Online sellers line up for business

By Michael Foreman

Online retailing finally seems to be heating up in New Zealand, with a number of large and small operators jostling for position.

FlyingPig.co.nz, a joint venture between two Eric Watson-linked companies, Pacific Retail Group and Advantage Group, is due to go live this week.

Farmers said this month that it would make a limited range of products available over the web.

Flying Pig will start with book sales and stationery through its partnership with Whitcoulls, but plans to rapidly expand into music CDs, videos and consumer electronics, acting as the online shopfront for Pacific Retail's Noel Leeming and Bond & Bond chains.

"We are in the race," says Flying Pig chairman Stefan Preston.

"It's like a goldrush and we are going to stake out the claim with our customers."

Farmers' foray into e-commerce looks tentative by comparison, and the company admits it is taking a cautious approach.

Commercial services general manager John Milford says a small range of merchandise will be available online, including outdoor furniture and playground equipment, much of which is not available in all Farmers' stores.

"Our cyberspace store will not be competing directly with our traditional retail outlets, but rather supporting them."

Farmers eventually plans a much broader e-shopping service, but not before it has had time to "gauge interest and obtain customer feedback about online selling."

While the big retail names are looking for a return on their investment in years, several smaller companies claim to be making money now.

NetworksDirect and MicroDirect started selling PC hardware and software on the internet this year, taking advantage of high web use by the computer literate.

Katherine Scott, who together with partner Brett Waterson started MicroDirect in April, says turnover is about $150,000 a month.

While the profit margins on the range of 50,000 books, hardware and software products are"fairly slim," so are MicroDirect's overheads.

The business is run from her home and apart from herself and Mr Waterson, there is only one part-time employee.

Ms Scott says sales have taken off in the past three months as MicroDirect gained credibility in the market.

Repeat orders have started to come in from a customer base of about 350 companies and individuals.

With a background of six years in computer sales, she says setting up relationships with suppliers was not a problem.

"I already knew everybody so credibility wasn't an issue. For someone who is coming in cold it would be."

Ms Scott says established players in the computer industry do not view MicroDirect as a threat yet, something she is "quite comfortable with."

"If they don't take it seriously they are going to be left behind.

"In a couple of years if you don't have a web site your customers will be viewing you with suspicion," she says.

Another home-based web supplier, Discounts Online, has been trading for six weeks, selling 2000 products, including home electronics and whiteware.

Owner Shane Frith says he has made about 1000 sales at an average of $300 and is "already in the black" if his six months spent developing the project is disregarded.

"The first week was pretty quiet but since then sales have been growing week on week."

He says about 25 per cent of sales are repeat business. Once customers overcome their reluctance to pass credit-card details "they just keep coming back."

Mr Frith offers products from recognised manufacturers such as Sony and Fisher & Paykel at less than the markup charged by traditional stores.

He sources stock through third-party suppliers rather than the manufacturers.

Mr Frith agrees that Discounts Online faces a threat if the big manufacturers and retailers embrace the internet and undercut him in turn, but judges it a distant prospect.

"There is a natural reluctance for them to get involved in the price-cutting."