Online retail group MySale has snapped up three competing deal sites belonging to Grays eCommerce Group in a bid to strengthen its position in the Australian market.
The $5.2 million acquisition will see OO.com.au, dealsdirect.com.au and topbuy.com.au come into the MySale fold.
Contracts for the deal are expected to be exchanged in November, with the transaction expected to close in January 2016.
Chief executive of MySale Group, Carl Jackson, said in a statement the acquisition will boost MySale’s potential active customer base.
The three acquired websites have around 3 million average monthly users between them, along with an email database of 6.5 million customers.
Only 50,000 unique active customers from the three websites overlap with MySale’s deal-hungry users.
“This is a great opportunity to substantially grow our active unique customer base in Australia and fits with our strategy of widening our online proposition to leverage our existing assets,” Jackson said.
“The sites being acquired are all well-recognised brands in their own right, with a female-weighted customer base. There is very little overlap with our existing member base, so there is also a good opportunity to cross-sell our core fashion offering.”
MySale has flash-sale websites in Australia, New Zealand, Asia and the United Kingdom that specialise in clothing, health, beauty products and homewares.
The business was founded in 2007 but today has more than 800,000 active members across its websites, which include brands such as Ozsale.
MySale recorded company-wide revenue of $235.9 million last financial year, however operated at a $11.2 million loss.
The online retail group aims to return to profitability by the end of this year.
Brain Walker, retail expert and chief executive of the Retail Doctor Group, told SmartCompany it is clear MySale is looking to grow through acquisitions given that online retail can be a tough business.
“The overwhelming evidence is that pure-play, niche online retailers can really only grow through acquisitions,” Walker says.
“Online retailing is not an easy business at all and in many cases it’s more expensive to run than a normal, physical store. You find increasingly cost of returns, freight, distribution and stuff like that are very large relative to revenue.
“The other issue with online is over 80% of consumers pre-research online for bigger ticket items. But the conversion to sales is about 3 to 4% generally speaking.”
Walker says because of these statistics, online retailers have to be a “volume player” if they want to scale.
In addition, he points out that people are increasingly recognising the value of the databases that online retailers have at their disposal.
“Increasingly, if you think about the sale of these businesses, it’s much less about operating returns in the short-term and more about desired future value and the asset of the database,” Walker says.
First published on SmartCompany on 21/10/15