he business. “What can we expect going forward? How much pain are you prepared to put up with? How much patience do you expect us to have?” Errington asked Scott on the call.  “Because if this business doesn’t improve, if the consumer does weaken in the second half, one would have to expect that [Catch’s] performance gets a little worse before it gets better.”  “We made a few mistakes”  Wesfarmers has attributed the losses primarily to a miscalculation around customer demand after Covid-19 restrictions were lifted in 2022.  Catch invested heavily in its range and inventory, supply chain capabilities, technology and personnel during the pandemic, but online transactions dropped off faster than it expected once stores reopened, and it was forced to mark down prices to reduce stock and lay off workers to right-size the business. Inside Retail was the first to report earlier this month that Wesfarmers has cut 100 jobs at Catch, with the redundancies impacting key departments including marketing, product and technology, and finance. According to Inside Retail sources, the payrolls of some departments have been cut by as much as 30 per cent.  Wesfarmers CFO Anthony Gianotti acknowledged that poor range selection and execution issues in the expansion of the first-party business also contributed to the online retailer’s poor performance, but said the restructuring will enable Catch to move forward and develop as a profitable business. “This is inherently a valuable business. We made a few mistakes and need to fix it up,” Scott told Errington on the investor call. “Judge us by what we do over the next year or so.”  Homebase all over again However, Inside Retail has spoken with multiple former Catch employees who believe the problems started well before the pandemic and stem from Wesfarmers’ misguided attempt to change the DNA of Catch, which was profitable and growing when the retail giant acquired it in June 2019 for $230 million.  One former Catch employee, who wished to remain anonymous, said it was a repeat of Wesfarmers’ failed takeover of Homebase in 2016.  After paying $705 million for the British hardware chain, Wesfarmers replaced almost the entire board, fired more than 140 head office staff and removed a significant percentage of products as part of its plan to convert Homebase stores into Bunnings.  But that plan never came to fruition as sales started dropping almost immediately, and Wesfarmers sold the business for a nominal sum, reportedly £1, just two years later. Unlike Homebase, Catch’s leadership team remained in place post-acquisition – at least initially. But the business was part of Kmart Group, and the former employees we spoke to said there was a push to adopt the Kmart culture and way of doing things, which was at odds with Catch’s more entrepreneurial spirit.  “We had an open-door policy, lots of communication. Everyone had a voice,” one former employee said. “And then they came in with this corporate structure, closed doors and decisions made in the background. It’s just a different way of thinking and working and the result is destruction.”  Another former employee, who wished to remain anonymous, said that Wesfarmers favoured managers over doers, and when it came time to create a strategic roadmap for the future of Catch, the executive team wasn’t involved.  “They basically self-sabotaged,” they said. “Catch was a tech unicorn brought down by a Trojan horse.” Bleeding senior leadership Almost none of the leadership team from the time of the acquisition remains at Catch today. Managing director Nati Harpaz resigned in April 2020, followed in September 2020 by the executive head of marketplace Kalman Polak, who is now CEO at MySale.  Both the chief product officer Liron Nehmadi and head of buying Guy Polak left Catch in October 2020, while chief marketing officer Ryan Gracie departed in May 2021 to join rival online marketplace MyDeal. Many of the category managers have also left, taking jobs at MyDeal, Kogan and MySale.  “The competitors have taken all the best people. The Kmart people were not smart enough to retain them, and the reason is, they didn’t think there was anything important to retain,” a former employee said.  “They came in with a lot of ego and a lot of, ‘We know best, we have a very successful business in Kmart, and we’ll do it again.’ And it just blew up in their face.”  It’s an example of “what not to do when you’re a big corporate entity buying a successful business start-up,” another former employee said.  A third former employee corroborated this account, saying: “The original Catch staff including the executive team could see where the business was heading, the Catch we knew was gone, and under Wesfarmers unlikely to ever return. The OGs started leaving in volume, to be replaced by people not familiar with an online retail business and how it operates.”  Bigger but less efficient While longtime Catch employees were departing at a rapid rate, the business was hiring new team members even faster.  Catch had around 450 employees when Wesfarmers acquired it in 2019, including around 200 head office staff. Prior to the redundancies, there were over 700 people working at the company, according to LinkedIn.  This increased headcount was largely in management roles, according to a former employee, contributing to increased costs and inefficiencies in the business. “What we used to do in three months, they take 12 months. When I look at the website, and the updates and things they’re rolling out, it’s so slow. That’s the biggest challenge now – they’re just not executing well,” they said.  Multiple sources described the recent redundancies as unfortunate but likely necessary, though a former employee questioned whether the “right” people have been let go. “The question in my mind is who are they firing? If they’re firing people who are doing the job, and not the managers who are just wasting everybody’s time, then they’re making a mistake,” they said. “You need the buyers, you need the planners. A lot of that business is senior managers, who tell people what to do, and they’ve lost the people who actually get the job done.” Wesfarmers’ response A Catch spokesperson told Inside Retail that the business has experienced considerable growth since Wesfarmers’ acquisition, with gross transaction value more than doubling to $451 million in the first half of FY23, and the number of marketplace sellers increasing by 170 per cent, from 1650 to 4500.  It has also expanded the number of team members, including in areas such as customer service, product and technology.  “As the business adjusts to changes in online demand that has occurred following the Covid period, we recently reduced our headcount by approximately 35 per cent as we want to be as efficient as possible to drive value for our customers,” the spokesperson said.  They noted that Catch continues to recruit and retain top talent, with leaders from brands including Coles Online, The Iconic, Australia Post, Ebay and Marketplacer.  “Under Wesfarmers, the business has brought in skilled e-commerce experts across technology, digital, buying and supply chain, and established support functions including product compliance and safety,” they said.  They added that Wesfarmers has invested considerably in Catch, and that it remains an important part of the group’s strategy. Lessons learned?  In 2022, Wesfarmers moved Catch out of the Kmart Group and into its new data and digital arm, OneDigital, led by Nicole Sheffield. It also appointed a new managing director in Brendan Sweeney, who previously headed up e-commerce at Cotton On Group. Sweeney took over from Pete Sauerborn, an ex-Amazon executive from the US, who ran Catch for two years after Harpaz’s departure. Will these changes be enough to help Catch regain some of its previous momentum? It may be too soon to say.  “I don’t know what the future holds for them,” one former employee said. “They’re clearly going down the marketplace pathway, but unless you’re Ebay, it’s impossible to have a profitable marketplace in Australia.”  Part of the frustration for the ex-Catch team members we spoke to is that Catch wasn’t a broken business when Wesfarmers bought it. In their opinion, there was nothing to fix.  “You buy a business because you think they’re doing something good,” another former employee said. “The lesson to me is that it’s always about the people. You have to treat them with respect and with the reality that they have value. If you treat them like they don’t, and they start leaving the business, you’re bound to lose something. You might be able to compensate for it, but in this case, they couldn’t. And now they’re paying the price.”