THE STORY OF DEALSDIRECT – AUSTRALIA’S PIONEER ONLINE RETAILER
I launched DealsDirect in October 2004, with a handful of hardy customers and a bit of money squeezed from an earlier online auction venture with eBay. Within five short years, this pioneer online retail brand had revenues heading briskly towards $100 million dollars per annum, from a standing start - along the way serving millions of Australian shoppers and pioneering a new kind of retail. This new retail landscape was one where customers weren’t expected to come to our shop; rather we took our shop to them.
As a migrant to Australia in the late ‘90s, I was living the Australian dream. The ‘ride’ I took with DealsDirect can be explored down any number of metaphorical roads – a mirror to Australia’s own online journey, indeed the coming of age of the World Wide Web itself. But I prefer to see it as its own story – unique and with enough rollercoasters to fill a respectable theme park!
In 2010, as I turned fifty, I was the proud and unexpected recipient of an inaugural Retail Industry Recognition award and found myself being anointed at the event as the ‘Grandfather of Online Retail’ in Australia! At the time, my first thought was “ouch!”. It seemed to acknowledge a ‘changing of the guard’ in the industry, something up till then I had struggled to come to terms with, but now suddenly saw clearly. From that point, my journey with DealsDirect evolved quickly to include a capital partnership with Ellerston Capital in 2011, and in late 2012, my own cravings for something new – exiting the business to launch another startup. A new kind of startup, NORA – once more paving the way in Australia’s ‘New Retail’ landscape.
DealsDirect listed on the ASX on the 29th January, 2014 (my birthday!); a reverse listing under the MNEMON MNZ shell. The beginning of a new and exciting journey for this pioneer Aussie retail brand. And I guess that’s why it made sense to write this now – the natural point in the timeline where one story ends and another begins. Despite not being a part of this new chapter, I will still be cheering her on from the sidelines – much as a boat builder waves his ship ‘bon voyage’ and a safe journey on uncharted waters ahead. Sometimes the winds are in your favour, sometimes storms rage. That’s business.
I seek to combine a few elements with this book. Firstly, the story. It’s a good one. Personally, I find entrepreneurial journeys a joy to read and it’s a privilege to share mine – with all its thrills and inevitable spills! Secondly, I also hope to illustrate real lessons, summary ‘take aways’ for fellow or aspiring entrepreneurs in this brave new technology-led world, from both my wins and misses. Lastly, as with most authors, a bit of self-discovery. “When you fight yourself to discover the real you, there is only one winner.” Too true. Overarching all of this is my hope that my story encourages entrepreneurship. If just one person is inspired to follow their business dreams, then for me, this book would have been a success.
I have written in chronological sequence, along the way referencing a selection of interesting and talented people who were vital to the journey. I have not been able to include everyone, but you know who you are. I can only hope those in this narrative find my assessment of the events and times accurate; indeed reality can be subjective.
Of course, this story,does not just reference DealsDirect, but indeed a fascinating time in retail. What some call the greatest structural shift in Australian retail, ever. I feel privileged simply to tell the story as I saw it. After all, this ‘grandfather’ was there from the very beginning…
My sons Jacob and Max
All those early pioneers of DealsDirect – Team, Suppliers, Service providers, board…you know who you are.
Jeff Bezos – the founder of Amazon.com
“What are these?”, the burly Afrikaans customs officer asked me in an accusing tone, pointing to a stack of guitar cases neatly lined up inside our 20-foot shipping container. My heart was in my throat. It was 1997; foreign exchange control was still a well-monitored policy in South Africa, and as my container was about to be loaded in Cape Town, I was called dockside to ‘please explain’.
The rules were simple. At the time, if you emigrated from South Africa, you could only take the equivalent of around $20,000 with you. Not much to start a family and a new life in Sydney. I was 37. We had sold our house and cashed in our Super. Like any focused and hardworking professionals, my partner Lisa and I had accumulated a bit of net worth, but there was nothing we could do with it. Sure, you could leave to start a new life, but your money had to stay. Great.
“Just a few old guitars,” I stammered nervously. “I play them all,” I added hopefully, hardly relevant. The customs officer eyed me suspiciously and started opening the cases to inspect. Perhaps he was expecting to uncover a stash of hidden guns like he’d seen in that new Antonio Banderas film. In fact, they were indeed just ‘old guitars’. He could be the biggest Antonio Banderas fan on the planet – but right now I just had to hope he wasn’t a guitar enthusiast.
You see, the golden decades of American guitar making were the 1950s and 1960s, led by brands like Fender, Gibson, Gretsch, Rickenbacker. And that morning on the docks in Cape Town, I had a few fine examples of each. I had collected them over the years, and to the uninitiated, they simply looked like a few dinged up, well-worn and faded instruments. After all, some were over forty years old, older than my own dinged up, well-worn and faded self! But to the passionate and hardy band of guitar collectors around the globe, this was a most presentable and valuable stash indeed.
Time stopped for a moment. Just me, him, and some of the finest instruments made for the rock n roll era. A bunch of old guitars. Finally, the customs officer looked up, speaking in his broken English. “You know you can take some personal effects with you to Australia, but you can’t take anything worth a lot of money.” I nodded. He went on. “Well these old guitars look stuffed up to me, so they can’t be worth much. If they were new,” he waggled his finger, “I would have confiscated them all, so you’re lucky.” As he closed the door on the container he looked at me directly in the eye. “Teach those Aussies to play rugby.”
I walked down the wharf. I didn’t look back. Sydney here I come.
One of the real opportunities of moving to a new country is the priceless opportunity to reinvent one’s self, personally and professionally. For me, above all, I was excited to be starting a new life in Australia, and taking on a new journey. My career prior to my move had been varied. A mosaic career. Initially in the human sciences, I had studied psychology at the University of Cape Town and postgraduate studies at the University of Stellenbosch. Once my studies had been completed, I had been conscripted to the army, the Psychological Services of the Medical Corps. No choice. Well, there was, two years military conscription or three years jail. Choose.
I had no appetite or interest in the clinical aspect of psychology, but was more interested in organisational psychology and industrial relations. I worked with psychometrics and the testing and selection of pilots for the South African Air Force at the Military Psychological Institute outside Pretoria. After completing military service, I worked in organisational development for South Africa’s largest life insurer. But during a sabbatical, I stumbled across an intriguing industry. A family auctioneering business. Small but lucrative, it was a dynamic environment, ever changing. A kind of retail, a dynamic retail, where prices were driven by supply and demand. I loved it. I woke up one morning to find myself the sole owner of the business, the CEO. I was in my late twenties and I had discovered my true calling. I was an entrepreneur. I would never apply for a job again.
I left South Africa as an entrepreneur, and planned to recommence that journey in Australia. I had heard the Australian market was a tough one for entrepreneurship. High costs, highly competitive, well suited to those with networks, and capital intensive. But I was upbeat and arrived in Sydney with an open mind. “The easiest way to make a small fortune in Sydney is to start with a big one,” said a jaded looking bloke, from Johannesburg, whom I got chatting to in a pub in the Rocks, soon after arriving. But I was undeterred.
I didn’t have a plan, but I did know that I had two commercial interests. One was auctioneering; the other was vintage guitars. I had been thinking about taking a break from the auction game, but as a matter of course, applied to join the Australian Institute of Auctioneers as a way to network and explore potential opportunities. Armed with a heap of references from South Africa (I had been a founding member of the South African Institute of Auctioneers), I went out to meet the membership panel in Bankstown. “Your application has been declined,” said Reg White, the then head of the Institute. I shook my head in disbelief – I had assumed I was a shoe-in. “Can you provide a reason?” I asked Reg and the panel. “In terms of our constitution, we are not required to provide reasons,” was the answer back. It was then that I realised one simple truth. I was thirty-seven, in a new country, and yes, I had to start again. And it wasn’t going to be easy.
With Reg’s reasonless words still ringing in my ears, I found myself gravitating to the golden mile of guitar shops – Annandale in Sydney’s inner west. A musical mecca. Guitar collecting and playing was a hobby of mine many decades old, so I was thrilled to come across the ultimate emporium for guitar collector enthusiasts – Jacksons Rare Guitars, run by the ever-welcoming Steve Jackson and Mark Evans (bass guitar player in the early years of AC/DC). I had found my spiritual home! When my container of guitars from Africa arrived, thankfully without problems or delay, we were soon opening up the guitar cases like school kids huddled around a bag of lollies. Again I thanked my lucky stars none of my new friends had ever considered a career in Customs inspecting!
Sydney also introduced me to a new passion. Coffee. Of course, Australia is known around the world for its coffee culture, but South Africa at that time was not even on the caffeine radar. And so I savoured my new discoveries – latte, cappuccino, espresso, macchiato. I drank up the ritual as fast as the cups themselves: the aroma, the sound of the grinder, the golden crema, the whirr of the steamed milk, the ingenious latte art from talented baristas with their casual mastery. I was in coffee heaven! One day, whilst sitting in Jackson’s, playing an old Fender Strat, I mentioned to Steve and Mark that I would love a coffee. “Hmmm, just Macca’s on the next corner,” said Mark, ”and that’s pretty crap, or you’d need to head up to Norton Street in Leichardt.” My mind whirred. A niche had just presented itself. Why not combine a quality café with my vintage guitar collection? It would surely be a success! And so began my first commercial failure in Australia.
As it happened, a rundown milk bar a few doors down from Jackson’s was available, and with little thought, I got down to business. I rolled up my sleeves, working with some great tradies, giving the place a makeover, learning how to pull a coffee, getting beautiful wooden cases made to hang my guitars. Coffee and guitars! It was truly an ‘unsinkable’ idea.
“Sounds like a Hard Rock Café,” said the local ANZ Bank manager up at Petersham. I cringed. “No no,” I protested. “It’s a place for serious guitar enthusiasts to meet, drink coffee, order light meals and discuss their passion.” It hadn’t sounded quite that pretentious inside my head. He looked at me with a slow gaze. Finally he said, “we can give you a small overdraft, but we don’t generally like the risk around coffee shops.” Encouraging sign. “And Parramatta Road doesn’t have parking, that’s why there are so few cafes along it.” Hmmm, fair point actually. He looked at me quizzically. “Have you read the business book “The E-Myth” by Michael Gerber? “? I had not. “Well, it basically explains how small business people make the common mistake of turning their hobby into a business. It invariably fails.” I left the bank with a small overdraft, but also a nagging feeling that I should have read the book. That feeling proved to be correct.
The café opened, and despite initial interest by the vintage guitar fraternity, it soon became just another coffee shop on a street with lots of traffic and no parking. There were some very fond memories though from that time. For example, upon being introduced to Slim Dusty in the cafe, I proceeded to ask him, in true migrant fashion, what he did for a living! Or chasing a few young kids away who’d been leaning on my car behind the café. How was I meant to know they were Silverchair? Chatting across the coffee machine with Tim Rodgers of You Am I or Mark Lizotte (Diesel). The list goes on. Great musicians, lovely blokes. But it was clear that my passion for vintage guitars and the café society were not gelling. After about six months I had made up my mind.
Lisa had migrated with me from South Africa for our bold new life together in Australia. She was by now used to my big ideas usually followed by less than big execution, so what I had to say that evening probably didn’t come as a great surprise. “I’m closing the Vintage Guitar Cafe and handing the lease over to a guy who sells vinyl records” I announced to Lisa. She looked at me, bemused, for she had an announcement of her own. “ I’m pregnant” was all she said.
My first son Jacob was born in April 1998, and if anything was going to make me ‘get real’, becoming a new parent provided fresh motivation to provide – a newborn urgency in my step. I had finally managed to secure auctioneer status, and was pretty good at it, making a bit of pin money doing auctions for other companies. But the money I made as a ‘hired-auction-gun’ was not going to cut it in Sydney, with a young family. Hired guns turned my thoughts back to those guitar cases… You guessed it. It was time to start selling some of my vintage guitars.
“If you consign it, I think we can clear you $5000 for this late 1960 Fender Telecaster,” Steve Jackson explained. “But if you want a cheque now,” he went on, “the best I can do is thirty five hundred.” I grimaced. She was a beauty. “I need the cheque Steve, thanks.” I had sold Steve quite a few of my instruments, at prices, whilst respectable, were on the lower end of my expectations of value. And while his mark ups were high, the sales cycle was very slow and I would often see my guitars in his window for six months or more. Eventually, I still had a few, and still needed the money, but felt intuitively there had to be a better way to get a better return. I had heard that Australians used to take a good vintage guitar to London or New York and the profit could pay for a decent holiday. Collecting vintage guitars was clearly a global interest, but I felt isolated. The market in Sydney was deeply local. In fact, Steve Jackson was the market.
“Have you heard of a website site called eBay?” asked Mark Meallin, a music shop owner I had become friends with on the Parramatta Road strip. It was late 1998 and I had moved into a small office above my ‘ex’ coffee shop in Annandale, trying to work out my next move. Like many Australians, I had signed up for my first modem, complete with its alien-like dial up sounds and blistering 56.6k/sec speeds, ‘logging on’ and ‘surfing the net’ as some were calling it. But my online dabbling to date was cursory at best and I hadn’t heard of eBay. Mark continued. “Mate, Ebay is an internet auction business. You’re an auctioneer, you should get into it!” I was skeptical. Auctioneers needed to call an auction, in a physical environment, whether from the grand podiums of Sotheby’s or the back of a ute at a stock & station auction. Online? Pffft. An auction was an event. A physical real world event, where theatre, entertainment and business drove the process. But then he said something else.
“ I heard a bloke took a guitar out of Jacksons Rare Guitars, it had been there for a year, and stuck it on eBay, sold it three days later for double the money Jacksons was asking, to a buyer in Dallas” said Mark enthusiastically. I went to my computer and dialed up Ebay, the squawking, whistling, beeping and boinging modem connecting my to the world out there beyond Parramatta Road. Alta Vista pointed me towards eBay, where I spent fifteen minutes surfing the site. Transfixed. I got it. Quickly.
It’s a strange sensation looking at one’s own future. An eerie calm. For despite having been a pretty good auctioneer, my real interest had never lain in that part of the business, but rather the economic mechanisms that drove supply and demand marketplaces. And here it was. A new worldwide trend that was tapping me on the shoulder. It took me less time than it takes to make a decent cup of coffee (or a bad one, for that matter) to ‘get’ what eBay was all about – what it represented. And at that moment I began to get, there and then, that small failures are the stepping stones to success. All my apparent random dabbling in vintage guitars, auctions and coffee shops had converged in quite a remarkable way.
I was on my way.
DIRECT LESSON #1: FAILING FORWARD
In Silicon Valley, they have coined an important term: “Failing Forward”. John Maxwell has also written a great book with this title. In essence, the concept has its origins in the view that small failures are indeed the stepping stones to success. The failing “forward” mantra implies that as long as one learns from their mistakes, than failing is more than just a sound strategy, it is essential, an imperative for this brave new technology-led world we live in.
In this new retail we must all learn by doing. No longer is business a linear journey with clear milestones along the way. Rather, it is a winding road, with lots of S bends, U-turns, and even dead ends and blind alleys. This mantra is forcing us to redefine our definition of failure. Too often, it is seen as a shameful loss, a loss of face, a loss of opportunity. Great entrepreneurs understand it is fact quite the opposite. Jeff Bezos, the founder of Amazon.com, puts it more succinctly than I ever could: “Any business plan won't survive its first encounter with reality. The reality will always be different. It will never be the plan." And if you think that’s good, I think he really nails it with this: “If you decide that you’re going to do only the things you know are going to work, you’re going to leave a lot of opportunity on the table. Companies are rarely criticized for the things that they failed to try. But they are, many times, criticized for things they tried and failed at.” I love you Jeff!