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Online marketplace giant Amazon Australia has launched free next-day delivery for Prime members living in Sydney and Melbourne, but has kept its membership fee steady as it seeks to lure more shoppers to its platform.

Amazon made a $500 million investment in its recently opened robotic fulfilment centre in Sydney’s west that spans 200,000 square metres, helping it to meet this next-day delivery milestone.

From the Kemps Creek site, products can reach 80 per cent of the population within a 12-hour drive.

Prime members within the majority of postcodes of the two cities will get free one-day delivery on eligible items, with no minimum spend. This is all about acquiring more customers as quickly as possible as rivals Wesfarmers and Woolworths ramp up their marketplaces.

Australian consumers are demanding what markets such as the US and Britain already have: good prices and fast delivery. But it is not easy, given Australia’s low-density population and costly last-mile delivery.

Amazon Australia country manager Janet Menzies said customers’ feedback was that next-day delivery was “a really important breakpoint”, and hinted that she would like eventually to offer same-day delivery.

“We’re really confident that our customers will respond positively to next-day delivery. For us, it’s all about the value of Prime – it just needs to be great. And I think people expect fast delivery,” she told The Australian Financial Review.

“Never say no, never say no [to aiming for same-day delivery]. But you need the fulfillment network that can set that up.”

Lower membership cost

Ms Menzies said she would look to extend Prime’s next-day delivery offer beyond the major metros in coming months.

It is estimated there are now more than 2 million Prime members in Australia, just a fraction of its global 200 million-plus members, who get access to exclusive shopping events such as the recent Prime Day and to streaming services.

Roughly 20 per cent of the British population has Prime and 45 per cent of the US population are members.

Amazon reached about $3 billion gross transaction value (GTV) in the 2021 calendar year, which includes third-party sales. MST Marquee head of consumer research Craig Woolford estimates that if Amazon achieves its US or British penetration in Australia, it will have $27 billion to $40 billion in GTV.

Prime in Australia costs $6.99 a month, significantly below the US rate of $US14.99. Amazon earlier this year lifted the membership fee in the US and most European markets as it battles higher costs, but has yet to do so in Australia as it builds out its offer.

Amazon has been criticised previously for not having top brands. Last year it signed up Apple.

Ms Menzies said Amazon continued to scout the latest brands and aimed to beat out rivals and get them on the site fast.

She said Amazon could offer customers top delivery speed because it built six fulfilment centres and delivery stations close to where customers lived and worked.

Amazon Flex (self-employed delivery drivers) would continue to grow, and Amazon would keep working with third-party delivery partners, she said.

Amazon also implemented delivery to more than 500 lockers and 400 counters – such as convenience stores and petrol stations – where customers choose where their order is delivered as part of its last-mile delivery offer.

Mr Woolford said Amazon would need to expand its same-day delivery service before lifting the Prime fee, and to achieve this it needed three to four times the delivery capacity it had today.

Amazon would disrupt local retailers over the next decade, he added, and questions remained over whether rivals Wesfarmers and Woolworths could lock in customers before Amazon’s encroachment.

“More importantly, how much cost and capital will they outlay? We are concerned the investment will be bigger than most investors expect,” he said.

Trans-Tasman online retailer Kogan has reported a return to adjusted profit during the first quarter, but not by enough to prevent a 69 per cent slump for the full year to June 30.

Sales for the year were static, up by just 0.1 per cent, to $1.18 billion, while adjusted EBITA was $19.1 million – down from $61.8 million last year and $49.7 million the year before.

Significantly, the majority of its EBITA for the latest year came from New Zealand, where it earned $12.2 million from its Mighty Ape marketplace. The core Kogan.com operation earned $6.9 million, down 87.4 per cent year on year.

However, despite what the company described as tough trading conditions – impacted on both sides of the Tasman by Covid – Kogan’s active customer base has grown to 3,972,000 and its Kogan First loyalty program membership surged by 210 per cent.

Ruslan Kogan, founder and CEO of Kogan, said consumers don’t want to alter their lifestyle but are happy to shift the way they shop in uncertain times.

He said the company is working to become “leaner” and to pass on cost efficiencies to customers through lower prices in response to changes in the macro environment.

Earlier this year, the business said consumer demand did not meet its expectations as it moved through a challenging market condition in its third-quarter results.

Meanwhile, the group’s total stock inventory has been reduced from $227.9 million a year ago to $161.1 million, with $139.2 million worth in warehouses and $21.9 million worth in transit. That has also assisted in boosting its net cash position from $12.8 million at the end of last financial year to $32.1 million.

Kogan’s portfolio of businesses includes Kogan Retail, Kogan Marketplace, Kogan Mobile, Kogan Internet, Kogan Insurance, Kogan Travel, Kogan Money, Kogan Cars, Dick Smith, Matt Blatt and Mighty Ape.

Apple says parts shortages are easing and that demand for iPhones is unceasing despite consumers tightening other spending, helping it top Wall Street expectations and forecast faster sales growth ahead.

Though macroeconomic indicators around the world are turning negative, CFO Luca Maestri told Reuters there had been no slowdown in demand for iPhones, the company’s biggest source of revenue.

Phone sales in the fiscal third quarter rose 3 per cent to US$40.7 billion, when Wall Street had braced for a 3 per cent decline. By contrast, the overall global smartphone market dropped 9 per cent during the just-ended quarter, according to Canalys data.

Apple’s loyal and relatively affluent customer base has enabled it to weather consumer spending dips better than other brands in the past, and the company’s latest quarterly results suggest a similar pattern emerging.

Canalys Research analyst Runar Bjorhovde said, “Apple in that sense has a certain robustness that will allow it to be impacted less than a lot of its competitors.”

Apple offered some caution. The slumping economy is hurting sales of advertising, accessories and home products, Apple’s Maestri said in an interview, calling the units “pockets of weakness.”

“Fortunately, we have a very broad portfolio, so we know we’re going to be able to navigate that,” he added.

The results show Apple’s advertising business, which includes selling ads alongside news articles and app store search results, is vulnerable to marketing cuts just the same as rivals Snap Inc and Meta Platforms Inc.

Parts shortages will continue to hamper Mac and iPad sales, Maestri said, though the impact has been easing. They cost Apple under $4 billion in sales in the quarter ended June 25, less than it had forecast. Maestri said the company expects the hit to diminish further in the current quarter.

But Apple risks joining rivals in amassing an unsellable stockpile of tablets and PCs if more customers than expected hold off purchases due to rising inflation and interest rates.

“In terms of testing the demand, you can’t really test the demand unless you have the supply,” Apple Chief Executive Tim Cook told analysts on Thursday. “And we were so far from that last quarter that we have an estimate of what we believe demand was. But it is an estimate.”

Citing the economic uncertainty, Apple said it was not providing specific revenue guidance. But it said sales compared to a year ago should rise faster in the current quarter than 2 per cent growth it posted in the just-ended quarter.

‘More Deliberate’

Overall, Apple said quarterly sales and profit were $83.0 billion and $1.20 per share, above estimates of $82.8 billion and $1.16 per share, according to Refinitiv data.

The rising US dollar has hit many companies such as Apple that generate substantial foreign revenue and are getting less cash back when they convert it. Apple said currency fluctuations slashed sales by 3 per cent in the June quarter and would crimp them by 6 per cent in the current quarter.

Shuttering its business in Russia earlier this year due to the war also has hurt sales.

Apple, like many of its tech industry peers, is slowing hiring and cutting costs given the tough economic climate. Cook said Apple was “being more deliberate in (hiring) in recognition of the realities of the environment.”

The most recent economic woes include supply chain disruptions that have hit production of some Apple products such as iPads and Macs whose assembly locations were clustered near regions of China that went into Covid lockdowns.

While sales of iPhones and iPads topped expectations, revenue from services, Mac computers and accessories missed Wall Street targets and sales in the crucial China market fell 1 per cent as consumers being on lockdown there limited sales.

Apple also is confronting slow overall economic growth in China, where its fiscal third-quarter sales were $14.6 billion.

Growth in the company’s services business, which has provided a boost to sales and profits in recent years, was 12 per cent, below the previous year’s 33 per cent rate and resulting in $19.6 billion in revenue, below estimates of $19.7 billion.

Apple said it now has 860 million paying subscribers to its services, up from the previous quarter’s 825 million.

Sales of iPads and Macs were $7.2 billion and $7.4 billion, compared with estimates of $6.9 billion and $8.7 billion. Mac sales represented a 10 per cent contraction, after record sales since 2020, first from a work-from-home boost and then from Apple’s new proprietary processor chips.

Its shares closed Thursday down about 11 per cent so far this year, slightly less than the broader S&P 500 index and also less than other consumer hardware makers such as Sonos Inc and Samsung Electronics Co, the only company that sells more smartphones than Apple.

Ruslan Kogan’s eponymous online retailer has come a long way since it was founded in a garage in 2006, and the business has had its fair share of troubles along the way.

Known for its cheap electronics, Kogan experienced a boom during the pandemic, as shoppers flocked online to deck out their home offices with new monitors and laptops.

However, since then, the company’s share price has plunged due to ongoing issues with excess inventory levels and shipping delays. Investor sentiment has waned, with most analysts relatively pessimistic about its future.

Still, with Kogan’s share price in the ditch, are there some opportunities for investment?

How it started: Kogan’s origin story is classically startup: the business began out of Kogan’s parents’ garage in 2006, initially selling LCD televisions online that were assembled in Chinese factories for less than half the price similar models were being offered in bricks-and-mortar stores.

Early success saw the operation grow and expand its offering into other electronics – all sourced overseas at lower prices. By 2012, the business was reporting revenue of more than $100 million.

Ruslan Kogan made somewhat of a name for himself as an agitator, issuing bold bets and challenges to the likes of Harvey Norman founder Gerry Harvey and JB Hi-Fi boss Terry Smart.

In 2016, Kogan floated on the Australian Securities Exchange with an offer price of $1.80, giving the business a market capitalisation of about $150 million. It has also made a number of acquisitions, including Dick Smith, Matt Blatt, and New Zealand retailer Mighty Ape.

How it’s going: Today, Kogan’s market capitalisation is $323 million and its shares trade at about $3, a massive decrease in value since late 2020, when COVID-fuelled online spending helped its revenue and earnings soar and investors hoped the pandemic might entrench online shopping habits.

Several missteps and worse-than-expected trading performance have hammered Kogan shares. In early 2021, the business hinted at some growing pains, which were laid bare in May when the company said it would slice its earnings forecasts after buying too much inventory.

Kogan profit for the 2021-22 financial year plummeted 86 per cent and the company axed its dividend payout.

The company also drew shareholder ire at its annual meeting for poor performance and perceived mismanagement, with investors also protesting a generous share grant to Ruslan Kogan and David Shafer in the year prior.

Industry: Online retail.

Main products: Electronics, household goods.

Key figures: Chief executive Ruslan Kogan, chief financial officer David Shafer.

The bull case: With Kogan’s share price just a few dollars above its 2016 initial public offering price, much of the bull case stems from hope it may be able to again reach the levels of performance it was reporting through the pandemic.

Barrenjoey analyst Tom Kierath told clients in a research note in June that Kogan may be able to turn a corner if consumer conditions improve at a better-than-expected rate, and overall online penetration in the market exceeds forecasts.

It is possible Kogan may also be able to improve its standing through some “strategically compelling” acquisitions, Kierath says. The company has been fairly active in the mergers and acquisitions space, most recently acquiring NZ retailer Mighty Ape.

The company’s recently launched marketplace – where third-party sellers can offer their goods on the Kogan website – could also deliver higher sales and profits, with UBS analysts giving the company a 12-month share price target of $6 under this scenario.

A downbeat economy could also see more shoppers opt for cheaper goods, which Kogan sells through its private-label range, which makes up about half its profit.

The bear case: Many analysts remaining pessimistic about the company following its half-year results in February.

Primary among their concerns are the company’s continued high levels of inventory, an issue it has been wrestling since May last year.

UBS analyst Tim Piper told clients last month the company was still carrying “significant levels” of excess inventory.

“We forecast Kogan’s gross margins to remain somewhat compressed in the near term while this is cleared, while this additional inventory should also drive an elevated warehousing expense,” Piper said. Kierath notes Kogan’s inventory levels are still about $30 million higher than they should be.

Investors are also concerned over the weak consumer environment as inflation continues to rise. Data out this week from major banks CBA and NAB shows spending on discretionary items, including Kogan’s key lines such as household products and electronics, has begun to fall.

Finally, the uptick in online spending during the pandemic has been both a blessing and a curse for Kogan, as other retailers are now pouring more resources into the channel, further increasing competition.

A clear example is Woolworths’ recent $250 million acquisition of MyDeal, a close Kogan competitor. This, alongside Wesfarmers’ Catch, means there are now numerous well-funded competitors in the market.

“This, coupled with increased investment by omni-channel peers and continued investment by Amazon will result in a permanent step-change in customer acquisition costs and competitive intensity, reducing Kogan’s long-term earnings power,” Kierath says.

Wesfarmers’ Catch.com.au has tapped Cotton On Group executive Brendan Sweeney to run the online marketplace as the battle for digital dominance heats up.

At Geelong-based Cotton On, Mr Sweeney is leading the group’s international online strategy across seven retail brands, including Rubi, Factorie, Typo and Cotton on Kids.

Former Catch managing director Pete Sauerborn left the business on June 30. The Australian Financial Review’s Rear Window column reported his planned exit in April.

Catch operates an online marketplace selling products from food and liquor to clothing, furniture and electronics but it was a serious underperformer for Wesfarmers in its first half-year results when sales fell 4.3 per cent and earnings were hit by more discounting.

Mr Sweeney takes the helm of Catch at a tough time for digital retailers, following a surge in pandemic-led spending.

Tech giant Shopify boss Tobi Lutke warned overnight that the Ottawa-based company was slashing 10 per cent of its global workforce and expects sales to fall after making a “wrong” bet on how long the COVID-19-fuelled online shopping boom would continue.

This not only paints a troubled outlook for Catch, but also for others like Kogan.com, online beauty and cosmetics retailer Adore Beauty and home retailer Temple & Webster.

Many retailers bet big on digital capabilities, capacity, supply chain capex and inventory based on assumptions of compound growth and market share gains to online, which do not appear to happen as was expected, said DNR Capital analyst Chris Tynan.

“For large retailers, the phasing of digital investments may need to be re-assessed, and less profitable pure play online retailers could face real challenges in a normalising environment,” he said.

Catch is now part of a new data and digital division, OneDigital led by Nicole Sheffield, at Perth-based Wesfarmers. This unit also includes the OnePass subscription program (formerly the Club Catch) and the Advanced Analytics Centre.

“Under OneDigital, Catch is transitioning to a broad-based Australian marketplace offering, focused on brands customers know and love,” Ms Sheffield said.

“Brendan has significant experience leading large-scale eCommerce and retail investment programs and will spearhead this transformation,” Ms Sheffied said. “He will also lead the Fulfilled by Catch program, a multimillion-dollar investment in cutting-edge fulfilment centres and delivery technology to drive faster delivery for Catch and other Wesfarmers retail business.”

Wesfarmers snapped up Catch in June 2019 for $230 million in the hopes of building out online sales at its Kmart and Target retail chains. The group has heavily invested in Catch in new automation and fulfilment capacity.

Before joining privately held Cotton On in 2015, Mr Sweeney previously headed the strategy function at Coles Group, where he led the supermarket’s multichannel offering.

He has also held executive retail roles in the UK, including as commercial director at department store John Lewis where he led the growth of its online business.

Mr Sweeney will take up his new role at Catch in late October, and said he was keen to join as Catch prepares for what is expected to be its busiest Christmas ever.

“I am thrilled to be taking on this new challenge and am honoured to be leading such a well-known Australian brand in Catch,” Mr Sweeney said.

“The opportunities to improve delivery and fulfilment also excite me as we know consumer expectations are changing, and we need to move quickly not just keep up, but to lead the industry.”

Mr Sweeney was born in Ireland and moved to Australia in 2012. He lives in Melbourne with his wife and children.

Brendan Sweeney has been appointed as the new MD of operations for online marketplace, Catch.

Originally from Ireland, Sweeney has held senior leadership and executive roles in Australian and international e-commerce businesses before joining the Cotton On Group in 2015. He currently heads its global e-commerce and loyalty arm.

Nicole Sheffield, MD of Catch parent Wesfarmers OneDigital division, said Sweeney has significant experience leading large-scale e-commerce and retail investment programs and will spearhead the business’s transformation.

In his new role, Sweeney will lead the Fulfilled by Catch program, a multimillion-dollar investment in fulfilment centres and delivery technology for Catch and other Wesfarmers retail businesses.

“As a customer of Catch myself, I know the strong value proposition it offers, across categories including household, apparel, grocery and sport,” he said. “I look forward to working with the team as we continue to evolve this offering in what is a very competitive market.”

Sweeney commences his new role in late October.

A record 9.3 million Australian households made online purchases in the year to March according to data released by Australia Post.

The postal service said online spending increased by 12 per cent year on year and in the six months from July to December 2021, an average of 5.6 million households purchased online each month.

The dominant categories were pet foods (38 per cent), tools and garden supplies (29 per cent) discount items (32 per cent) athleisure (17 per cent) and baby products (18 per cent).

One in three purchases were directed to NSW, which recorded the highest participation among states, growing by 27 per cent year-on-year. 

Australia Post’s head of e-commerce analytics, Rose Yip, said the growth in online shopping has accelerated “beyond expectations”.

“We’ve seen more than 900 million parcels delivered in the past three years alone, which says so much about how quickly e-commerce has grown in a short amount of time.

“It’s now the norm for so many Australians, with more than 5 million households regularly shopping online every month, which is why we’ve not only increased our network capacity but we’re investing in more new facilities, technology and our fleet to set up a strong and sustainable network for the future.”

Tony Nash, the founder of online book retailer Booktopia, was last night ordered by the board to step down immediately, even as a search for a new CEO has yet to be completed.

In a statement filed with the ASX, chairman Chris Beare said Nash – who built a $240 million business from scratch – would receive compensation of $375,000 as part of a bonus he was to otherwise receive related to the 2021 financial year. He will remain on the board as a director and as a significant shareholder in the company, but will serve out his six months notice period “out of the office”.

Booktopia CFO Geoff Stalley has been appointed interim CEO until a permanent replacement is recruited. 

Last May Nash announced his decision to step aside from the day-to-day management of the company after shareholders were critical of his sale of part of his stake in the company for $4.5 million, just three weeks before what one media described as “a significant downgrade” in earnings. At the time he said he would step into a new role as chief growth officer, focusing on business development.

Today, Beare said Booktopia had just completed an internal business review “focussed on, amongst other things, its overall strategy, efficiency and its cost structure”.

“As part of this process, the board has determined that retaining Tony Nash as the chief growth officer whilst at the same time appointing a new CEO was not in the best interests of the business going forward.

“Accordingly, the board has given Tony notice to step away from executive management of the company in order to enable a new CEO to enter with a fresh start on well-laid foundations.”

Beare praised Nash’s “single-minded focus” in building Booktopia from nothing to the $240 million turnover company that it is today, adding it was an accomplishment rarely seen in Australian business.

Nash has been under increasing pressure in recent months from institutional investors in the listed company, concerned at seeing the company’s value fall from a market capitalisation of nearly $400 million to just $26 million late last month.

After critical coverage in the financial media, Nash took to LinkedIn to defend his position: “I don’t like being the villain in the investment community,” he wrote. “There’s nothing fabulous about that. But at the cost of being a leader in the book industry. Never!”

Referring to his success in building Booktopia, he wrote: “You do realise that there is no country in the English speaking world with an alternative online bookstore to Amazon, don’t you? Booktopia is the only one.”

He concluded: “No one said being listed was easy… it isn’t, but it is the path we are on and I for one look forward to see how Booktopia continues to grow and succeed.”

Vehicle listing business carsales.com, which runs Australia’s largest online marketplace for cars, motorbikes and boats, is seeking to raise $1.2 billion from shareholders to fully acquire US listings business Trader Interactive.

Carsales, which took a 49 per cent stake in Trader Interactive last year, will acquire the remaining 51 per cent of the US company it does not already own for about $1.17 billion.

Chief executive Cameron McIntyre said he expected the takeover to generate “attractive financial returns for shareholders”.

“During the course of the last 12 months we have become even more excited about the value of the Trader Interactive business and its growth potential,” McIntyre said.

“Culturally, there is strong alignment between the carsales and Trader Interactive teams and we are looking forward to working more closely together to unlock the significant potential in the business.”

Carsales is looking to raise $1.2 billion by issuing 68 billion new shares at $17.75, a 14.5 per cent discount from Friday’s closing price of $20.76.

Trader Interactive hosts branded online marketplaces and offers digital marketing services primarily for trucks and recreational vehicles (RVs) in the US. The company had an adjusted revenue of $US125 million ($181 million) in the 2021 financial year.

Trader Interactive boss Lori Stacy said the company was “thrilled” to join the Carsales group.

“We have thoroughly enjoyed working with Cameron and the carsales team over the last twelve months and we can see how compatible we are from a culture and strategy perspective.

“Trader Interactive is a great business with a proud history and we are incredibly excited about the value that we can generate by leveraging carsales’ product and technology capability.”

Carsales’ share price has fallen from an all-time high of $26.44 in December 2021 but prices are still higher compared to their pre-pandemic price. The cost of cars on the site rose 30 to 40 per cent during lockdowns and demand for trucks, boats and caravans spiked.

The company reported profits of $131 million last financial year and expects to report profits of between $161 million-$163 million this year, up 23-25 per cent.

Annual salaries demanded by IT workers specialising in software development, DevOps and user experience design in the financial services sector have risen by 10 to 17 per cent over the past six months, according to global recruiter Robert Walters.

Securing information technology staff is an international battle where job candidates typically field multiple offers amid “intense competition to secure talent with industry related experience”. Banks and start-ups are struggling with high turnover as the average tenure for in-demand tech workers falls to 1½ years, the firm said.

At the start of this calendar year, senior software developers and engineers were asking for between $140,000 and $180,000 a year. The figure as of this month is $150,000 to $200,000, Robert Walters said.

Senior DevOps engineers, who help companies increase the speed of development of applications and services, had been seeking $150,000 to $200,000 in January but are now seeking $160,000 to $220,000, 10 per cent higher at the top end.

“There is movement,” Robert Walters’ NSW managing director, Andrew Hanson, said. “We have seen the top end move up in areas where skills are in very short supply.