By Andrew Patterson*
Fishpond and Facebook have plenty in common; apart from both starting with the letter F.
Both sites began life in bedrooms, were started around the same time by young entrepeneurs in their early twenties with no specific background in business and both quickly enjoyed phenomenal growth using the power of the net and feedback from users to spearhead their future direction.
In the case of Daniel Robertson, CEO and founder of Fishpond, his studies in electrical engineering offer a clue as to the logic he applied in building his online business.
Starting out as an online book retailer with humble beginnings in a spare bedroom, which rapidly consumed his whole house and eventually his first warehouse, the business has achieved success in a way that Telecoms disastrous foray into online retailing, Ferrit.co.nz, failed to do a few years back.
Rapid growth
Seven years on, Fishpond has now graduated to its fourth warehouse, all three thousand square metres of it, conveniently located just a stone’s throw from Auckland International Airport thereby ensuring an efficient turnaround of both the delivery goods from more than 300 suppliers and the despatch of orders to its customers.
The numbers are as impressive as they are scary for traditional retailers. Fishpond sells something on its website, on average, every 7 seconds, adds a new customer every 51 seconds and has 5.3 page views per second – and manages all of that with just 65 staff.
While books remain the mainstay of the business at around 70%, its merchandise mix is rapidly evolving to include fragrances and perfumes, toiletries, DVDs, toys, clothing and even printer cartridges. There are plans later this year for shoes, e-books and digital music to also be added into the mix.
In fact, Fishpond currently boasts a total of 7 million different product offerings with plans to increase this to more than 10 million over the next 12 months.
Business model
The success of the business model is based on the fact that not all of those items are actually contained in the company’s warehouse as it also acts as a reseller on behalf of other businesses, but more about that later.
Ben Powles, General Manager at Fishpond says the company’s phenomenal growth has been driven by three key attributes.
“Firstly, and most importantly, having the best price, secondly having the best selection and finally delivering all orders free of charge.”
Clearly the strategy has worked with Fishpond now laying claim to being Australasia’s biggest online retailer in Australia and NZ; it even says so on its business cards.
Surprisingly, sales to customers across the ditch now account for 80% of the company’s revenue which becomes obvious as you observe its delivery conveyer with Australia Post bags everywhere being rapidly filled with customer orders ready for twice daily despatch across the Tasman.
“Australia has been growing much faster for us than NZ since we began targeting that market in 2007. The Aussies seem to be more comfortable buying a variety of merchandise online and we even have the time zone working in our favour.”
Pricing strategy
Fishpond’s clever pricing mode, where stock on hand is regularly repriced to reflect the current exchange rate, provides an extra bonus for savvy online shoppers.
“If the kiwi dollar strengthens then customers are able to get the benefit of that straight away which means they don’t have to wait until the currency gets to a certain point before they decide to start shopping.”
The strategy offers some insights into how Fishpond manages to compete against the likes of Amazon in the book space, which is one of the more common questions it regularly gets asked.
The answer is both smart business practice and reassuring for online shoppers.
Every purchase is automatically checked against Amazon from the outset which means customers are guaranteed both the lowest price in addition to freight free delivery.
“We guarantee to beat Amazon everytime and unlike other retailers who say find a better price and we guarantee to beat it by a certain percentage we simply give customers the assurance that we’ve already gone out and done that for them each time they place an order.”
It’s another example of how online e-tailers such as Fishpond are redefining the retail landscape by not only being able to avoid expensive shop fronts and having to employ front line sales staff but also being able to provide price guarantees which customers obviously value during these tough economic times.
Customer interface
Managing the customer interface is another area where the company is able to save money in order to keep its prices low.
“We don’t operate a call centre which means all our customer enquiries are conducted by email. Effectively we empower customers to manage their orders themselves so if a delivery doesn’t turn up, which does happen from time to time, then they’re able to simply reorder the goods or we offer them a full refund.”
Like everything else online, Fishpond is continuously evolving as a business according to the demands of its customers.
Staff and culture
“We tell our staff that if you don’t like continuous change and process improvement then we’re probably not the sort of place that you want to be working.
But in saying that, we do invest significantly in our staff and setting up the right culture is important.
As an example, they came up with our nine company values themselves. We didn’t specify a number; they just decided there were nine.”
All staff also complete Fishpond’s yearlong School of Fish programme, a 12 month orientation exercise that exposes them to each of the different aspects of the business.
Embracing new age work practices, not all staff are actually located on site with many virtual workers choosing to operate from home – some out of necessity.
Fishpond has staff working from home both here and overseas in countries as diverse as Russia, Indonesia, India and even Belarus.
Staying connected to the customer will often reveal business opportunities, including the company’s latest foray into the second hand market.
New opportunities
Smart Sell involves customers packaging up unwanted low value items around the house and sending them in for resale or having them collected by Fishpond.
“The whole listing process for selling low value second hand goods online is quite clunky and we thought we could do a better job by managing the pricing process for customers which involves a lot less hassle.”
“So for example, if a book is sent to us in near new condition then we’ll list it just below the price for a brand new copy and when it sells we lodge the funds directly to their account so the hassle factor is virtually nil.”
“From a buyers point of view it gives us a lot more product on the site which obviously further increases our online traffic and our Google search rankings.”
The same model is also made available for businesses.
“We can list, market and distribute the product for them into Australia. They can set the prices but suddenly they can have a fully functioning distribution channel that’s already set up and running for them. There’s no upfront cost and we simply charge a 17% commission.”
Future
For those considering entering the online space Ben Powles has some useful advice.
“Really understand your market. Don’t think you automatically know what your customers want. Test that as much as you can.”
“Our philosophy has been to get the product or idea launched, then wait for the feedback. If you’re not embarrassed by your first prototype you’ve launched too late.
Don’t think you have to get it perfect before you launch something.”
As for marketing, like many other online businesses the traditional marketing mix doesn’t apply.
“We don’t advertise in the traditional sense, everything is done online.”
So what could Fishpond look like five years from now?
“We’ll continue to be based here in NZ, we’ll be operating in more countries, building innovative IP and technology and just being a really great place for people to shop online.”
Traditional brick and mortar retailers should beware - Fishpond may well turn into a shark.
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KEY FACTS
| Established: | 2005 |
| Sector: | Online retailer |
| Turnover: | NZ$70 mln this financial year |
| Growth rate: | Sales projected to increase by 30-40% in next financial year |
| Sales Frequency: | A sale is recorded, on average, every 7 seconds |
| Biggest Market: | Australia, which accounts for 80% of turnover |
| Product Range: | 7 million items with plans to expand this to 10 million by 2013 |
| Profitable: | Yes |
| Staff: | 65 |
| Ownership: | Private company. Founder Daniel Robertson and associated interests retain a majority shareholding. |
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6 Comments
While books remain the mainstay of the business at around 70%, its merchandise mix is rapidly evolving to include fragrances and perfumes, toiletries, DVDs, toys, clothing and even printer cartridges. There are plans later this year for shoes, e-books and digital music to also be added into the mix.
We just cannot get the public to lay off buying gimcracks in hard times, or any other for that matter.
What's the solution? We have to become something more than a nation of shopkeepers - buying cheaply offshore to markup up to the stupid.
It's the model employed by the second hand Japanese car importing industry - pay NZD 7,000.0 sell @ NZD 14,000. How hard is that? A total waste of interim interest payments to GE Money, whose profits get shipped offshore. But the entitled view it as their hard won privilege to enforce such wasted effort. We even bestow knighthood's on the likes of Tindall.
We no longer have to wonder why we have a current A/C deficit - the roots of it's conception are being eulogised right here.
Stephen - wholeheartedly agree with you, it is still quite unbelivable that Tindall was awarded a knighthood - for what? decimating small NZ manufacturers? Flooding NZ with shiploads of tat? However if the likes of Fay can be knighted then hey it all stands to reason right?
I'm gonna have a sniff around Fishpond to see what, if anything at all is sourced from NZ manufacturing companies....here's hoping but not expecting much.
We will never prosper as a nation of shopkeepers. We need a manufacturing backbone and as the book The Pine Tree Paradox proposes huge innovation investment beginning at the Uni's.
Online shopping is the way of the future man, get with the programme. It's survival of the fittest and those that can offer the best value for money for their customers. That's right it's about we the customer getting good value. Nice Huh?
I love it, heaps of choice, way more than any one shop can offer. Have you checked out Amazon lately?
Awesome!
True to a point, but businesses are in business to make money, not to give the best deals to their cusomters. The reason they are giving good deals to customers, is becuase online companies can undercut other companies on price, as they don't have the same overheads, and maybe able to get better deals by buying in bulk. So buyers are buying solely on price, rather than customer service and after sales service when things go wrong.
Really great to see somebody in business and doing a great job and being rewarded for it. And in New Zealand too.
I do indulge in lots of thinking and discussion about finance. This sort of story reminds me that 'finance' is not what it is about. Business is the core really.
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