Catch of the Day hits $250 million revenue, and some hurdles

The group buying Catch of the Day stable doesn’t seem fazed by the doom and gloom in the local retail sector. Its founder and CEO, Gabby Leibovich, isn’t perturbed by figures from Quantium – the online retail consultants who analyse NAB’s credit and debit card database on an anonymous basis – showing February’s group buying activity was down 34% from the August peak.

If anything, the company has been expanding. In July, it will launch a new online shopping site targeted at mothers with young children. The site, Mumgo, will be the fifth addition to the Catch of the Day group. It will operate alongside Scoopon, Grocery Run and online wine retailer Vimofo.

Leibovich doesn’t pull any punches when he talks about his competitors. “From what I am hearing, we are the only ones actually making money in the group buying space,’’ he says. “Groupon and Cudo are not going anywhere and they’re spending more money on marketing than they are making it.

“That’s not the way we like to do business. In our world when you run a business, you need to be profitable at the end of the week and we have been doing it from day one and we are still extremely profitable. So it’s certainly possible that a lot of the other players are not performing as well but we are not feeling that at Scoopon.”

In tough times, the Catch of the Day stable has found its niche – providing the cheapest possible deals. As pure play online retailers with low overheads, the group brings products to market at a low price, still maintaining good margins to ensure that they are highly profitable.

Scoopon, for example, will sell a car maintenance package for $19, Vimofo is selling a Margaret River Cabernet Merlot for $11.50, while over at Catch of the Day, you can pick up a padded jacket for $39. Want a tin of Pringles? It’s $3.98 at GroceryRun. Cheap as chips, but there’s enough margin to deliver strong profits.

Selling end of line and clearance products, the group claims to generate one deal every 1.96 seconds, 24/7. With a database of two million customers, it sends out an average of 10,000 packages a day and turns over its inventory every three weeks. Leibovich claims the group is Australia Post’s biggest customer for parcels. Since launching in 2006, the company has doubled its revenue year-on-year. This year it’s on target to make $250 million by June 30. Leibovich declined to reveal how much profit the company is making.

Last year, James Packer’s Consolidated Press Holdings and Tiger Global Management teamed up with Andrew Bassat, co-founder of Seek, and Glenn Poswell of Gannet Capital invested $80 million for a 40% stake in the business.

Leibovich says the investment was to help Catch of the Day expand. It was making good profits, he said, it just needed help moving on to the next stage. “The business was always profitable and we did not require any extra financial help. What we did require was help and advice on how to take a leading online company to the next level, and that is exactly what is happening right now.”

“Since the funding took place, we have launched three new sites, doubled sales and profits and increased our sales force from 150 to 350 with lots of “rockstars” joining in key roles. We are very happy with the investors and their support.”

It is a very different scene now for an outfit that literally started in a garage nearly six years ago. “Very soon after, we moved to a tiny 200 square meter warehouse in the suburb of Moorabbin in Melbourne. We put together a team of six people, I was the buyer, someone else was doing the IT, one guy was doing packing, one guy was doing customer service and that’s when we launched.”

“Obviously we didn’t have the expectations and the dreams that we have right now. When we launched it, all we wanted to do was have a job, just like a lot of people who start from nothing. I remember very clearly our target on the first week was to sell 60 items and that was all we wanted, and we thought that if we do sell 60 items, then we’ll be able to pay the bills and have a decent salary to feed the family at the end of the week.”