What Catch reveals about Wesfarmers’ acquisition strategy
Last week retail conglomerate Wesfarmers announced it entered into an agreement to acquire Catch Group for $230 million pending approval by the Australian Competition and Consumer Commission.
The online marketplace will continue to function as an independent business unit under the leadership of Kmart Group managing director Ian Bailey, and will support the growth of Kmart and Target’s e-commerce offers through supply chain, fulfilment and online execution.
“Catch will also benefit from the support of Kmart Group’s scale and capabilities to drive its continued growth in its existing marketplace business,” Bailey said.
Catch Group’s managing director and chief executive, Nati Harpaz, said the Catch team was looking forward to working with Kmart, and that the marketplace would continue to focus on delivering value to its customers.
The acquisition stood out to KPMG national sector leader of consumer and retail Trent Duvall in that Wesfarmers seemed to be deliberately looking for an established business to purchase.
“Wesfarmers is a very astute business when it comes to how it uses capital, and the fact they’ve acquired one of the oldest existing cash-generative businesses in the Australian market shone through their investment mandate to me,” Duvall told Inside Retail Weekly.
“They could have gone and bought many, many different businesses that are in various stages of startup, but this is an established business with an established e-commerce, established technologies, and is cash positive.
“There are very few online retailers in Australia that can claim any of those.”
The biggest difference for Catch moving forward will be felt in its ability to scale more effectively, having access to the resources and infrastructure afforded by Wesfarmers.
“I think it’s more about how they can accelerate and grow that, and not do anything particularly different,” Duvall said.
However, Duvall notes the acquisition is unlikely to bear fruit immediately, though it would improve the online businesses for both Kmart and Target in the medium term once the Wesfarmers team is able to learn, understand and adapt what has been successful at Catch.
Queensland University of Technology associate professor Gary Mortimer agreed that it was an astute acquisition, and sees both parties benefiting from the relationship.
“I think what will happen now, under the leadership of Ian Bailey, is that Catch will have access to greater levels of management, infrastructure and capital,” Mortimer said.
One of the benefits Mortimer identifies in the acquisition is the immediate access to a pool of dedicated online shoppers, with Wesfarmers now able to market its goods to Catch’s 1.4 million online customers.
“It will give Kmart another market to channel their products through. We know that automotive, sporting goods and toys are all growing categories online because you don’t necessarily need to touch and feel those products if you know the brand that you’re looking for.
“Kmart can essentially sell those products into [this channel],” Mortimer said.
Catch’s 26,000sqm and 22,000sqm Victorian distribution centres are also included in the deal, and are likely to complement the existing supply chain of Target and Kmart, which are currently focused more on store delivery, according to Citi retail and gaming analyst Bryan Raymond.
“While it is difficult to quantify synergies, the acquisition should drive productivity benefits across supply chain, fulfilment and online execution,” Raymond said.
“We see clear benefits to scaling Catch Group’s digital, customer and data capability across Kmart and Target, as online continues to grow as a channel and bricks-and-mortar like-for-like sales growth slows.”
H&M is expanding its online presence around the world after seeing a 32 per cent increase in online sales while sto… https://t.co/xvXqAerNes2 days ago