Discounter shrugs off downturn

DailyDeals and Catch Of The Day principal Gabby Leibovich is on a winning formula, and sees no reason to change it – in fact he says a recession will even cement his position. Gabby Leibovich is the half owner of the umbrella company that runs online department stores DailyDeals and Catch Of The Day with brother Hezi.

While retail has been doing it tough, Gabby claims their business has grown by 10% to 15% a month, taking revenue to about $40 million in 2007-08 with about 30 employees.

Amanda Gome: You’re 38 and you’ve been involved in the business from day one. What niche did you see?

Gabby Leibovich: DailyDeals is a very simple site that sells a number of items in quite a few categories. There’s hundreds of sites similar to it on the market. We started the niche of the one-product-per-day type operation (Catch of the Day.)

And it proved be very, very successful.

What’s your background?

Retail of audio/visual items, TVs, VCRs, hi-fi, etcetera. So we started in that market. Very soon, we started being approached by various suppliers to try different things from IT, to pillows, to socks, to jewellery, Manchester, toys, etcetera. I knew nothing about clothes and we gave it a try – and pillows proved to be a very, very successful item. So we don’t pretend to be experts in all those areas, but the internet is a great shopping tool.

One of the sites that started before you was Zazz. There’s a number of people who’ve said that your site is very like Zazz. There’s nothing wrong for entrepreneurs to pick the eyes out of other successful ventures when they start their own, but did you take a lot of things from Zazz?

Both the names DailyDeals and Catch Of The Day basically mean one product per day. The name DailyDeals was registered probably two years before Zazz were even thinking about it. To be honest we both spotted the idea in the USA. It’s just that it took us a little bit longer to come up with it and we started five months after them.

Did that give you an advantage then, because it’s often very hard being first?

I don’t think so. We looked at the American site as an example.

Did you have to spend a lot of time educating the market or was this just something that was growing very fast anyway?

It was certainly something that was growing very fast. There’s a simple trick to it, and it’s the product. The product sells itself and the product brings new customers. We used those loyal members of ours as our best advertising tool. When a new happy user shows his workmates and family the latest Toshiba laptop, we’ve instantly won a few extra members. And that’s why membership as well as turnover has been increasing in such high percentages.

You used TV shopping very effectively. You bought a half priced advertorial on Bert Newton that worked. Are the daily advertorials on morning TV still working for you?

At the moment, we do not have a product on TV. We just finished two items about a couple of months ago.

We’ve tried absolutely everything from newspapers in both Melbourne and interstate. We’ve tried radio. We’ve tried television specifically for Catch Of The Day. We’re just about to try street billboards.

What worked best?

Honestly I don’t know. It is very, very hard to tell what works best. It is very hard for us to tell where exactly our customers are coming from. One thing that we do know is that advertising works. If you don’t advertise, less people will get to know about you. And we’re quite happy to put a certain percentage of our profits back into advertising.

What percentage of profits do you put back in?

Under 5%. It really varies throughout the year.

Do you do anything online?

Oh absolutely. We’re certainly on Google.

Do you find that works well for you?

Google is certainly a winner. Again it’s very hard to judge the whole marketing, and advertising part is very, very hard to judge.

One of the very robust debates on SmartCompany has been with Gerry Harvey who says that online is basically a waste of money. And of course he’s just recently had to close his Ofis outlets. Can you give us any perspective on that? What’s he missing?

I think Gerry Harvey’s a very smart guy, and he’s not telling us the truth. He’s the master of marketing and manipulating the media, and I take my hat off to him. Gerry knows that the internet is working and that the internet can generate huge profits. But Gerry runs a franchise and I’m guessing online stores don’t work in a franchising situation, as he would get rebellious franchisees going against the introduction of a website as such.

Why? Because they would lose people walking into their franchisees?

Correct. I mean how do you divide the profit share? I’m guessing Gerry would want to keep all the profits off the internet while the franchisees would certainly not accept such a situation. So Gerry’s telling us what we want to hear, but I’m sure he thinks otherwise.

But surely the individual franchises would get their own websites?

I don’t think individual franchises can get their own website. There’s no way you can do Harvey Norman Moorabbin and then Harvey Norman Parramatta under two separate website operations. I just don’t see it happening. The longer it takes for them to wake up, the stronger companies like us and the top 10 become. So I’m happy that Gerry’s still asleep.

What about eBay? How does that work in with you?

Honestly eBay to us is not exactly a concern at the moment. I think people are becoming tired of the auction system. People are stressful these days and I don’t think anyone’s got the time to follow a seven day auction these days. The market is becoming very, very competitive and generally anything that you can buy at eBay you can buy on some website on the market for the same price and just go and buy it now.

The other thing with eBay is you deal with a lot of garage type companies. There’s nothing wrong with that, that’s how we started, but people prefer to deal with someone that gives them security. You know, bricks and clicks.

Catch Of The Day posts a new product at midday each day for a bargain price that lasts 24 hours or until it’s sold out. Have you changed any part of that strategy? What’s your observation on what works, what doesn’t?

Actually we have not.

So how many registered members do you have now?

We’ve got over 200,000.

How often do they come?

Every day. The concept of Catch Of The Day is quite addictive. Thousands of members will visit the site on any given minute of the day to view the day’s special offering. Which in turn really converts into thousands of daily orders.

Now last time we talked you were going to go into bricks and mortar opening a clearance shop in Clayton. Did that happen?

Yeah absolutely, the shop opened in November 2007.

Are more going to follow?

Absolutely not. We certainly not going to get into retail in any big way. Our future is certainly in the internet. Retail for us is the building that we are operating from, which is 4000 square metres. We had the opportunity and the space to open a retail outlet, which we use as clearance outlet.

What’s your biggest challenge going forward?

Making sure everything works properly from the website to customer service etcetera. I don’t see many external factors affecting the way we operate. And that includes the economy.

Our strongest asset is really in the buying and the relationship with the buyers and the suppliers. In a way, the drop in the dollar hasn’t had any impact on us. As long as we keep giving them unbelievable deals they will come back. They definitely will.

While you’ve got a lot of very happy punters out there, there’s always the occasional grumpy person that didn’t get what they expect. How do you deal with that negative criticism when it comes up in a forum?

The nature of customers is that you’ll sell 100 items and 99% of the customers will be happy, but we certainly don’t expect congratulatory email. The one person that is unhappy, and these people will always be out there whether it’s our fault or postage or any other reason, you just have to deal with. Look we’re very, very flexible in regards to refunds. We understand our customers. If someone’s unhappy, they know that someone is here to help them. But there’s no easy solution there.

You’ve funded all the growth yourselves. Are you looking to take any money in or are you profitable and don’t need capital?

We don’t need any capital. If someone wants to talk we’re willing to listen, but we’re certainly not pursuing anything. We’re still young and we enjoy the everyday running of the business.

Can you talk to us about the trends you’re seeing online and how people are changing their habits of buying?

That’s a tough one. By the amount of products or the type of products that we sell, we try to appeal to every single person out there. We try to appeal to the young and the old. We certainly appeal to females as well as males.

Looking at our membership I can tell you that our membership is very much like the Australian population, a lot are based in Melbourne and Sydney. So as far as I can see, everyone shops online and we try and get as many of them as possible to get to know about us as quickly as possible.

So there’s no real group that doesn’t shop online, that hasn’t adapted yet?

It’s very hard to tell. We honestly don’t have the statistics, we don’t have the age of our customers. I can certainly tell by the amount of products that we sell, that everything sells. Whether it’s something that appeals to the older generation or something that appeals to kids if the deal is great, we have the customers that are willing to buy the items in large numbers.

How do you see your site changing? You said you haven’t changed it much since the start.

At the moment we don’t have any reason to change a winning formula. We’re generally very innovative and we keep thinking of various ways of selling items in large numbers or selling items in different ways.

We’ve seen a few of the lower priced retail stores go into receivership. Is that partly because of online taking off so much?

We can name quite a few companies that went out of business last week. All I can tell you is we are quite positive. The way that Catch Of The Day operates is we specialise in buying other people’s mistakes. We specialise in buying large volumes and you’ll have to agree with me that the tougher it’s going to get, the more great deals we are going to receive, and that means our offers to the consumer will get better.

A recession-proof business.

I suppose I have to agree with you.

Suppliers do like dealing with us for a number of reasons. We sell the item within a very short time so we don’t affect the market for a long period. We pretty much insist on pre-payment. We pay the supplier before the goods have been shipped. And with the economy going the way that it is, it’s a great security for them.

What’s the biggest mistake you’ve made growing your business so far?

I would say staff and the systems including software, warehousing, etcetera.

Do you see better opportunities to hire staff now that there’s probably more talent out there?

Absolutely, I mean a lot of people are in the situation of losing their jobs these days, so I’m guessing there’s a lot of great talent out there in the market.