News

Covid-19 has shone a spotlight on the arcane world of supply chains. From shortages of toilet paper to timber and semiconductor chips, businesses and consumers in Australia and globally have all experienced first-hand the disruption to international supply chains over the past twenty months.

New research released by Asia­link Business, in partnership with Toll, looks at the structural pressures on supply chains exacerbated not only by Covid-19 but also geopolitical tensions and extreme weather events. It indicates that technology, innovation and e-commerce will be the key drivers of building resilient and sustainable supply chains.

The latest trade statistics released by the OECD in late August paint a global picture where soaring commodity prices are driving overall merchandise trade to new highs, while congestion in international shipping and supply issues puts pressure on traded goods.

These rolling crises have driven many businesses to rapidly shift away from lowest-cost, which brings with it often long and complex supply chains, towards shorter, regional alternatives as well as increased inventories. Building this resilience into supply chains comes with costs that are putting pressure on profits.

In a post-Covid-19 world, business will need to think carefully about how to balance resilience and cost-effectiveness, as well as how to keep up with emerging technologies that are driving transformation.

Technology is revolutionising supply chain management. The internet of Things (IoT), machine learning (ML), artificial intelligence (AI) and improvements in data analytics are helping businesses increase manufacturing productivity, improve logistics, and provide tailored customer experiences.

This is a global phenomenon. But access to deep pools of capital and supportive government policies mean adoption in north Asia is particularly rapid.

China’s Cainiao – the $10bn logistics subsidiary of global e-commerce giant, Alibaba – offers a standout example. Cainiao’s IoT platform integrates the business’s storage facilities with one of the world’s largest fleets of autonomous vehicles. The company has invested heavily in infrastructure and grown quickly. Using cloud computing to connect with over 3000 logistics and delivery partners, Cainiao can now deliver a 1kg package anywhere in China in 24 hours for approximately 40c.

E-commerce

This rapid and reliable delivery shows how e-commerce is reshaping consumer expectations around speed, convenience, and personalisation. Customers now want access to a wide range of products, delivered quickly, with easy options for returns. They increasingly seek a unique and personal service, such as special packaging for high-end retail.

The Covid-19 pandemic has accelerated Asia’s e-commerce boom. Spurred by rising incomes and growing internet and mobile penetration, Asia’s e-commerce market grew by almost 20 per cent between 2019 and -2020, and is forecast to reach $3.3 trillion by 2024.

But as the region’s e-commerce volumes grow and consumers’ expectations evolve, traditional supply chains are being put to the test. Businesses that fail to invest in an agile, digitally connected supply chain will risk losing market share to competitors that can better fulfil these consumer needs.

Sustainability

To varying extents, customers, investors, and regulators across the Asia-Pacific are also expecting businesses to do more to demonstrate sustainability. This creates challenges, as most businesses have diminishing visibility of suppliers further up the supply chain.

New technologies, in particular improvements in data management driven by AI and ML, are helping responsible business address these challenges and meet rising consumer and social expectations around sustainable production and distribution.

New technologies are providing greater visibility and transparency, in addition to efficiencies. Japanese clothing retailer Uniqlo has focused on reducing carbon emissions in manufacturing in its sustainability strategy. It has pioneered filtration technology to make polyester fibre from recycled plastic bottles. This process generates about a third of the carbon emissions when polyester is produced from crude oil.

Australian business has made some progress, but risks being left behind. The rapid adoption of new supply chain technologies across Asia will create new opportunities for Australian businesses equipped to connect with them.

But business has been reluctant to embrace these innovations on a large scale.

Cost is still a significant restraint. Although the price of advanced technologies has fallen considerably in recent years, businesses require significant capital to establish and maintain autonomous systems.

The barriers are particularly acute for smaller and medium businesses. The Asialink Business/Toll survey found that 27 per cent of medium business and just 13 per cent of small business are investing in AI for supply chains, compared with 47 per cent of big business. If we are to compete successfully in Asia’s fastest paced markets, we will have to invest more in resilient and sustainable supply chains.

Finding supply chain partners with extensive experience in the region can help businesses of all sizes keep up with rapidly evolving technologies and standards. Partnering with organisations with deep experience in the region doesn’t just help business identify and manage supply chain transparency. They can also help business identify and seize on new opportunities created by the rollout of new infrastructure and the expansion of e-commerce platforms across Asia.

Asia is not a homogenous market in its own right, with different countries bringing unique challenges – and opportunities. Agility and nuance is important to navigating current challenges and unlocking future opportunities.

Unicorn hotel booking software company SiteMinder has closed a $100 million funding round, adding Fidelity International to its roster of big-name backers, as it continues to bide its time for an anticipated initial public offering on the Australian Securities Exchange in the current financial year.

Chief executive Sankar Narayan said the company had kept up investment in its technology platform during a pandemic that had initially appeared to threaten its viability, retaining its valuation above $1 billion and booking $100 million revenue.

The precise amount of funding raised was not disclosed, with Mr Narayan only saying it was more than $100 million, similar to its previous funding round, which it crucially closed in January last year, before the COVID-19 lockdowns.

The round comprised both primary and secondary capital, with Fidelity joining existing shareholders AustralianSuper alongside equity funds managed by BlackRock, Ellerston Capital, Pendal Group, and Washington H. Soul Pattinson.

Other existing investors in the company include ASX-listed Bailador Technology Investments, Les Szekely of Equity Venture Partners, and TCV.

Mr Narayan said raising capital without being able to travel and meet investors was a new challenge; however, most of the backers were returning investors with whom he had spoken regularly throughout the pandemic to keep them apprised of progress.

He said investors had been heartened by the company’s decision to invest in product development, despite the obvious challenges posed by the pandemic for its customer base.

Core software for hotels

It has made its name as core software for hotels that allows their back-end systems connect with various online booking sites and be instantly up to date. However in the past 1½ years it has added a number of new functions, including a payments system and a guest acquisition platform for small hotel operators.

It also introduced a partner program last November, a global hotel trend tracking tool last April and a multi-property tool in May, to simplify the management of multiple hotels for chains.

“Right from March 2020 we set the scene for the company saying how we were going to navigate out of the pandemic by not stopping any of the big projects that we had set out to do before it hit,” Mr Narayan said.

“The new products kept customers because they helped hotels by providing a lot of insight and information that took quite a bit of the uncertainty down about their business, because there has been a lot of twists and turns over the course of the last 18 months.”

In March this year, Mr Narayan told The Australian Financial Review that SiteMinder’s long-mooted initial public offering plans remained solid after it had restricted a feared pandemic wipeout to just a 10 per cent revenue drop, with a listing likely in the 2022 financial year.

However, despite the company describing its latest funding as a pre-IPO round, he refused to discuss anything further about its plans, or whether the resumption of travel in other countries, or Australia’s slip back into lockdowns, had changed the likely time frame.

“For a lot of reasons I can’t talk about that, I can’t actually talk about an IPO or any IPO plans,” Mr Narayan said.

He said the next year would involve further global expansion to follow on from recent European expansion, particularly across German-speaking parts of Europe.

AustralianSuper senior portfolio manager George Batsakis meanwhile said he believed the turmoil of the last 18 months had strengthened SiteMinder’s position in the industry, as the importance of easy-to-use technology platforms had become more apparent.

“After joining SiteMinder’s capital raise of over $100 million in January 2020, at a time when we could not have foreseen the events ahead, what we have seen is SiteMinder show tremendous agility, resilience and innovation, particularly as the needs of their customers and partners have rapidly shifted,” Mr Batsakis said.

Retailers have 11 billion reasons to look forward to this Christmas period, according to the Australian Retailers Association.

Aussies are expected to spend an average of $726 each, with most (79 per cent) preparing to spend the same or more than they did last year, according to joint research by the ARA and Roy Morgan.

This is compared to last year’s expectations, which saw Aussies wanting to spend around $500 each.

Prior year’s expectations by the NRA landed closer to $50 million, though the ARA’s survey could be impacted by the lower levels of stimulus and Delta’s impact on the economy, as well as a narrower survey base.

And, as the country pushes through an uncertain few months to a potential reopening of physical retail, online is expected to play a bigger role than in prior years – with almost half of all spend likely to come through e-commerce.

“The past few months have been a uniquely challenging time for most retailers, in particular small businesses navigating extended state-imposed lockdowns and restrictions that have limited their ability to trade,” said ARA chief executive Paul Zahra.

“Despite this uncertainty, the good news is that consumer sentiment is upbeat for Christmas and retailers can look forward to healthy trading conditions over the busy festive season.

“We might be in September, but we’re already seeing Christmas levels of demand with current online purchases.”

Wesfarmers chief executive Rob Scott said the business was optimistic about the year head, according to the AFR, but that he is wary of the long-term impact on consumer and business confidence from elongated lockdowns.

“There have been a lot of people stood down, so lots of people are out of work and that does have a very negative effect on the economy,” Scott said.

“The current levels of stimulus are a lot lower than last year, so we should be quite cautious and concerned about the longer-term economic impacts if lockdowns were to continue.”

Zip Co will add cryptocurrency trading functionality and allow its merchants to accept bitcoin as a form of payment as it moves beyond the heated buy now, pay later market into broader financial services.

Zip USA chief executive Brad Lindenberg laid out details on Tuesday of the Australian-born fintech’s much-anticipated move to expand into a range of products that comprise the “Millennial finance diet”, including cryptocurrency. Shares in Zip tumbled 2.3 per cent to $6.86 by 2pm in Tuesday’s trade.

Armed with internal research that suggests buy now, pay later users are 67 per cent more likely to trade crypto assets than non-users, Mr Lindenberg confirmed Zip would introduce the ability to “buy, sell and hold” digital tokens through the company’s app, initially restricted to its US customers.

It will also allow its 15,500 US merchants to begin accepting bitcoin as payment for goods and services, and allow customers to convert cash rewards into bitcoin with the launch of its “BitcoinBack” feature next year.

“The innovation around crypto feels like the internet did in 1995,” Mr Lindenberg, who is a New York-based Australian national and jointly runs Zip USA (formerly QuadPay) with Adam Ezra, told attendees of Zip’s first retail investor day.

“The distributed ledger [blockchain] is one of the most powerful concepts in fintech today and we feel it will be a revolution we need to be a part of,” he said.

“We don’t know exactly where this is going to land … but we need to be part of this movement and take our customers and merchants along for the journey.”

While the feature will be launched in the US next year, a Zip spokesman said the company intended to roll out the functionality to its 12 global markets, including Australia, over the next 12 to 18 months, although he added that the products and timing may vary depending on location.

Super-app add-ons

The addition of crypto would help customers live “fearless” financial lives, Mr Lindenberg said, as well as boost engagement with the Zip app as users check market movements and portfolio performance.

Zip co-founder Peter Gray had hinted at a foray into cryptocurrency and share trading in an interview with The Wall Street Journal in April, but the fintech remained tight-lipped about the launch since.

The company gave no details of a touted move into listed securities trading, but outlined a raft of new features, again slated first for the US market, including a savings account (which can be used to fund instalment payments) and a credit score builder.

It will also launch a physical “pay in four” Visa card, aimed primarily at the US market, where just one in 10 merchants adopt tap-and-pay technology (as opposed to 99 per cent in Australia, according to Zip).

“This means we can access point of sale terminals and other real-world physical locations where they don’t accept ApplePay or GooglePay, such as Walmart, restaurants and other popular venues,” Mr Lindenberg said.

The physical card was beta-tested with 5000 Zip customers. The pilot program concluded that customers with a physical card transacted three times more frequently than those without one.

Mr Gray said the establishment of a retail investor event followed feedback from shareholders that the company “could do better with our communications”.

‘Blow the shorts’

Asked about US payments giant Square’s $39 billion acquisition of Zip rival Afterpay, Zip co-founder Larry Diamond congratulated his “good friends” Nick Molnar and Anthony Eisen, the Afterpay co-founders, on the development – the largest M&A deal in Australian corporate history.

“It’s great to see Aussie fintech leaders structuring such a deal,” Mr Diamond said from New York, adding that it should be seen as an endorsement of the buy now, pay later business model.

Asked about short-seller interest in Zip, Mr Diamond said: “There are hedge funds that sit in their offices trying to attack businesses that may not be No. 1. Good luck to them. Our growth will ultimately vindicate us.

“If you continue to fight for us, we should be able to blow the shorts over time.”

This week Kate Ingwersen started a new role as chief technology officer at investment management company Challenger.

Besides being an expert in all things digital, Ms Ingwersen is steeped in sales, having spent much of her early career in retail broking and business banking sales at Commonwealth Bank.

A sales background, Ms Ingwersen said, had been valuable for her career, particularly in the technology field.

“Understanding commercials and customers has been a big driver of the success I’ve had in leadership and technology,” Ms Ingwersen said.

Sales roles, she said, taught critical skills such as psychology, communication, building a rapport and an appreciation for the top and bottom lines of a business.

“When you come from sales, you think hard about every dollar you spend because you know how hard it is to win revenue,” Ms Ingwersen said.

“I’ve been asked to do different leadership roles because of my track record of building relationships. Being able to build rapport, communicate effectively and take people on your journey naturally leads to you having more success in getting your initiatives through. Getting an initiative through is like closing a deal.

“And when building or running technology, you always have the customer in mind. If you have been in a role where you make a commitment to a customer, you know what it is like to have skin in the game. You don’t want to let the customer down,” she said.

Louise Watts, co-founder of Transition Hub, which runs programs to help executives who are looking to change jobs or careers, agreed that sales roles can teach people critical skills, such as listening, engaging easily in conversation, understanding the importance of relationship building and being able to read different people and adjust communication styles accordingly,

“It is about reading people and the psychology of the individual. Introverted or extroverted people want something different.

“On the introverted side, there is the conciliator, who wants to develop a rapport before they want anything from you in terms of what you’re going to sell. The deliberator, who’s also on the introverted side, wants the detail. On the extroverted side, you’ve got the conceptors, who want the passion and energy, and then you’ve got the drivers. They just want the facts, and they want them fast.

“So there are four different styles and if we can understand them, then we can sell to them, or we can build a rapport with them, and we can work with them,” Ms Watts said.

Lisa Claes is chief executive of property data and analytics firm CoreLogic. She is a former barrister but spent more than a decade in sales roles.

“The skills that tend to be successful in sales roles are transferable and incredibly beneficial to senior executive leadership roles,” Ms Claes said.

Ms Claes argued that among the key skills people in sales roles learned was the ability to influence.

“I think at the heart of being an effective sales professional is the ability to influence and, as a senior executive, the ability to influence is probably the most critical attribute you can have. Some people are innately very good at that, so they don’t need to have navigated through a sales career path, whereas others learn [it],” she said.

Reflecting Ms Ingwersen’s experience, Ms Claes also pointed to lessons in revenue and margins.

“[Sales] taught me that every dollar is not the same. Dollars with larger margins are more important.

“Not only do you want the revenue number, but you also want to make sure that it’s a sustainable revenue. So sales taught me about retention,” she said.

The ACCC has approved Eftpos, BPAY and the NPP’s efforts to join together under a unified parent company in order to better collaborate and coordinate their company’s actions, after the commission decided the merger wouldn’t substantially lessen competition in the payments market.

The green light was only given after the businesses proposed a court-enforceable undertaking which will hold the new parent company, Australian Payments Plus (formerly known as NewCo), to continue investing in and maintaining eftpos, accepting a QR-code based payment standard by the end of June 2022, and will do “everything in its control” to make least cost routing available for three years.

ACCC chair Rod Sims said, in general, the three businesses do not compete with one another and that the amalgamation wouldn’t have a significant impact on the broader industry.

“We considered a number of potential impacts on competition, including concerns raised by industry participants about the impact of the amalgamation on Eftpos’ services and least cost routing,” Sims said.

“The Reserve Bank of Australia, the regulator of payment systems in Australia, will also continue to take action to safeguard the availability of least cost routing.” “Together with the commitments made in the undertaking, the oversight of the Reserve Bank will minimise the risk that eftpos is diminished or that least cost routing will become less available.”

Australian Payments Plus independent non-executive chair Catherine Brenner said the decision marks the day the business’ can start working together to transition to a single Board structure, and will include the businesses moving into the same building and setting up ways of sharing information.

Sims also said one of the key reasons the ACCC approved the merger was that it will help ensure that Eftpos, which is an important alternative to the Mastercard and Visa networks, continues to be developed and improved.

The merger will enable the three payment schemes to coordinate investment proposals and avoid inefficient duplicative spending and, according to Sims, could increase the likelihood of major banks investing in domestic payment services.

“This is likely to result in public benefit, by placing them in a better position to deliver payment service initiatives more quickly and successfully, for the benefit of consumers and businesses,” Sims said.

Auctus Asset Management is raising capital to buy up a significant minority interest in Adam Schwab’s Lux Group.

Auctus, a subsidiary of ASX-listed Auctus Investment Group, will establish a new fund specifically for the opportunity to invest up to $100 million in a new convertible note being raised by Lux.

The PE-type asset manager has set a date of November 18 to have raised at least $60 million. If it does not hit this amount by that date, the deal will not proceed.

Auctus Investment Group typically raises funds from its network of investors for specific opportunities.

It has broad portfolio of assets, including positions in PETstock, healthcare tech platform Unite US, North American energy storage company esVOLTA and US-based early stage VC fund Scout Ventures Fund III. It also part-owns nine US-based student housing assets with a gross asset value of approximately $US125 million.

Its biggest backer is Wolf Capital, a private investment company established by Bruce Wilson (the Wilson family are the majority owners of plumbing company Reece Group) in 2011.

The investment company is listed on the ASX, and despite owning substantial stakes in a range of assets, only has a market capitalisation of $88 million.

Based in Melbourne, Lux Group is the owner of travel deals business Luxury Escapes.

Before COVID-19, it was forecast to turnover $500 million in 2020 and has previously appeared on The Australian Financial Review’s Faster Starters list.

In February, it bought digital concierge firm Porter & Saile.

In late 2019 Luxury Escapes had been looking for a buyer, with major airlines, travel brands and private equity firms interested in the company at the time.

After a brief time away from the day-to-day operations of the business, Schwab stepped back in as CEO of the company in October last year when Cameron Holland resigned.

Adore Beauty has enjoyed a record maiden result, with revenue and active customers hitting peak levels throughout the business’ first year on the ASX, bringing the company into a positive position.

Active customers hit 818,000, up 39 per cent, which drove revenue growth of 48 per cent to $179.3 million. Net profit grew 168 per cent over the course of the year, with the beauty firm eking out a positive result of $845,000 – a slight win, but a big boost on last year’s loss of $1.2 million.

“Adore Beauty has had an exceptional start to listed life, delivering record revenue and profitability in its first full-year result,” chief executive Tennealle O’Shannessy said.

Highlights for the business’ first year as a public company include the launch of its loyalty program, which has seen strong uptake amid its most active customers, the launch of its native iOS and Android apps, as well as the onboarding of 51 new brands to the health and beauty marketplace.

The new year has started off strong, according to the business, with revenue up 26 per cent year-to-date, and plans on reinvesting earnings to drive above market growth moving forward.

“[Our] passionate and dedicated team has made excellent progress on the execution of our growth strategy, further building on our market leadership and strengthening our competitive advantages,” O’Shannessy continued.

“[And] our continued strong returning customer rates and growth in new customers provide strong momentum to drive continued growth in FY22 and beyond.”

Temple & Webster has surfed strong online homewares sales to a year of record profit, revenue, and customer growth, with Australians continuing to rethink and refurnish their homes amid ongoing lockdown restrictions.

“While we don’t take for granted how fortunate we are to be able to trade through lockdowns, we believe Covid has accelerated the shift from offline to online that was already in progress,” chief executive Mark Coulter said.

“[And] while the start of FY22 has been difficult for many Australians, we remain focused on strengthening our customer proposition, built around having the largest and best range of furniture and homewares, combined with inspirational content and a great customer service experience.”

This strategy seems to have paid off for Temple & Webster, which enjoyed revenue growth of 85 per cent to $326.3 million in FY21, active customer growth of 62 per cent to 778,000, and a net profit of $14 million – 165 per cent up on a normalised basis.

Revenue per active customer also increased 12 per cent, as customers get used to the idea of shopping for homewares online and becoming repeat customers.

During the year the business’ iOS and Android dedicated apps launched, and the business enjoyed a successful pilot of an ‘artificial intelligence interior design’ service based in Israel: one which Temple & Webster begun investing in some time ago and which hasn’t yet announced who the partner is.

And, into the new financial year, the online homewares giant has seen this pattern of growth continue, with lockdowns around the country fanning revenue growth of 49 per cent for the period between July 1 and August 27.

Pureplay Booktopia has delivered a strong year of growth in its first year as a public company, with record units shipped, revenue up 35 per cent to $223.9 million, and adjusted earnings of $13.6 million – more than double that of last year.

All of this is well ahead of where the business thought it would be when it initially listed on the ASX in December, with chief executive Tony Nash stating the result has laid the foundation for further growth in FY22.

“Our prospectus set some very ambitious targets for our first year as a listed company and I am very happy to report we have been able to eclipse those expectations,” Nash said.

“Our focus has now shifted to executing our multipronged growth strategy that will see us ramp up our market penetration, expand our reach within the book industry and lock-in new, earnings accretive partnerships and acquisitions.”

During FY21 Booktopia made a number of new partnerships, such as a deal with Brio Books in May to help its inhouse publishing and edtech provider Zookai in April to expand its academic range, as well as a partnership with UK-based publisher Welbeck for a new joint venture in Australia and New Zealand.

And, Nash confirmed the business is eagerly looking at new bolt-on acquisitive opportunities to further enhance Booktopia’s infrastructure.

“Bolt-on opportunities, whether through acquisition or partnership, provide a clear path to supercharging our growth over the next few years and if we see an opportunity that provides the right benefits, at the right price, we will pursue it,” Nash said.

The Covid-19 pandemic has had a positive impact on the publishing industry, with people trapped at home picking up new ways to engage and entertain themselves.

According to Nash, the Australian book industry is forecast to generate more than $2.6 billion this year, and that, despite the size of that pie, Booktopia is looking at opportunities to expand into new markets – if there is an attractive option.

“Our intent is to be the core of the book industry, locally and internationally,” Nash said.

“We will continue our growth strategy, investing into key areas of the business to cement our online market leadership and drive increased market share with an ongoing ‘customer obsession’ mindset to ensure our engagement and service is second to none.”