Invasion of the big brands

Despite the doom and gloom in the retail sector, there’s been a plethora of large, overseas brands enter the Australian market recently.

Spanish fashion retailer Zara recently opened its first store in Sydney’s Pitt Street Mall, followed by a Melbourne offering. UK brand Topshop is rumoured to be following suit, while in the online space British retail success story Asos is also heading Down Under.

Then there’s La Senza in the lingerie market, Airbnb in the budget accommodation market and Petals Network in the flower delivery market.

So what does this all mean for Aussie start-ups? How can they compete with this overseas invasion effectively and, perhaps more importantly, differentiate their offering?

Gabby Leibovich, founder of hugely successful home grown group buying businesses Catch of The Day and Scoopon says the entrance of overseas competitors including Living Social doesn’t phase him.

“We welcome competition, and if it means a better outcome for the consumer, even better,” he says.

“But I do feel any new entrant to the market – no matter how much clout they may have globally – will struggle to build their position for the simple reason that the sector is already very crowded.”

“Australia’s group buying sector would have to be one of the most competitive markets in the world and there is bound to be an element of consolidation as it gets harder to source deals and to have a point of difference.”

Scoopon currently leads the Australian group buying sector, with 20.5% of revenue in this market, and Leibovich says he intends to build on this leadership position in the coming months with a number of new initiatives.

“Our goal is to make Scoopon a household name, synonymous with great experiences and savings.”

“That means expanding into new categories and larger value deals, along with bringing Australia’s best deals to more customers in more locations.”

An example is the business’s recent move into airfares and travel. Leibovich says this will enable him to reach new customer segments that traditionally may not have shopped on group buying sites, as will his investment in new technologies to support mobile commerce.

“But our competitive strength lies in our ability to source the best deals in Australia.”

“So a big part of our focus will be continuing to build our business-to-business partnerships and strengthening ties with high quality businesses to ensure we continue to deliver the best deals every day.”

Leibovich says he’s unconcerned about competitor businesses having large marketing budgets.

“Our success is proof marketing budgets do not matter in this space,” he says.

“We have grown from the ground up, one deal at a time. We have never spent any funds on marketing. We find nothing accelerates growth faster than placing a great deal on the site and letting our members talk about it.”

“Word-of-mouth is a very powerful tool. While hefty marketing budgets can build site traffic and sign ups with click through promotions and incentives, it does not guarantee transactions.

“Collectively the group has over one million registered members and sells one deal every four seconds, 24 hours a day, seven days a week.”

“That is why we lead the market on revenue, people don’t just visit our site, they transact and bring their friends along too.”

Nikki Durkin, founder of 99dresses, a site where users upload their unwanted clothes to sell for a virtual currency called buttons, which they can then spend on other users’ unwanted clothes, says her biggest overseas competition comes from eBay.

She says the key to differentiating what she does from what eBay offers is appealing to “a different market segment such as women who don’t want to deal with the hassles of eBay, or don’t have designer clothes to sell.”

“Fast fashion changes hands frequently and smoothly on 99dresses in a community-driven environment, whereas on eBay this would be hard to do because it has gotten so big that the user experience and community have suffered.”

“We’ve innovated to stay alive, and a big overseas player like eBay isn’t going to be able to implement some of the innovations that we’ve built into our product. That’s our competitive advantage.”

For example, the business removes the background from every photo, which gives women the experience of shopping for new fashion but with second-hand clothes instead.

“We also have a focus on presentation and simplicity in the upload process and on the site in general,” says Durkin.

Durkin sees positives in the entry of fashion retailers such as Zara into the Australian market.