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In mid-2014, Jordan Catalano and Tom Hywood took a leap and did what most men in their 20s wouldn’t: they went into competition against their fathers.

Catalano and Hywood, the sons of then Domain boss Antony Catalano and Fairfax Media chief executive Greg Hywood, could see an opportunity to make money from specialising in selling off-the-plan apartments. They launched AD Group, a business that has since expanded to offer developers and sales agents technology that helps track transactions.

“I was studying entrepreneurship at uni and in the very early stages of house hunting,” Catalano said. “The market was going pretty strong, but there wasn’t a dedicated portal to buy off-the-plan property. When we first approached developers, they were crying out for their own portal. The bread and butter for the two major [portals] was always established real-estate.”

This week the business sold for $32 million. The deal, worth $8 million in cash and $24 million in scrip, will bring AD Group into View Media Group, a collection of real-estate companies amalgamated by billionaire Alex Waislitz and his business partner, Antony Catalano, over the past year.

The 31-year-old co-founders said there were options to sell in previous years, but the timing wasn’t right. Catalano said VMG was a “natural fit” because of the group of companies that formed it.

“We kind of put the cart before the horse and were working with Real Estate View and The Today Business long before this deal happened. We already knew each other. It made sense,” he said.

Catalano’s father, Antony Catalano, who now runs a raft of regional newspapers including The Canberra Times and Newcastle Herald, has spent the past few years bringing together VMG, a real-estate company that offers agencies solutions that make it easier to sell to buyers.

His group owns 72.6 per cent of Australian property site realestateview.com.au, property tech company The Today Business, a shareholding in utility connections platform Beevo and is a major shareholder in data and AI business Propic. The group recently received investment from Seven West Media, a deal which gives it free advertising across Seven’s television network.

Antony Catalano said the early success of his son and Hywood was bittersweet.

“It’s naturally a proud feeling to see your children succeed, but this had some interesting twists and turns at the start,” he said. “Much of Fairfax’s future would hinge on the growth of Domain and suddenly, our sons tell us they are setting up in competition to us. That made for some interesting dinner table conversations.”

AD Group began as a property portal for off-the-plan apartment developments and house and land sales with about $200,000 funding from a range of investors, many of which worked in development. Hywood said VMG’s ties to the media sector through Seven and ACM would help AD Group reach more people.

That scale will help Hywood and Catalano to expand the business beyond the east cost, where it predominantly operates. “Watching Seven West Media jump on board and having ACM there gives us access to these huge audiences... is very enticing to a business like ours,” Hywood said.

Like most businesses, AD Group is not immune to broader economic challenges the country is facing. For portals such as Domain and REA Group, rising interest rates have had a direct impact on commercial and residential property prices. Catalano said interest rates were not a major issue, but the cost of building was having a substantial impact on project launches.

Hywood said he was unfazed by the challenges facing the sector. “I’m super bullish,” Hywood said. “Developers are always going to develop, builders will always build and people will always want to purchase or invest in property in desirable living areas. Once interest rates plateau and a new normal is realised… there are certainly greener pastures ahead of developers, who are our customers.

“As long as there are cranes in the sky, and developers continue building upwards rather than outwards, we will be sweet.”

Atlassian co-founder Scott Farquhar has outlined a two-tier pay system for the tech giant’s workers who will be paid more in NSW and Victoria than other states, but he says the policy is not discriminatory.

Under Atlassian’s two-tier pay system a worker in Goulburn or Yass in country NSW is paid more than their equivalent in the national capital of Canberra, while working from Byron Bay on the NSW north coast means more pay than in Brisbane.

Mr Farquhar defended the differential pay model saying the company paid above the going rate wherever an employee is based.

“We have high-paying jobs in all locations, and we pay slightly differently in some of the major metro regions to recognise the cost of living there,” Mr Farquhar said.

“But these jobs have significantly increased [pay rates] on what local salaries are in local regions.”

Mr Farquhar and his team rolled into Australian National University on Monday in a decked-out Jayco motor home called the AtlassiVan.

He is on a tour of the East Coast and Adelaide to recruit over 1000 workers – 1032 to be precise – within the next 12 months with the promise the company is location-agnostic.

The website pay scale estimates the average Atlassian salary to be $120,000 a year, with an $11,000 bonus. The website doesn’t outline differences in location-based pay scales.

The Atlassian compensation structure in Australia is based on two zones: NSW and Victoria are Zone A, and all other states are Zone B.

“We opted for less granularity here so people have the freedom to work wherever is best for their family,” an Atlassian spokeswoman said.

On the subject of differential pay, Paul Gollan, a professor of management at University of Wollongong, said the practice was long-established but the rise of remote working had raised questions about its fairness.

“The reality of the marketplace is if you want people to work in Sydney you have to pay them sufficient remuneration to be able to afford to work in Sydney,” he said.

“But what the pandemic has done is show you can be just as productive, no matter where you are. You can be on Bondi Beach or Green Island, it doesn’t matter, unless there is some other requirement for you to be present.

“Is it fair if you’re doing exactly the same job and are just as productive that you’re not paid the same money?”

For companies that keen to attract skilled workers while encouraging remote working and are to attract skilled workers, the practice of paying less outside of NSW and Victoria was “a bit strange”.

“If you want to be an employer of choice and you want to attract talented and skilled people it would seem to me not be a sensible thing to do in paying different rate of pay, no matter where located. You’d think the emphasis would be on talent and experience and how productive they are.”

Alan McDonald, managing director of employment law firm McDonald Murholme, said regardless of the fairness question there was nothing unlawful about the practice.

“There are many forms of discrimination that are unlawful – far more than the community often realises – but geographic area is not one of them,” he said.

He said the Fair Work Act had also “not caught up” with protections for discriminating against people from working from home.

“Most of our peer companies have a similar market-driven compensation philosophy.” an Atlassian spokeswoman says later.

“Additionally, we believe that the option to live and work from where you want is a huge benefit to employees and offers more flexibility than most employers, which will help us compete for the best talent to help drive TEAM Anywhere.”

Atlassian’s compensation structure in Australia is based on two zones. NSW and Victoria are zone A, all other states are zone B.

“Tech is the biggest growth opportunity for our economy. Tech is the industry for well-paid, interesting and plentiful jobs. And tech is the place for our best and brightest. It’s the industry we all need to capitalise on,” Mr Farquhar told the assembled crowd of students, staff and hangers-on at ANU.

It’s a message that somehow is not resonating with the younger generation.

A massive OECD report released last week pointed to the fact that one-third of all Australian university students study either business, administration, or law, while only 7 per cent study information technology, despite tech companies being among the coolest brands in the world.

Mr Farquhar doesn’t have an answer as to the sector’s image problem.

“It’s an interesting one, isn’t it?” he said.

“Four of the top five market capitalisation companies in the US are tech companies, and they are the fastest growing and most exciting companies in Australia,” he said.

Recruiting and developing talent in Australia, especially in the R&D space and “people building stuff” - jobs across the whole lifecycle of the software sector - is critical to the “future prosperity of Australia”.

Matthew Chen, 21, has got the news. The Canberra local will head to Sydney for a three-month paid internship with Atlassian when uni finishes in November.

“I’m studying computer science, mainly cybersecurity, systems and architecture,” says Mr Chen who will graduate at the end of 2023.

Graphic design platform Canva is taking on Microsoft and Google with a push into office software as it hopes to justify its $US26 billion ($39 billion) valuation and return to its pre-downturn peak of $US40 billion from late last year.

Australia’s most valuable privately held technology company will expand into word processing as part of a broader play in which its trademark drag-and-drop design tools will apply to new areas, including websites and virtual whiteboards in a substantial expansion of its potential market.

Co-founder and chief executive Melanie Perkins said the new products – chief among which is the Canva Docs writing app – unveiled under the umbrella of the “visual worksuite” at an event in Sydney’s Hordern Pavilion on Wednesday, fulfilled the company’s initial vision.

“Back in 2011 we were like, OK, we’re going to empower everyone to design anything and publish anywhere,” Perkins said on Tuesday. “Those few words took 10 years to do. But we are here.”

The launch puts Canva, which is best known as a rival to Adobe products that let people produce slick social media posts, in competition with the world’s largest technology companies.

Its whiteboard and website tools were unveiled last month but the broader suite of products makes Canva’s market – and competition – clearer.

Microsoft has Word and PowerPoint while Google has its online Docs and Slides tools. Dedicated virtual whiteboard companies Mural and Miro are also valued in the billions, albeit at less than Canva. Website design, too, is a contested space.

Canva’s leaders said their firm’s integrated products were an advantage and that making designing things easier would attract new potential customers.

Like the rest of the technology industry, Canva has endured a harder market this year than last. Its major investors, including the Australian venture capital firm Blackbird that has ridden its success more than any other, dropped the value of the company from $US40 billion to $US26 billion in July while some others went even lower.

But Canva has played down those concerns, pointing to its $US700 million in cash reserves and continued hiring.

Unlike a wave of technology bosses who have left their roles in recent months, from top leaders at accommodation booking company Airbnb to cult spin bike fitness firm Peloton, Perkins said she was committed to staying in the top job.

“It is my dream job,” she said. Far from resting on Canva’s achievements, Perkins gave a different analogy. “We’ve created the foundations of a city and we’re getting to build now ... magical things that haven’t been done before.”

She pointed back to Canva’s early investor pitches. “What’s your total addressable market?” Perkins recalled investors asking, referring to a measure of how many potential customers a business could reach. “And we’re, like, the whole world. And the question for us was then and still is now, how much of that world can we empower with design.”

A key feature Canva emphasised on its Docs tool is an ability to turn a vertically scrolling document into a segmented, horizontal series of slides with one click.

Atlassian co-founder Scott Farquhar says businesses like his software powerhouse should be rewarded with the ability to more readily bring in skilled migrants in return for training more Australians to become high-paid tech workers.

“There’s been a trade-off, which I agree with, which is if you want to bring people to Australia from overseas, in return, you should be training up the people who are here,” Mr Farquhar told The Australian Financial Review.

“We train people locally in return for the privilege to bring people in from overseas. That’s a great trade.”

Ahead of the Jobs and Skills Summit in Canberra this week, the Tech Council, which Mr Farquhar is a member of, has signed an agreement with the ACTU backing a proposal to establish a new digital apprenticeship, a one-year entry-level program of study and work delivered through Australia’s VET system.

The agreement also supports expediting visa applications for highly skilled, highly paid migrants and ensuring all tech jobs have a pathway to permanent migration.

Separately, the Australian Worker’s Union has proposed that employers must train one Australian worker for every skilled migrant they take on.

The Tech Council estimates the Australian technology industry contributes $40 million to the Skilling Australians Fund levy, which was established to ensure the businesses that employ migrants are also funding apprenticeship and traineeship places.

The new proposed digital apprenticeship program would be funded through Skilling Australians Fund to train workers in roles such as cybersecurity analyst, business analyst and data analyst.

The industry is also concerned Australia is losing global talent to other countries as a result of the massive visa application backlog and slow processing times.

While not commenting on specific policy proposals, Mr Farquhar backed the need to invest in local training as well as the need to reform the visa system to keep students who are studying ICT degrees in Australia after they graduate, rather than returning to their home countries.

“How do we get those people to stick around in Australia and contribute to our economy versus going home and contributing to their economies?”

On Tuesday Atlassian announced it is recruiting 1032 research and development professionals over the next 12 months in Australia and New Zealand. The specific number is a nod to Atlassian’s past, when the young company hired 32 engineers during the global financial crisis.

“Heading into the jobs summit we want to remind people that in this industry, this is a supply problem. There’s plenty of demand for the jobs here,” Mr Farquhar said.

Part of the new cohort will be made up of 142 graduates who will start in Jan 2023 and 152 interns. The company plans to double its intake of trainees over the next year.

Mr Farquhar said Atlassian’s remote work policy would help it secure workers around Australia and in regional areas.

The Tech Council and the ACTU has also asked for government funding to assist women and under-represented groups to participate in tech jobs.

“We need to do a better job of training people, particularly outside the three- and four-year university degrees,” Mr Farquhar said.

“If we can’t find those people – what do we do about migration and bringing some of these people in so these jobs can happen in Australia, rather than happening overseas?”

The fresh hiring spree coincides with a wider downturn in the start-up technology sector, which has led to a slew of redundancies and hiring freezes at Australian companies.

While some tech bosses have reported an easing in the talent market, Mr Farquhar said he hasn’t noticed a significant change in the competition for top candidates.

“I would say it’s still a pretty competitive hiring market for technology professionals … maybe slightly easier than it was,” Mr Farquhar said.

“These jobs are always in demand, and so, if a start-up doesn’t get funding and they lay people off, those people aren’t joining that unemployment queue. Those people are walking straight into another job the next day.”

Providing the kind of experience and skill building that augments human capital can open up a much broader pool of candidates.

A hiring manager with a regional bank has been searching fruitlessly for a software developer to create a better digital customer experience. Yet no one among the hundreds of applicants checks off more than a few of the items on the long list of required technical skills, including knowledge of the obscure programming language the bank uses. A hospital system needs to build a network that will seamlessly link patient records across its locations. When its human resources department finally identifies a seasoned engineer who has done similar work, he turns the offer down and takes a more senior position with a cloud-services firm.

With every company needing to harness the full power of technology to remain competitive, there is now a perpetual stampede to hire tech talent. Demand is growing exponentially for skills such as software engineering, data management, platform design, analytics-based automation, customer experience design, and cybersecurity. Eighty-seven percent of global senior executives surveyed by McKinsey said their companies were unprepared to address the gap in digital skills—and that was before the pandemic caused dramatic shifts toward remote work and e-commerce. The pressure is particularly acute for employers outside the tech sector.

One frequently repeated solution to the shortage of tech talent is for companies to hire candidates with more unconventional backgrounds. That sounds logical in theory, but it’s hard to put into practice. Hiring managers are skittish about choosing people with learning curves to fill mission-critical roles. It’s human nature to hold out for someone who feels like a safe choice because they already perform exactly the tasks you need.

Recent research from MGI and McKinsey’s People & Organizational Performance Practice offers some reassurance that could make it easier for companies to hire for potential rather than searching for an elusive perfect fit. In addition to showing how work experience enhances the value of human capital over time, the analysis quantifies the skill differentials associated with specific job moves. Zeroing in on the tech professionals in the data set shows that people routinely break into tech from other fields, and they make substantial shifts in skills and specialization when they do.

Our research shows that people are capable of mastering distinctly new skills and that unconventional tech hires are not so unconventional after all. But the willingness to hire them and the commitment to help them expand their capabilities require a shift in thinking.

The tech professionals in our data set are well paid and mobile—and 44 percent of them started in nontech occupations

Our data set of four million de-identified online work histories in four countries includes roughly 280,000 tech professionals, and it’s clear that they earn more and move more often than workers in other fields. Roughly 90 percent of the tech occupations we analyzed deliver above-average lifetime earnings. While workers across all professions changed roles every 3.2 years on average, tech professionals moved almost 20 percent more often, switching roles every 2.7 years.

We parsed millions of online job postings to quantify the “skill distance” associated with specific job moves (the share of new or nonoverlapping skills associated with the new job when someone makes a change).¹ The size of the differential reflects someone’s opportunity to acquire or deploy additional skills when they assume a new role. People who start in tech typically overcome a skill distance of 27 percent every time they change roles.

More intriguing for hiring managers is the subset of tech professionals who started out in other types of occupations. These are not the experts who earned computer science degrees and never deviated from their chosen path. These are people who started out in entirely different lines of work and then reinvented themselves by adding new abilities along the way, perhaps learning to code, understand web architecture, or develop apps.

This is a common phenomenon in tech. Forty-four percent of the individuals who held tech roles at the end of the period we observed transitioned from non-IT occupations (Exhibit 1). To do so, they had to master a greater share of distinctly new skills—and their reward for doing so is upward mobility.

 

By making bold moves and moving more frequently, newcomers to tech boost their lifetime earnings. Almost two-thirds of their lifetime earnings can be attributed to experience capital, or skills learned on the job. These workers moved an average skill distance of 53 percent, sharply higher than the norm when people who started out in the field make a move. This indicates that workers who want to push out of their comfort zones are often capable of developing and applying more new technical skills than many hiring managers assume. Over the period we observed, these newcomers grew their salaries annually by 5.3 percent on average, higher than the 2.3 to 2.6 percent growth for those who started in tech.

Individual journeys illustrate how people break into tech and master distinctly new technical skills

Seventy percent of the workers in our data set who pivoted into tech roles started in professional services, healthcare, or other STEM fields. Within professional services, the most common occupations for those who moved into tech were general, operations, and marketing managers; management analysts; public relations and market research specialists; business operations and human resource specialists; office assistants; and customer service representatives. Mechanical and industrial engineers and social science researchers were among those who left other STEM specialties to enter tech. An additional 20 percent came from creative or education and community service roles; their most common paths started in graphic design or teaching and development. In general, workers moving from nontech to tech roles add skills like tech support, programming, application development, and web infrastructure.

Some common tech roles that offer newcomers an entry point include application software developers, IT support specialists, web developers and administrators, and document management specialists. From these launching pads, the sky is often the limit in tech, where things evolve so quickly that the field is wide-open for anyone who can keep up, regardless of pedigree.

Almost three in five workers who ended up as IT managers in the United States started in non-IT roles. They typically launched their careers as operations and marketing managers or management analysts. A quarter of German computer programmers once held roles in fields like graphic design. Sixteen percent of India’s information security analysts were previously in roles such as customer service representatives and administrative assistants.

Within the data are stories of individuals with a drive to learn, grow, and move up the earnings ladder. Consider the worker who began as a customer service rep, a role that requires ten skills such as sales ability, customer relationship management (CRM) tools, documentation, and communication. About three years later, she became a tech support specialist, a role that required four new skills on top of those she was already using (in this case, technical data analysis, data management, technical support, and knowledge of IT frameworks). This move involved a skill distance of 47 percent. Some years later, she made another strategic move to become an information security analyst, with a skill distance of 53 percent from her previous role (Exhibit 2). These challenging moves brought her pay increases exceeding 40 and 50 percent, respectively.

 

Another example is a UK resident who started as an office assistant at a large university. She took a one-year sabbatical, using her time off to take online courses in JavaScript and Python. She put those new skills to work as a resource manager at a small education technology company. A few years later, she became an associate network administrator at a defense technology company, eventually earning a promotion into an IT manager role. These moves had an average skill distance of 55 percent.

Another story that leapt out of the data was that of a US truck driver who took online courses on his own time. He eventually landed a job as a systems and data analyst with a midsize healthcare services provider—a major leap involving more than 90 percent new skills from his days handling a big rig. After three years in the position, solidifying his skills, he was hired as a software developer by a small solutions provider. Two years later, he became lead developer for a fast-growing IT service company.

Three strategies are key to cultivating tech talent

Companies that are not digital natives routinely find themselves outbid for tech talent or bypassed by highly experienced candidates. That’s an indication that they need a fundamentally different approach to hiring, retaining, and enabling the talent they need—one that moves away from insisting on narrow specialization and takes a broader view of the potential within people.

1. Don’t overlook people within your own organization who could make a switch

The tendency to pigeonhole people based on the work they do in their current roles is particularly ingrained when it comes to current employees. In Germany, more than 80 percent of the total role moves observed in our data set involved someone leaving one employer for another. Individuals who want to reinvent themselves often have to go to a new environment to do so. Compared with those who are already in tech roles, workers with nontech backgrounds are almost 30 percent more likely to leave their current employers to become systems software developers.

Since organizations typically pay a premium for external talent and cannot always know if a candidate will be a cultural fit, it makes sense to take a real inventory of the capabilities that are already available internally, in proven employees, before looking for external candidates.

Employers can benefit from making job movement within the boundaries of their organizations more fluid. It may feel more comfortable to let someone competent continue doing the same thing rather than letting them try on an entirely different hat. But the best place to look for people with aspirations and untapped potential is often within. Investing in learning and development opportunities for people who already know the business and have proven to be bright and reliable can be a safer bet than looking externally.

Internal opportunities don’t have to involve promotions. They can be lateral moves with greater tech specialization. The most important element is helping people gain more varied experience. Creating internal mobility that enables employees to add new skills and change course can keep them energized and stem attrition. In a June 2021 Gallup survey of 15,000 US workers, 61 percent said that the opportunity to learn new skills is an extremely or very important factor in deciding whether to stay at their current job.

2. Have the confidence to make bolder hiring decisions

Although the data show that tech talent can come from a broad range of backgrounds, some employers remain conservative when it comes to hiring. Weighed against the sheer speed of technology advances and the fact that tech workers have greater mobility, caution can be self-defeating.

Since it’s common for people who enter tech roles for the first time to expand their skill set by more than 50 percent, employers need a new lens that enables them to select candidates based on their potential as well as their past.

This means assessing candidates not only on their current responsibilities but also on their transferable skills, intrinsic capabilities, and potential to succeed in new roles. Since technical skills can be taught, it makes sense to look for the kind of mindset and relevant soft skills the role demands. Did candidates need an analytical mind or meticulous attention to detail in previous jobs? Have they been problem solvers, and do they appear to be adaptable? Are they good communicators and multitaskers who enjoy solving puzzles? Digital tools, including gamified options for pre-employment testing, can help with these types of assessments. Employers can also use data on the predictors of success, including factors beyond the candidate’s current day job. Analyzing candidate profiles against performance outcomes can help an organization refine its hiring criteria over time.

Removing strict requirements for a college degree can be liberating, and growing numbers of employers are going this route. In our data set, significant shares of workers who transitioned into technology occupations did not have college degrees. This applies to 10 percent of network technicians, 15 percent of information security analysts, 21 percent of network administrators, 24 percent of IT support specialists, and 26 percent of computer maintenance workers.

Hiring managers can tap into broader talent pools by considering midcareer workers who want to change their trajectory. Companies can also benefit from considering people who may have stepped off the career track for caregiving responsibilities or sabbaticals but now want to return to work. It’s never too late to embark on a tech career; more than half of the workers in our data set who started elsewhere and wound up in tech roles made bold moves later in their careers.

3. Train to retain

Given the mobility of tech workers, employers need to assess the totality of what they offer employees—and one of the most important components is the opportunity to learn. It may feel counterintuitive to invest in training someone who might leave, but the greater risk is failing to train and develop people who stay. Deepening and expanding the digital skills of the entire workforce pays off in the form of productivity, innovation, and retention.

Learning can take the form of structured in-person courses tailored to specific employee cohorts or digital content modules that employees can access on their own. However, nothing can substitute for learning by doing and coaching delivered in the moment. Every organization needs frontline and middle managers with the ability to teach as well as workers with the ability to learn.

Companies that still have a long way to go in their digital transformations may feel at a disadvantage when it comes to instilling technology skills. But they can tap into an entire ecosystem of technology training resources. They can, for example, pay for people to attend outside classes or boot camps or make use of the rapidly proliferating universe of online courses.

The most sought-after employers emphasize lifelong learning for all employees. Closing gaps in digital skills is not a one-time effort but a continuous process. The fast-changing nature of technology means that even high-level experts are constantly learning and improvising on the job. Opening the field to all employees—especially people who want to reinvent themselves—is a smart tactic for activating talent and staying on the cutting edge.

The Swiss group will sell an additional 3.2 percent to Symphony Global, leaving YNAP without a controlling shareholder. The deal paves the way for Farfetch to potentially take control of the loss-making e-tailer, the companies said.

E-commerce operator Farfetch and Symphony Global, the investment vehicle of Emirati real estate mogul Mohamed Alabbar, will acquire a 47.5 and 3.2 percent percent stake in Yoox Net-a-Porter (YNAP) respectively, from Cartier-owner Richemont, the companies said in a statement.

The deal leaves Yoox-Net a-Porter without a controlling shareholder, and paves the way for Farfetch to potentially acquire the remaining YNAP shares. As part of the agreement, Richemont’s brands will also adopt Farfetch’s technology to power their digital activities, according to the statement.

“This investment and work we will do with Farfetch Platform Solutions for YNAP will pave the way to a potential acquisition by Farfetch, which would create a complementary portfolio of iconic luxury destinations, appealing to different demographics, price points and regions,” Farfetch CEO Jose Neves said.

The deal provides a long-awaited, albeit painful exit for Richemont from a costly foray into multi-brand e-commerce. The Swiss group, which acquired full control of YNAP at a €5 billion valuation in 2018, will receive shares in Farfetch valued at just $440 million, which it has agreed to hold as an investment, as well as receiving another $250 million in Farfetch shares in 5 years.

The transaction values YNAP at around €1 billion, materially lower than Richemont’s investment, as well as below recent estimates of the unit’s value. As a result, Richemont said it would claim a €2.7 billion writedown on the asset.

Still, investors and analysts welcomed the news. Bringing its stake in YNAP below 50 percent will allow Richemont to deconsolidate the e-tailer in its reporting, where the unit’s steep losses have dragged down the company’s valuation for years. Richemont shares were up more than 3 percent in early trading on Wednesday.

Richemont, which is controlled by South African billionaire Johann Rupert, has faced mounting pressure to report progress on selling or turning around YNAP, which fell behind rivals during the pandemic even as online shopping surged.

Sales and profits in the group’s jewellery houses including Cartier and Van Cleef & Arpels have boomed in recent years, but the company trades at a discount due to the drag on profits from YNAP, a governance structure that deflates the voting power of minority shareholders, and a pattern of idiosyncratic fashion investments. Activist shareholder Bluebell recently proposed a shakeup to Richemont’s governance, including an expanded board and bringing on a former Bulgari CEO, Francesco Trapani, to represent minority shareholders’ interests.

The Farfetch deal will boost Richemont’s operating profit margin by around 4.5 percent, RBC analyst Piral Dadhania said in a note to clients.

Farfetch, which reports its first-half earnings Thursday, will gain exposure to a broader base of customers by investing in its biggest rival. It’s also opened the door to acquiring major clients for its business-to-business services: providing white-label solutions for Richemont’s brands will be a boon for Farfetch’s Platform Solutions unit, which is seen as an increasingly important growth engine for the group as some key luxury brands like Gucci reduce their exposure to third-party sellers.

“This seems very good news for both companies. Richemont will finally remove YNAP from its perimeter … Farfetch secures the number two in multi-brand digital distribution,” Bernstein analyst Luca Solca wrote in a research note.

The addition of Richemont’s brand portfolio to the Farfetch platform is likely to give the e-tailer a much-needed traffic boost, Solca added. “Prima facie, this seems an excellent deal for Farfetch,” he said.

Zip Co has vowed to further reduce how much cash it is burning through in its overseas operations, after announcing the closure of its United Kingdom business as it delivered a full-year loss of $1 billion.

Zip, a key rival to Afterpay, on Thursday revealed further details about its plan to move into profitability, as investors turned their back on buy now, pay later (BNPL) businesses in the past year.

As BNPL shares prices have plunged - a trend seen across loss-making tech companies - Zip has responded by slashing costs and ditching peripheral overseas assets, to instead focus on its core markets in Australia, New Zealand and the US.

Following the plunge in BNPL valuations, Zip’s bottom line was hit by $821 million impairments of its goodwill and intangible assets in the United States, UK, Europe and Middle East. This pushed Zip to post a $1 billion statutory loss, with the company’s results also weighed down by sharply higher bad debts and operating costs.

Zip regards cash earnings before tax, depreciation and amortisation (EBTDA) as a better reflection of the cash needed to run the business. By this measure, it made a smaller loss of $207 million, and it said it would be profitable on this basis during the first half of 2024.

Co-founder Peter Gray said the carrying value of some overseas businesses had been written down because the company was now factoring in slower growth rates in some markets, while rising interest rates have also lowered the value of Zip’s US business.

“Like many other companies who’ve adjusted goodwill or carrying values of their assets or business that they’ve acquired, we’ve done the same. All our overseas businesses have been written down,” Gray told this masthead.

Gray said he expected Zip’s statutory loss to narrow over the next year, as the write-downs were in part a move to “clear the decks.”

“The adjustments that we’ve taken - we’ve obviously gone deep so that we wouldn’t be faced with a similar situation next year,” he said.

As well as closing its UK business, Zip on Thursday said it was running a strategic review of businesses in Europe and the Middle East that it bought last year. These businesses are currently burning through about $50 million a year, and the review aims to “neutralise” cash-burn in these markets by 2024.

Zip’s revenue - which jumped to $620 million, from $393.9 million last year, was released last month in a quarterly update. Its net bad debts that were written off more than doubled from $82.5 million to $228.9 million, and the company believes its bad debts have peaked after moves to tighten lending.

Zip shares, which have plunged 86 per cent in the past year, were 1.75 per cent higher at 98c in afternoon trade.

Jarden analyst Elise Kennedy highlighted growth in Zip’s EBITDA in its Australian business, which she said showed BNPL businesses could be profitable when they had scale.

“In our view, the payments companies need to show their ability to strip back costs, focus on their core markets, and show the market their pathway to at least breakeven,” Kennedy said in a note to clients.

Amazon’s new fulfilment centre in Sydney’s western suburb of Kemps Creek is buzzing.

More than 1000 staff are busy working, although you wouldn’t know it given the space is as large as 24 Rugby League fields – or double the size of Bondi Beach.

Over the past two years amid COVID-19 lockdowns, you have probably ordered from the US giant that set up operations in late 2017 in Australia. But have you ever wondered how that little box arrives at your door?

Watching each box whizz past to get the final address air stamped on it all seems so simple as it heads down the belt out to a sorting centre and then to homes around the nation.

While it is possible to get a package out the door from the 200,000 square metre site (dubbed BWU2) within hours of its arrival, there is a huge logistical process that is all pinned to getting the product to the customer at the time promised.

Amazon this past week upped the ante by promising its Prime members next day delivery for customers in metro areas of Sydney and Melbourne.

“Reliability is key, or you can’t earn customers trust,” Amazon country manager Janet Menzies tells AFR Weekend.

Amazon Australia has more than doubled its operational footprint in 2022 with the launch of this first robotics fulfilment centre, which opened a few months ago after committing $500 million to the project.

The e-commerce giant has storage spaces across six local distribution centres. Its global fulfilment network includes more than 200 facilities with robotics.

Amazon has huge efficiencies in the way it processes the items. It brings the shelves to the people “pickers” and has random stowing in the shelving system called “pods” to ensure easy access – this is all shaving time off the delivery process. “Counters” help with staying on top of inventory in each pod.

The robotic units over four floors use QR codes to navigate the shelving system. They can lift up to 680 kilograms of inventory stored in the pods, of which there are 33,000 in the building.

Amazon site manager Siddharth Yadwad, who first joined Amazon in Britain, says there is 2.5 kilometres of special fencing around the robotic field and no one can enter the field without a robotic vest.

“The system is smart and robotic drives will stop if they sense a person inside the field,” he says.

Set in what was once farmland, the site out past Liverpool and Cabramatta is surrounded by bulldozers and construction zones. Many businesses, such as Fujitsu, have new offices or are mid-construction of new mega warehousing facilities, such as Australia Post.

From Kemps Creek, products can reach 80 per cent of the population within a 12-hour drive, allowing Amazon’s next day delivery promise.

There are 56 loading docks around the building where items are offloaded and moved into the inbound area.

Toaster sized-boxes or smaller, think books, tissues, makeup and small technology items, come from this site that eventually will hold up to 20 million units at once.

As an outsider, the hum of the 14 kilometres of advanced conveyancing equipment pushing boxes around BWU2 seems loud, but the staff do not seem to mind – none that I see wear ear protection. Many wear shorts, T-shirts and trainers. Some wear protective boots in the climate controlled facility.

The system is all virtual, with a bar code always on the item as it shifts from the incoming area to outgoing packages.

The backbone is Cubiscan, which weighs and gives product dimension. If it is incorrect, the item gets shot off to another direction and fixed.

“Pickers”, who work 10-hour shifts four days a week, place items from the pods into one of the 17,000 yellow totes for outbound packages. Boxes are taped up and ready to go.

“Even at a robotics site people are at the heart of the operation. All customer orders will interact with at least four different people before they leave the building.” Mr Yadwad says.

Every box that leaves the centre is moved to the “middle mile”. Packages either go to an Amazon logistics site or third-party player like Toll Holdings or Australia Post. Boxes are then sent to last mile delivery partners.

Mr Yadwad says the centre regularly ships more than 100,000 packages a day, but has the capacity to ship many hundreds of thousands of packages daily.

While Amazon globally has come under pressure about workers’ conditions Mr Yadwad says there are great opportunities at Amazon, and it is an attractive place to work.

“Pickers” start at $30.17 per hour for a permanent role working in an FC - plus benefits, such as subsidised private health care and up to 20 weeks’ paid parental leave. That is slightly higher than the average pay of $29.66 per hour for workers at a Woolworths distribution centre.

Ms Menzies added that 30 per cent of hiring comes from referrals, but admitted more needs to be done to engage with young university graduates about opportunities. Amazon has just opened 150 intern spots across the business from AWS as well as Amazon.com.au, she said.

“If you join Amazon from day one, you get to be an owner. And I don’t mean financial. I mean, that the way the roles are, the responsibilities, the opportunity for impact, the customer obsession – all come together,” she says.

“I know I sound like I’ve drunk the Kool-Aid, but I sort of have. There are good jobs. I think our issue is that we’re not very well known in Australia.”

The parent company of search giant Google generates a little over $1bn in revenue a day.

It’s a staggering figure, with nearly two-thirds of this income coming globally from advertising sold across search, as well as sales on the tech major’s other platforms, such as mapping and the Google Play store. Advertising linked to Google’s YouTube video on demand business pulls in another $110m a day.

Australian courts have shown they are starting to apply more force when it comes to civil breaches by companies. However, the latest numbers from Google owner Alphabet highlight the $60m Federal Court fine slapped on it in recent days for misleading users over the tracking data they secretly stored when using Google services over Android phones is barely a drop in the bucket.

The tech company is valued at $US1.5 trillion ($2.1 trillion) – nearly the entire annual economic output of Australia — and this only serves to highlight the scale of the battle ahead.

The Federal Court found Google engaged in misleading conduct and made false claims to as many as 1.3 million Australian users because of the way it presented its collection, storage and use of personal location data in its privacy statements.

The Google fine comes just a few months after the Federal Court issued a near $45m fine against German travel booking major Trivago after it was found to have misled consumers over hotel room rates. Both legal actions were launched by the Australian Competition and Consumer Commission.

The harvesting and finetuning of individual data remains at the heart of the business model of players like Google and Facebook’s owner Meta. But how they secure permissions to use this data in the future is going to be a high-stakes battle against regulators.

Indeed, all companies will increasingly be lining up against consumer rules as data becomes the lifeblood of the digital economy. Banks, supermarkets, airlines and of course technology companies generate volumes of individual data. As companies invest more in automation, AI or data analytics, consumers risk being swept up in their loss of control in how the data is used.

ANZ’s now shelved talks around a multibillion-dollar acquisition of accounting software player MYOB was mostly driven by the prospect of the bank having full visibility (with consent) over its business clients’ accounts. Commonwealth Bank’s partnership with H2O.ai and development of a customer engagement engine sees the bank analysing as much as 157 billion data points in real time.

Elsewhere, burgeoning loyalty and reward schemes offered by retailers are more about knowing their customers’ habits so this can be used for targeted advertising. Supermarket major Woolworths last year paid more than $220m for a controlling stake in data science payer Quantium.

But it’s the tech giants in particular that need to be sent a message that consumer laws should be front of mind in dealing with the public.

Big implications

Google’s case has big implications for all companies in the way they present information about how their customer data is used. We are all used to scrolling through endless online screens of user agreements. But the Google case now means companies can no longer bury important information for consumers.

Instead critical information should be disclosed to consumers upfront.

“When communicating to consumers, the form and presentation of privacy statements, collection notices and privacy settings can be as important as the content,” says Jacqueline Downes, a competition law specialist and partner with Allens Linklaters in a case briefing note.

While it seems a one-sided battle against the world’s biggest companies, where Australian court actions against consumer law abuses of tech power are becoming potent is when they are used as a blueprint for other regulators around the world. For example, Google’s missteps here are likely to be repeated in Europe or the United States.

Court battles also have a habit of shining an uncomfortable light on the inner workings of tech companies, which can often be at odds with the seamless image their digital products present.

In this case the Federal Court trial even had the potential to put Google global chief executive Sundar Pichai in the spotlight if information from the documents secured were made public. It emerged that an urgent meeting dubbed as the “Oh Shit” meeting was held between various Google employees when the location tracking issue came to light. The ACCC’s discovery process revealed that Pichai was involved in these meetings, although there is no suggestion of wrongdoing by Pichai, merely he was present.

The ACCC’s case against Google was the first legal action in the world to dig into Google’s approach to the collection of location data. Here Federal Court Justice Tom Thawley found some of Google’s Australian users who navigated its Android operating system were not aware of the tech company’s retention and use of their personal location data even when they had switched off location history settings. The case found that data was being collected as a default on position under another account setting titled Web & App Activity.

Essentially it boils down to a company telling its consumers one thing, and doing something else.

“Those users were misled and some of them are likely to have made different choices about the collection, storage and use of their location data,” Thawley’s judgment says. “The position of the consumers is highly significant.”

He also reminded Google and all companies that have “significant levels of interaction with consumers” and profit from data that consumer laws should be “front of mind”.

“It is not acceptable that consumers be exposed to being misled on these sorts of issues, even by conduct which is not deliberate,” he says.

Regulatory heat

Google is facing regulatory heat on several fronts, with activity increasing since the ACCC published its first digital platforms report from 2018. There the ACCC called out the significant market power of the tech giants Google, Facebook and to a lesser extent Apple. Worryingly it warned the market power of these digital platforms was becoming “entrenched” and was moving to adjacent and related services, including payments.

The ACCC’s fifth report into the digital platform services is due to be handed to the Treasurer at the end of next month. Here the ACCC is reviewing competition issues that emerged in its long running platforms review which largely impacts Google, Meta (Facebook) and Apple through its operation of the App Store.

Worryingly for the tech giants, this is the review that will recommend whether laws need to be updated or introduced to boost consumer protection.

The ACCC in late June opened a new investigation into advertising technology. The UK’s Competition and Markets Authority and European Regulators also made a similar move. Elsewhere Google is facing legal action from the powerful US Department of Justice, alleging that Google breached competition rules relating to search. It is facing actions in relation to search tech from several US state-based attorney generals. (Google has said these cases have no merit and is defending itself.)

In May, European and UK regulators each opened a formal investigation into Google Play’s business practices, while Korean regulators are investigating Google Play’s billing practices. In Australia the ACCC has warned that both Google and Apple’s dominance of digital payments over their respective app stores could lead to greater regulation.

Under former chairman Rod Sims, the ACCC had been a first mover in many cases around consumer data rights and the market power of a player like Google. In a briefing note to the new Albanese government, recently appointed ACCC chair Gina Cass-Gottlieb said the regulator’s role was to “make markets work for consumers now and in the future”.

This was not by overriding markets, but by “maintaining and promoting competition and fixing market failure where we can, and by protecting the interests and safety of consumers in the support of a fair marketplace”.

The local boss of e-commerce giant Amazon says Australian consumers are flocking to the site to sign up for subscription deliveries of household staples as the retailer ups the ante on fast delivery in major cities.

Country manager for Amazon Australia Janet Menzies said that despite concerns about slower consumer spending, most product categories saw an uplift in sales during the company’s recent Prime Day sale event - with pantry items, beauty and personal care goods performing strongly.

“I think what is most important [at the moment] is value - and we saw on Prime Day that people are willing to spend,” she said.

Grocery and household staples have been a drawcard for customers on the platform, with Menzies highlighting strong demand for the company’s “subscribe and save” feature, which gives users a small discount for scheduling repeat deliveries of things like toilet paper, dog food and soft drinks.

“We have thought a lot about this program and when it is useful — usually, it’s something that is a consumable. And it started off as everyday essentials in the kitchen, but now you can even get ‘subscribe and save’ on [printer] toner,” Menzies said.