Harvey Norman & JB Hi Fi Under Threat As Packer Moves Into Online Retail

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Mass retailers selling appliances, computers and consumer electronic goods are set to face new competition after James Packer and one of the world’s largest hedge funds backed new online operations that are set to strip business away from traditional retailers.

Compounding this move Federal Treasury has dismissed claims by Gerry Harvey, that the GST exemptions for imports under $1,000, has played any meaningful role in hurting the business of mass retailers.

Treasury has also accused the retailers, which include the likes of The Good Guys, Harvey Norman, JB Hi Fi and Bing Lee, of not passing on savings to consumers gained from high exchange rates.

Last week an investment consortium including Tiger Global Management, Packer’s Consolidated Press Holdings, Seek chief executive, Andrew Bassat, and boutique investment group, Gannet Capital, revealed that they had tipped over $200M into online operations CatchOfTheDay, which operates online retail sites CatchOfTheDay.com.au and Scoopon. com.au.

The consortium will take a 40 per cent stake in CatchOfTheDay, an organisation that identifies online deals for consumers.

CatchOfTheDay founders, Melbourne entrepreneurs Gabby and Hezi Leibovich, will retain a controlling stake in the group businesses.

“We want to give the Leibovich brothers the backing to support new technology investments, expand the company through acquisitions and run media and advertising campaigns to make CatchOfTheDay and Scoopon both household names,” Packer told The Australian newspaper.

The investment, the first by Packer’s private company in the booming online retail sector, follows similar investments by hedge fund group Ellerston Capital, Kerry Stokes’ Seven West Media Group and the CVC-backed Nine Entertainment, the Australian said.

Last year Yahoo7, the digital joint venture owned by Seven West Media and the US internet giant, bought daily deal website Spreets. Seven is also believed to have looked at CatchOfTheDay.

 

The acquisition followed Nine Entertainment’s purchase of rival site Cudo.

Both the Seven and Nine Networks are set to be used to run daily advertising promotions designed to drive people to online web sites to buy, an executive close to the recent acquisitions said.

“This will put pressure on retailers who are paying for prime time advertising space,” said the executive.

Deal-a-day websites based on US giant Groupon have been growing in popularity worldwide. The sites offer one highly discounted deal, product or service daily to subscribers.

“We are one of the companies that are recession proof,” Gabby Leibovich told The Australian in an exclusive interview.

“We go extremely well when the dollar is up, we do extremely well when the dollar is down. We do great in good times and in bad times. Suppliers are always looking to move stock.

“From the outset we decided we were going to be the cheapest and nothing else.

“At the end of the day, we are discounters, we sell items in very large volumes and it seems to be working.”

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