Inside Retail: You started your job at Catch at the peak of the pandemic last year. What was that like?
Peter Sauerborn: I joined Catch on May 11 last year. As you know, April was the first full month of lockdown. I entered the business and the way the team was talking about it was as though it ws Black Friday in May. It was unexpected. Normally we spend a year preparing for the holiday period, you plan the inventory, make sure systems are ready to go, so the team was just really scrambling. They did a fantastic job of chasing down inventory and categories customers wanted to shop in, and in our fulfilment centre we were making sure team members were safe and adhering to guidelines. From a business point of view, it was stressful but exciting, and the team came together. In many aspects, there was positive energy in the team.
The other part of it was as a CEO coming in, it was challenging for me to build out the team. We’d just spent about a year into the acquisition by Wesfarmers and we’ve been making some substantial investments to scale the business up, so I was taking over at that time, assessing the investment opportunities and hiring new leaders. We increased our head office headcount substantially during the time, bringing in new skills and capabilities and doing a lot of it on video. There were a lot of people who were hired that we didn’t meet for many months in person. That’s the nature of the game.
When you think about the dimensions of change, taking on a new job with leadership responsibility is a big change, then of course, the company being in a transformation going from being managed in a particular way to now being a part of the Wesfarmers group and having bigger aspirations to scale and grow — that was also a big change. I was also moving from Seattle to Australia during this time — if you look at all those dimensions of change, I kind of max it out! It’s been exhilarating and a lot of fun.
IR: Catch has just announced the development of a new warehouse in Sydney. What are the benefits of that for the business and customers?
PS: There are a couple of things. All of our fulfilment today is in Victoria. We have about 62,000 square metres here, but we wanted the new fulfilment centre in Sydney for two main reasons. One was to increase our capacity as we scale the business up, but secondly, to get our inventory closer to customers as well. We have a large number of customers nationwide, but New South Wales and Queensand are substantial in terms of population of customers, so this allows us to shift [products] faster and more efficiently to them. Our freight costs will be more efficient and the speed will be faster. The things customers care about in e-commerce are speed of shipping and cost, so we want to continue to configure ourselves to be really efficient in how we serve them. This opportunity to invest and build out is a part of our strategy with the Wesfarmers acquisition.
IR: What are some of the consumer changes that you’ve observed in the past year?
PS: The demand for things like masks, wipes and hand sanitiser certainly spiked through the roof and we had to adjust to those things. Home office equipment, home fitness equipment and we have a fairly substantial grocery category, including beer and wine and other pantry items. Those did very well. In particular, the beer and wine business has been booming for us.
What’s interesting is some of these patterns were necessary because of the lockdown, and a part of the challenge is usually, we’re looking at forecasting and anticipating customer demand to sort out inventory levels. Normally you look back at your history and that informs what you do next. But as we come out of lockdown, it’s tricky to forecast into the future because buying patterns shift.
IR: After the rise in sales last year, how do you plan to maintain consumer interest this year?
PS: We had an opportunity to introduce ourselves to many new customers. We’ve had almost 3 million shoppers that shopped with us in the past 12 months and so we try to make sure that we give them all a fabulous experience in terms of delivery, customer support and then we need to continue that relationship. We provide targeted product recommendations to customers and we encourage them to download the app and join our subscription program, Club Catch, which gives them different benefits including free shipping.
What I found over the years in my e-comm experience is there’s a period of time when people start to learn about the opportunity in e-commerce and shift their buying patterns. It doesn’t happen overnight. When you think about it, it’s a certain spend that a household has and they spend it on physical and grocery and increasingly, a portion of that is spent online. This is an accelerator to get people exposed and now our job is to delight them, make sure we have what they’re looking for and give them useful recommendations so they keep coming back — and it becomes not just an emergency thing as part of lockdown, but part of their ongoing share of wallet.
IR: Catch is investing a lot into the marketplace side of the business now. Can you tell me about how that’s going?
PS: Marketplace is about half of our GTV [gross transactional value]. When we think about our business model, we call it a retail in-stock model, where we purchase the items and resell it and it’s all in our fulfilment centre and shipped by us.
Then we have a third-party marketplace, which has 1900 independent sellers and, collectively, those sellers represent about half of our topline GTV. The great thing about marketplace is that it’s very resilient and dynamic. The number keeps growing as we recruit sellers. It allows us to efficiently and quickly add more product selection and enter more categories, which might be challenging in our core retail business.
We talked about people buying beer online. Carlton United is selling on our marketplace and it would be difficult to put cases of beer in our fulfilment centre because of the size, dimensions and weight. It’s better suited for them to do the fulfilment. That’s an example of a great partnership. Another example might be Bing Lee appliances. They have a bricks-and-mortar business, they’re a great Aussie retailer and they can connect with more customers through Catch marketplace and it allows us to offer a selection of big, bulky items that are not appropriate to put in our warehouse.
We have set a very high bar of professionalism for our sellers — we do a lot of vetting in advance. Some other marketplaces have an open self-service environment, so anyone can sell anything. Some of them are shady and some are legit; it’s a mixed bag. Our approach is we put a bit of friction in the front end and evaluate them in advance. It’s a marketplace for professional sellers, not any old seller. That being said, with that constraint, our intention is to continue to grow and scale that marketplace up.
IR: It’s turned out to be a great extra revenue channel for Catch.
PS: In my experience, when you have that trusted customer relationship, like in our case at Catch — they’ve given us their credit card details, address, created an account, maybe downloaded the app, there’s a commitment at the front end — you want to maximise the relationship over as many shopping occasions as possible. So therefore, we want to bring more to the customer through that trusted relationship.
As far as strategy goes, it’s really to continue to scale and add more marketplace sellers to serve more customers and shopping occasions.
IR: You’ve worked in marketplaces for many years during your career. What are some of the interesting things you’ve noticed about the evolution of marketplace?
PS: It’s actually been over 15 years in terms of the different marketplaces I’ve been involved in. It does feel to me now that it’s more mainstream and on-trend. What I’ve noticed is there are many others getting in this game. For a period of time, obviously you had the big multinationals, like Ebay and Amazon, but I think what I’m seeing is a greater degree of proliferation of businesses catching onto this trend as a compelling business model.
IR: What makes a successful marketplace?
PS: The quality of the seller obviously is very important. As the marketplace owner, Catch, we create the set of policies and standards that the sellers must live up to to deliver a great customer experience. Really, to make a great marketplace experience, the operator — Catch, in this case — has to have a high bar for customer experience and enforce that with sellers. It’s not always straightforward. In some aspects, sellers are customers.
But there’s a bit of tough love. Even though we love the sellers and we want them selling on Catch, if they’re not living up to a great customer experience in terms of speed, product listings and living up to their promises to customers, we have to take action to enforce that to maintain trust in the marketplace. There’s a lot of detail that goes into it, but the foundation is clear product descriptions, clear messaging around delivery timeframes, good, reliable delivery, excellent customer service if there’s an issue — all those things factor into it.
IR: How do the different marketplaces compete against each other?
PS: The sellers, the pricing, speed of delivery — the shopping experience is a big thing. How do I find an item on a website? How do I order it? Is it clear and relatively easy to find, or is it confusing, messy and mixed up? We spend a lot of time on things on the front end, making sure we have high quality sellers and they have high quality listings and the details page has to be well done. We want to make it as easy as possible for people to come to the site, find what they’re looking for, and not have to sort through a bunch of irrelevant things.
It’s putting all those pieces together: How do I get the right selection of productions in the right categories that are competitively priced and make the shopping experience clear and easy? Some of the things we’re doing in addition is our two business models work together — we have a retail offering and marketplace offering. They work really well together because at the core, half our business is the retail part and that sets the bar in some aspects for the sellers.
IR: Catch, Kmart and Target have worked together in the past. How is that going for the business at the moment?
PS: We offer click-and-collect at Kmart and Target in over 400 stores now and we’ve seen really great uptake. We’ve also got Target and Kmart brand Anko on our site and it really resonates with our customers. The interesting thing is it’s a win-win-win. Our sister companies within Wesfarmers are benefiting from exposure towards customers they didn’t have previously. The customers benefit from more things they can buy on Catch and then it helps Catch with our growth as well. It’s a great synergy.
I don’t want to pre-announce anything, but I anticipate we’ll be doing more to help customers shopping in an omnichannel fashion from all different brands. We’ll just have to wait and see as we introduce the capabilities.
Omnichannel is a really big part of our strategy. We’re all Australian-owned and operated companies [at Wesfarmers] and collectively, we have really great trusted relationships that are known to Australian consumers. I think each of the brands works separately to earn that reputation and we’re now part of that same family. We do offer a uniquely Australian alternative to some of these big multinational websites, so we’d like to capitalise on that as much as possible.
IR: You worked at Amazon for a number of years. What was that experience like and what were some of the insights you gathered from that?
PS: It was a fantastic experience. I’m now competing with Amazon, which is exciting and fun as well. I would say that the core thing [I’ve learnt] is the customer obsession that Amazon focuses on and I take that with me. We do it in different ways here — we have a unique way of doing it within Catch and at Wesfarmers, but really at the end of the day, we’re focusing relentlessly on the needs of the customer every day. It’s about creating a path to success and leveraging the unique capabilities that we have to meet their needs.