With this year’s financial reporting season nearly over, it is now clear the best performing companies are operating online, with many traditional retail and services businesses being left behind.
Following a number of disappointing results from companies across all industries including JB Hi-Fi, Foster’s and Woolworths, digital companies like Seek and WebJet have been able to produce solid financials due to a focus on bargains and customer-driven research.
In an environment filled with discounts and deals, customers are more likely to thoroughly research a product before they buy. The most successful online companies are offering customers the ability to investigate and find the best deals available, through the use of simple, well designed websites and a variety of features.
Online retail is still a maturing market, especially in Australia, but there is no escaping the success of these web-savvy companies.
A strong focus on social media allows them to spread the word quickly, and the lack of a storefront means fewer overheads and cheaper prices. Many are also using iPhone apps to market themselves and offer the same service on mobiles.
Kogan Tech chief executive Ruslan Kogan says online companies are able to provide better prices and services than bricks and mortar stores, simply because of their emphasis on word-of-mouth and viral marketing.
“Digital companies are recording growth month-on-month, and operating online is even safer than in a retail store. The most efficient businesses are online businesses, and they are leading the price war.”
“Online services can simply offer better services, better prices and better systems of purchase. They can track purchases quicker and easier, and are simply more efficient. That’s why customers keep going back.”
Judging by these results, Kogan isn’t far off the mark. Here are four of the fastest-growing online companies in Australia.
Last year CarSales floated on the ASX in one of the most successful listings of the year, and the company’s results have only continued to improve with full year EBITDA up 48% to $64.5 million, and net profit after tax up 41% to $43.2 million.
CarSales has a slew of sites under its belt, including BoatSales, HomeSales and CarPoint.com.au, but it is the company’s core product that is at the heart of its success.
Pursuing technology is also a big focus for CarSales. Its iPhone and iPad app has recorded over 400,000 downloads, and it spends a lot of time and money on aggressive SEO techniques to make sure it stays at the top of Google.
CarSales holds a dominant position and maintains it through an emphasis on following digital trends – social media, mobile applications and online advertising all focussed on bargains and deals.
Seek has been able to capitalise on the improving job market over the last year, but it has also grown as more and more employers begin to migrate from print advertising to online. The company’s net profit after tax grew by an impressive 62% to $55.3 million.
According to this year’s ANZ job series data, internet advertising outstrips print classifieds by far. While newspaper ads grew by 1.2% in July, with a yearly growth rate of 14.5%, internet ads grew by 1.3% in July with a yearly growth rate of 37.6%.
The company pins its success on the solid job market, with unemployment now at just 5.3%. And with analysts predict a full-blown skills shortage over the next few years, Seek will continue to grow as more advertisers migrate online.
An expansion into overseas markets, including an investment in one of the most popular jobs classifieds websites in Mexico, have also kept the company exposed to some emerging markets.
The message is clear – job advertisements are now a digital business.
The property market was undoubtedly one of the best performing industries in the downturn, with first time buyers flooding the market to take advantage of the Government’s stimulus. As a result, REA has managed to record EBITDA growth of 40% to $77 million.
Like CarSales, RealEstate.com.au offers customers a comprehensive search function that allows users to either narrow or broaden a search as much as they want, and with more property-hunters searching for a bargain, that option is crucial.
But faced with that surge in popularity, REA has focused on improving its website. It increased loading times and mad sure its most popular features were boldly designed and easy to use.
The company brags that it only requires one click to find search results, it loads 23% faster than its competitor and that as a result, users spend 52% more time on REA.
A slew of new features including the “find an agent” section, agent office profiles, a completely new redesign layout, suburb profile pages and property hubs with information including videos and pictures, have also helped REA increase its unique browsers by 29% year-on-year for June.
And like several online businesses, a large emphasis on social media and the company’s iPhone app has helped REA stay in the spotlight.
The airline industry has taken a beating over the past 18 months, but WebJet posted a 37% increase in net profit after tax to $10.5 million last month due to a strategic business model which relies on a service fee, rather than taking a cut of ticket prices.
Chief executive David Clarke told SmartCompany last month that even though prices have plummeted, the company’s service-based revenue model allows it to grow due to an increase in bargain hunting.
And with the growth in discount airline tickets, particularly those offered by companies like Virgin Blue and Jetstar, Clarke says the company has been able to target those customers doing as much research as they can looking for a cheap getaway.
“There is a sensitivity in the general consumer market, so we are being cautious in that regard, but downward prices are very good for us because consumers are hunting for those bargains,” he said at the time.
Like other successful online retailers, WebJet is all about research and choice. With customers hungry for cheap deals, the company stands to make money no matter how low airline ticket prices drop.
With the launch of its iPhone app and a heavy marketing push online, airline discounts can only be a good thing for WebJet.
August 24, 2010