns and complexities; questions that would need quick answers if we were to have any chance of success. It became clear the marketplace could function in many different ways and do many different things. We just needed to decide what they were, and how we would achieve them. Here are just a few of the questions we had to ask ourselves:

  • Who decides what sellers should be admitted to the marketplace?
  • Do we mention the seller's name when displaying the products?
  • How many sellers should compete for the same product?
  • If a product is sold on both Catch and the marketplace, do Catch products get priority?
  • Should we allow sellers to beat Catch on pricing?
  • Should we accept sellers from overseas?
  • What categories should we offer first?
  • Who do we hire to run the marketplace?
  • How do we maintain our levels of Catch customer service if we're not servicing the customer?
  • How quickly should a seller dispatch an item?
  • How many employees do we hire to launch the marketplace team?

The list of questions was nearly as long as this book, but the common thread that connected them all was the recognition that we had built a tremendous brand over 11 years; that we stood for something; that we had strong values in place; and that we weren't prepared to compromise on any of them.

If we were to pursue a marketplace, it needed to retain the DNA we had developed at Catch.

It had to represent everything we stood for: great prices, excellent customer service and fast shipping … and fun. If that was the answer, then there was really only one question: ‘How do we add a marketplace, introduce thousands of new sellers under the Catch brand, and still maintain the Catch culture?’ This question of course led to another. If the marketplace must represent the Catch culture, what exactly is the Catch culture? Defining culture is like catching a cloud.

But with the new team in place, we thought it was time to document this nebulous concept so that we could enshrine it as part of our corporate values, and hold it up for future generations of Catch employees to look at for guidance and inspiration. We called these values the ‘Catch DNA’. These were the commandments that underpinned it.

How we built the marketplace

We could have debated the merits of the marketplace for months on end and still not gotten everyone on board, so we did what we've always done and jumped right in and said, ‘Let's do it!’

Did we have all the answers on how it would get done? No way. We didn't even have the questions! But we figured it was better to be in the game than watch from the sidelines. The one thing we all agreed on was that we would have a curated marketplace. We did not want to be an open marketplace like eBay or Amazon where anyone could sell anything for any price. We wanted to control who would sell on our site and what products they would sell. We also wanted to ensure all the sellers could maintain high standards of customer service and ship as fast as we could. The mission that drove our every action and our every decision was to always give the customer what they wanted: a great range at the best prices.

Creating a curated marketplace not only solved the quality issue, it also enabled us to create a point of difference from eBay and Amazon. If you go to eBay and search for a black iPhone case, you'll be presented with hundreds of sellers offering the same items. But who do you trust? Who's reliable? Who's got the best price? You have so many choices you end up not buying anything at all. It's death by a thousand decisions. We didn't want this for our marketplace, and creating a curated marketplace meant we would avoid it.

We put our team of 60 product hunters on the job to start sifting through the sellers we wanted to invite onto the marketplace. They were the smartest, most experienced product source‐ers in the country. They had their work cut out for them because everyone who was anyone wanted to be on our marketplace. We took our cues from the John West school of product selection—‘it's the products we reject that make us the best’—and eventually turned away 80 per cent of the sellers who applied to be on the marketplace.

This marketplace offered us unparalleled opportunity to expand our offering. With our deal‐of‐the‐day model, we had been limited in what we could sell as it had to meet a range of criteria.

Now, the shackles were off and we could offer almost anything.

The size and weight of products were no longer an issue so we could offer furniture, gym equipment, trampolines, bathroom products and camping gear. We could be as niche as we wanted and offer obscure, long tail products that were of interest only to a few; we could offer products that had an endless range, such as books, jewellery, cosmetics and apparel. Big ticket items such as high‐end electronics, designer watches and luxury goods were also now on offer. The world was our oyster!

One of the first companies to join our marketplace was booktopia.com.au, Australia's most successful and largest bookseller. The founder, Tony Nash, and the deputy CEO, Wayne Baskin, are seasoned retailers, and they jumped at the opportunity to offer their range of 100 000+ books to the Catch audience. Catch had never really offered books before and certainly had no intentions of stocking 100 books, let alone as many as 100 000, so this was another great example of win‐win‐win. Booktopia sells more books to new Catch customers, Catch sells more books (1000 every day) and the consumer is super happy to discover a product on Catch that they weren't expecting to find. Everyone is happy!

The launch of BonVoyage.com.au

Logo of BonVoyage.com.au.

While the build‐up to the launch of the marketplace was taking shape, the travel team and Jon Beros were still working hard on building the Bon Voyage business. Luxury Escapes, being the market leader, had the first mover advantage. As a late arrival to the scene we had to launch with a bang and quickly get as many eyeballs as we could on our new site. We'd enjoyed our experience having Jason Alexander as our brand ambassador for Catch and thought we could duplicate the strategy and find an equally compelling ambassador to launch Bon Voyage. We chose Jennifer Hawkins, a former Miss Universe, a celebrity everyone in Australia loved and respected.

Photograph of Bon Voyage team and the ambassador, Jennifer Hawkins.

The Bon Voyage team and our lovely ambassador, Jennifer Hawkins.

Launching any business from scratch is hard to do, but launching one with the backing of the Catch group made the job so much easier. It meant Bon Voyage could tap into the customer service, design, IT, marketing and finance functionalities that already existed and leverage the substantial databases of Catch and Scoopon. Through Scoopon Travel we already had all the relationships with the hotels and resorts, so getting great product flow wasn't a problem either. We remarketed our offering via banners and daily emails, and took a leaf out of the Luxury Escapes playbook by creating vibrant, four‐colour, full‐page newspaper advertisements, which had worked so well for them.

Our first deal put us on the map. We collaborated with Melbourne's five‐star Crown Casino to offer 10 000 room nights and we sold out within 24 hours. Our team continued to source unbeatable deals like this and within a very short space of time Bon Voyage became a big blip on the radar of the market leader and started to threaten the territory it had begun to think it owned. In short, our activities and awareness were starting to bite and Luxury Escapes were beginning to get just a little bit annoyed, which was just what we wanted.

What's in a name?

Logos of catchoftheday.com.au and catch.com.au.

By July 2017, Catchoftheday was more than 11 years old. We were an established business with a high media profile, millions of customers and hundreds of employees. We'd moved offices more times than we cared to remember, bought and sold many businesses along the way, and changed our business model multiple times to reflect the changes in the market and the customers we served.

The one thing that hadn't changed, however, was our name: Catch of the Day. While we loved our name and logo, and recognised that it had worked so well for us for so long, the (sad) reality was that with the marketplace about to launch, the name no longer reflected what we did, or what we offered. For example, while our site had 30 000 products on it every single day, we were about to add an extra million+ products via the marketplace, so the name ‘Catch of the Day’ would quickly become redundant. This forced us to ask ourselves this question: Why are we still called Catch of the Day?

After a decade of success, here we were, about to mess with the name that had done so much to put us on the map. We were super conscious of the risk that messing with the brand posed. Under Nati's cultural revolution, we had hired Ryan Gracie, one of Australia's most energetic and experienced retail marketers. The original plan was for him to come in for only a few weeks to help us get our marketing back on track, but we convinced him to stay. It was a good move for all involved. With decades in the business working for the likes of JB Hi‐Fi and Fantastic Toys we knew he was well placed to lead this very important change.

While it sounded easy in theory, the task of rebranding an entire organisation as diverse as ours took hours of long, detailed discussions. Choosing the name going forward was a given. We had been referred to as ‘Catch’ and calling ourselves ‘Catch’ for as long as we could remember, so in many ways Catch of the Day was Catch.

Deciding on the new logo was a little harder. Do we go with a revolution and start from scratch? Or do we go for an evolution and make a subtle change? We went with the revolution, enlisted our own creative team, ran staff competitions, as we always did, and even used 99Designs and Fiverr to crowdsource some options. Everyone had a crack!

The launch of the new brand came with mixed emotions but the roll‐out went smoothly and now, when we look at the new Catch logo, we have to say that we love it as much as we loved the original. Even now, years after the rebrand, we are thrilled to see the new Catch logo on billboards around town and know we made the right decision. Old habits die hard though. We're still referred to by our customers, the media and the industry in general as the founders of Catch of the Day. Some things will never change, and that's just fine with us!

Photograph of Ryan Gracie, Gabby and Hezi.

Ryan Gracie, Gabby and Hezi. It was Mexican day at the Catch office.

The side benefits of building a big brand

Photo depicts the Catch-branded gift cards in the big retail stores.

We got a kick out of seeing our Catch‐branded gift cards in the big retail stores.

The gamble paid off

We launched the marketplace in July 2017 and the results were beyond anyone's expectations. In our first week of trade, the marketplace generated 917 new orders. By week four, it had doubled to 1800 orders, and by week eight we were taking 5000 orders. Within three months, the site was generating more than $2 million every week. We couldn't believe our eyes. Revenue was growing at rates that we had never experienced, and we were now on track to reach $50 million in sales by the end of our first year.

We said to each other,

‘We should have done this earlier!’

While we were super pleased with the results, we couldn't help but think how much we could have made if we'd expanded our offering earlier. Little things caught our attention, such as costumes. In one day, we sold 300 costumes! Who'd have thought? Imagine if we'd been selling costumes from the beginning? What a missed opportunity!

We were onto a winner again. Luck? Who knows, but fortune favours the brave and the massive gamble we took in launching the marketplace had paid off in spades. We weren't the only winners. Our 500+ sellers were beneficiaries too, selling so much more and introducing their product and brand to a whole new audience.

Here's a message to all the arrogant brands out there still sitting on the fence wondering if you should join our (or any other) marketplace:

You need to be where the customer is! You need to sell your product on other marketplaces. Remember: 1 + 1 = 3!

Our customers were the ultimate winners because they could now take their pick from a vast array of Australia's best suppliers at the best prices.

Amazon is getting closer

While the marketplace was flying, we had our eye well and truly on the Goliath across the Atlantic. We knew it was coming, we just didn't know when. We'd heard Amazon had secured a 24 000 m2 fulfilment centre in Melbourne and while the media were quick to suggest that our Catch star would burn brightly and then crash and burn the minute Amazon arrived, we didn't see it that way. We genuinely believed that a rising tide floats all boats and that Amazon's arrival would increase the awareness of online shopping and we'd be the recipient of that extra attention.

We had built great relationships with our suppliers, had a truckload of them waiting to get on the platform and knew they wouldn't desert us the minute Amazon arrived. Our customers loved that we were a little Aussie start‐up that had made good, that we were approachable and that we communicated with them in a fun and personable way. With Amazon on the horizon, we hoped this sentiment would help position us as a genuine alternative to them, even if our product range was a fraction of theirs. We'd been the number two player in many markets and each had worked out just fine. We hoped that this would be no different.

Don't chase a rabbit down a hole

You'd have thought that with the launch of the marketplace and Bon Voyage we would have been content with the status quo. Sales were going great, revenues were up and awareness was at an all‐time high. Surely, maybe now we could stop for a moment and smell the roses? But nah. We've never been happy with the status quo. We were always looking for the next bright, shiny object, and we saw it in Pumpkin Patch.

Pumpkin Patch was a 40‐plus‐year‐old children's clothing brand. It requires little introduction. Our kids wore it with pride over the years. One sunny day in 2017 Pumpkin Patch went out of business and into receivership. You may have seen it. It was front page news. Sadly, we seem to see more and more retailers over the past few years throw in the towel like this. But we thought we could do something with the brand, so Nati, Hezi, Gabby and our ever‐reliable CFO Mark Spencer jumped on a plane to New Zealand to meet the receivers at the head office of Pumpkin Patch. Within a few hours, we'd bought the worldwide rights for the Pumpkin Patch brand. Why did we do this? Good question. We asked ourselves the same question seven months later when it all went to shit, but like all our endeavours, it seemed like a good idea at the time.

Looking back, it's clear we were a little blinded by the brand. It was iconic and we wanted to own it. It did come with a huge database of mostly female shoppers of all age groups who were highly aligned with the Catch customer demographic. We saw value in that. We figured we had been selling fashion for years and so running a fashion label couldn't be that much harder to do and it would allow us to have our own private label of clothes without starting a brand from scratch. We were perhaps riding high on the thrill of our recent successes and believed we had the Midas touch and that everything we touched would turn to gold. We also suffered from the syndrome we had so carefully cultivated in our customers at Catch: FOMO. Pumpkin Patch seemed like a good deal and we didn't want to miss out on it. After all, we are great buyers, aren't we?

Focus on what you know

There's a saying in business and life: stick to what you know best. When it came to Pumpkin Patch, maybe we should have. The mistake we made was we didn't truly understand what it takes to run a fashion label and the complexities in the supply chain that underpinned it. Being apparel, it involved choosing designs that resonated with the target market, seasonality, demand forecasting and commitment to huge volumes of stock in a variety of combinations (colours, sizes, styles), fast‐moving tastes, not to mention photographic sessions featuring temperamental kids, their mums, casting agents and the like. No offence, we love kids—we have six of them between us—but we live for speed and once you introduce crying babies and all these other variables things slow down in a big way.

Long story short, we spent a few months building the site, and hired designers, buyers, managers and marketers to run it. But for a range of reasons, it just didn't work. We were disappointed.

If changing your mind is a sign of intelligence, we were Einsteins. The brand was perhaps more suited to someone with the right infrastructure and experience. That wasn't us. Seven months after buying Pumpkin Patch, we sold it to a New Zealand based company called EziBuy. A perfect home for a great brand.

While we considered the Pumpkin Patch foray to be a big failure, we also believed that you can learn a lot from your failures and we have always encouraged our people to take risks. While we both loathe failing at anything, we loathe lack of initiative even more. The lesson? Sometimes you win, sometimes you lose. But if you lose, decide quickly and move on.

Learning from the masters

The Catch marketplace was on fire and we were thrilled that an idea we had been incubating as a conversation for many years had finally flowered and borne fruit. It was exciting to see our new logo out in the world and know that we were competing with global brands such as Amazon and eBay and holding our own.

But we were never content to sit back and relax. We were always keen to experiment, stretch ourselves and challenge our team to see what we could accomplish. So, when two of our most loyal employees, Anees and Vijay, came to us with an idea to grow the market further we couldn't resist the opportunity. The idea? To inspire our customers to pre‐pay their shipping fees for a whole year.

WTF? What customer in their right mind would do that?

As it turns out, 200 000 of them—and the number is growing daily.

While the idea of asking customers to pre‐pay their shipping fees was new to many Australian e‐commerce companies, it wasn't new to our arch competitor, Amazon. They had yet to arrive in Australia, or take a foothold, so we figured now was a good time to replicate one of their masterstrokes of marketing and try it at Catch. Their ‘Prime’ membership program had been wildly successful for them and we thought it could be equally powerful for us. You don't need to be original to succeed!

Costco had done it successfully for many years and while they gave their customers very little back for the membership fee (other than some good deals) we resolved to give our customers such great value, they would be lining up to pay it. And that's exactly what happened.

Anees and Vijay were the architects of what became known as Club Catch. (We were very proud of that name too. It has served us well for many years. Never forget—a great name will be your greatest asset!) For $69 per year, our customers received free shipping on orders of $45 or more within a 12‐month period, and they could purchase as many times as they liked. The results were spectacular! We found that customers who used to buy from us three times a year increased their purchasing with us to as much as 10 times a year! This proved three things: our customers loved us, they trusted us and they wanted to buy more from us. We just needed to give them a good reason to do so, and Club Catch was it.

Club Catch wasn't just a superb tool for building loyalty and creating an unexpected source of cash flow. It became a valuable tool in our arsenal of ammunition and was integral to Wesfarmers acquiring us in 2019. After the deal, both Kmart and Target invited their customers to join Club Catch, demonstrating yet again how a little start‐up could teach a global retailer a thing or two.

It's complicated

Bon Voyage was travelling well and annoying the crap out of the market leader Luxury Escapes. So much so that just five months after we launched the site, we managed to sign and agree on terms for a most complicated deal with the Lux Group. This Travel Trends article by Martin Kelly sums it up best.

So much achieved in such a short space of time. Within 15 months we had managed to:

  • buy back our share of the business from Tiger and the consortium
  • parachute a new CEO into Catch and change almost the entire management team
  • rebrand Catchoftheday to Catch.com.au
  • launch a dedicated luxury travel brand, Bon Voyage
  • launch a marketplace that allowed us to increase our product range from fewer than 30 000 products to more than 2 million products
  • launch Pumpkin Patch
  • launch a New Zealand website, Catch.co.nz
  • merge Scoopon with Cudo and LivingSocial into a 50/50 entity
  • sell Bon Voyage for an equity stake in Luxury Escapes
  • purchase two retail sites from Lux Group: Thehome.com.au and brandsexclusive.com.au
  • receive 20 per cent of Luxury Escapes.

Ahhh, we forgot one. We also launched Catch Connect, a joint venture with Optus offering mobile phone plans to the Catch audience.

All up, not a bad financial year for 2017. After our ‘Year of Nothing’ in 2016, we called this our ‘Year of Everything’.

These mergers had a massive impact on our operations, both financially and culturally. We felt like we'd jettisoned some dead weight and removed some weaknesses and distractions, which freed us up to move quickly and more profitably. The result? We kick‐started FY2018 with a laser‐sharp focus: sell more products and turn Catch.com.au into the biggest business possible. The boat was much lighter, the sails were up, the wind was blowing and we were flying.

Amazon (finally) arrives

While the marketplace had been a huge success, the race was on. The media had been breathlessly reporting for months that Amazon was coming. It seemed every story they ran had to include a reference to Amazon. While Amazon wasn't the first mover in Australia, it sure as heck felt like it. Everyone was in thrall to the monster that Amazon was promising to be. We just wished they would arrive so we could get on with beating them. You can't fight an invisible threat.

Finally, just five months after we launched the Catch marketplace, Amazon launched in Australia. The impact was felt instantly. Like a domino piece, it set off a chain reaction in the industry and forced every retailer in the country to rethink their business model, including us. eBay pulled their finger out and went on a massive advertising campaign. JB Hi‐Fi and others like them made strong moves to improve their logistics offering, and Amazon was discussed at every boardroom meeting around the country.

By sheer coincidence or pure genius (we think the latter!) the timing of our marketplace launch was impeccable. You see, by the time Amazon launched in Australia, our marketplace was already up and running, and was host to hundreds of happy sellers and millions of even happier buyers.

Our sellers loved the fact we could deliver them a huge audience of hungry buyers and our customers loved that we could offer them a huge range of products at the best prices. Our business model was sound; our transactional capabilities were first rate; our automated warehouse was firing on all cylinders; and we had the best, most experienced e‐commerce management team in the country.

By launching early, we established ourselves as a force to be reckoned with. When the media talked about the three main marketplaces in Australia, Catch was listed alongside eBay and Amazon as a leading player.

This was a ‘pinch me’ moment. Our home‐made e‐commerce site was being compared and contrasted alongside the global Leviathans of online business, Amazon and eBay, each worth a thousand billion trillion dollars! (Is there such a number?)

We spent the rest of FY2018 building on the success of the marketplace, and by year end the marketplace offering added $65 million of sales to our overall revenue, and more than 40 per cent of our daily orders were generated by our marketplace sellers, which was well ahead of any of our most optimistic projections! Our total sales for the 2018 financial year were $321 million, which was 65 per cent more than our 2017 product revenue. These results, according to the Australian Financial Review (AFR), placed us at the top of the pyramid as Australia's highest selling pure play e‐commerce site. We couldn't have been happier.

Photograph of Luxury escapes with Cameron Holland and Adam Schwab.

Joining Luxury escapes with Cameron Holland (L) and Adam Schwab (R).

Source: Photo by Josh Robenstone

Notes

  1. *   The network effect is a phenomenon whereby increased numbers of people or participants improve the value of a good or service. For example, take Uber and Airbnb. The more people who use the site, the more useful the site becomes to other people. The more useful it becomes, the more people use it. And so on.
  2. *   Yes, we have 11 commandments. Break the rules if you want to.
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