sourced from NZ Herald
by Peter Griffin
10 February 2006
For an internet start-up with the hefty financial backing of Telecom, it’s been a fairly unspectacular debut.
Online retailer Ferrit.co.nz seems to have won more publicity for paying off the owners of the web domain Ferrit.com, which hosted pornography, than it has for its new online shopping service. Kiwi web surfers have paid relatively slight attention to the site’s arrival.
According to data from web monitor Nielsen//NetRatings, through most of January daily unique visits to Ferrit have been floating between 2000 and 3000.
That’s a lot of eyeballs but consider this: on January 19, a fairly ordinary day in the world of e-commerce, Ferrit, the new kid on the block, attracted 2500 unique visitors; well-established online auction site Trade Me attracted 284,000.
“We all use Trade Me,” says Peter Wogan, the marketing head of the Ferrit team that was formed last July and given $15 million to kick Telecom into e-tailing.
Wogan mentions Trade Me among a handful of New Zealand sites he respects and doesn’t want to go up against. While visitors are crucial to Ferrit’s business model, he says website traffic rankings come third in its measures of success. Still, he has a target in mind for visitor numbers, wanting 250,000 to 300,000 unique visits to the site by mid-year, with plenty of repeat visitors.
“If we do that, we’ll have built a good sustainable business,” he says.
The goals in phase one of Ferrit’s life are modest, with expanding the number of retailers and products searchable on the site as the main priority. So far 170 merchants have joined Ferrit and 300 more have expressed interest, Wogan says.
Sales queries are automatically referred to a retailer’s website, but by the middle of the year, the start of phase two, purchases will be made through Ferrit directly making it a real e-commerce operator.
Overseas trends show Ferrit’s timing may be right, with 2005 being a watershed year for online sales. In Britain, 24 million consumers spent £5 billion ($13 billion) online in the 10 weeks before Christmas.
In the more mature US market, people bought online in record numbers. Between November 1 and December 21 online retail sales reached $US17 billion, up 24 per cent from a year earlier.
But are New Zealanders as ready to shop online?
“The need and desire is there,” says Wogan. “Kiwis who have been travelling and seen shopping online overseas – they’re frustrated that the experience isn’t available here.”
He’s talking about the likes of Amazon.com, which sells everything from books and CDs to electronic gadgets and jewellery. Only the books and CDs can be shipped here and while you’ll have to wait up to two weeks for them to arrive, the high Kiwi dollar has made online purchases competitive.
New Zealand’s answer to Amazon, the e-tailer Flying Pig, was abandoned in November 2001 following a tumultuous and short life nurtured during the dotcom boom.
Its demise seemed to poison the e-commerce model here, with no one willing to put serious money into e-tailing ventures.
Individual retailers have built their own online operations, but there hasn’t been a major online marketplace for new goods – until the arrival of Ferrit.
But even it is taking a much more cautious approach to that of Amazon or Flying Pig.
“We’re not going to warehouse our own stock. We’re not trying to replace bricks and mortar-style stores. Without the retailers, we are nothing.”
Wogan knows all too well that Ferrit will attract thousands of users who research their purchases on the site but do their buying on the high street and in malls. “Eighty to 85 per cent of people going online are using it for information, comparisons and searching,” he says.
Wogan points to one of many early customer stories – a tech junkie who through Ferrit found $5000 worth of electronics then went into a Noel Leeming store and ended up buying $8000 worth of gear. Ferrit extracts nothing from such sales.
“Even in the US, for every dollar spent online, six dollars are spent in- store,” he says.
For those online sales generated through Ferrit, it derives revenue.
“We take a margin on the transaction but we’ll only do that when we’ve proven value to the [retailer’s] brand.”
While Amazon has tended to act as an online clearing house for retailers and publishers who use extensive discounting to attract online buyers, Ferrit customers cannot look forward to lower prices across the board.
“That’s some way off,” Wogan says. “What retailers and ourselves and customers are looking for needs to be seen in context.”
Instead, some Ferrit merchants tempt buyers with free national shipping of goods. There will be online specials during the annual selling hotspots, Wogan says, but no wholesale discounting online.
“We’ll not try to take on things that have been done extremely well.”
That rules out online events and travel ticketing, which the likes of Ticketek, Air New Zealand and Qantas already do.
It would also rule out auctions for second-hand goods, where Trade Me reigns supreme. Not all retailers are welcome on Ferrit.
“We’re not interested in parallel importers. We’re not interested in products that can’t be supported here and backed up.”
The retailers that do join Ferrit will be compared to each other as online shoppers search for the best price.
“Not all retailers want to be put in that position,” Wogan admits.