Source : THE AGE NEWS
It’s taken five years but Wesfarmers boss Rob Scott has raised the white flag on the company’s expensive retail experiment which involved forking out $230 million to a couple of charmed entrepreneurs for online marketplace Catch.com.au.
In a case of buyer’s remorse but sellers’ delight, the Catch founders Gabby Leibovich and Hezi Leibovich walked away even wealthier while Wesfarmers struggled to post any profit from the online marketplace operator, sustaining years of losses.
Wesfarmers chief executive Rob Scott
So Wesfarmers has taken the decision to shut down Catch – and have its department store chain Kmart pick up the infrastructure scraps, including warehousing. It will no longer operate as a standalone marketplace, but it will be a painful memory of a strategic mistake.
Catch, which Wesfarmers bought in 2019, was supposed to inject expertise and a growth culture into the West Australian conglomerate’s retail brands.
Fast forward to 2025, and Catch is expected to report an operating loss of up to $40 million in the first half of the 2025 financial year, while Wesfarmers will report one-off costs of $50 million to $60 million associated with the Catch exit.
Wesfarmers may have garnered intelligence on what it didn’t know about online retailing. More likely, Scott learned how tough it is to operate in a highly competitive marketplace, where its brand isn’t the major player and its rivals like Amazon wrote the book on how to operate in this market and newer competitors like Chinese-owned Temu are gaining traction.
Wesfarmers’ traditional brands like Bunnings, Officeworks and even Kmart have dominant positions in their respective sectors. They call the shots while smaller competitors struggle.
The Catch foray is also a fascinating study in how traditional businesses respond to the threat of technology-based disruption.
Buying a company with expertise seemed like a good idea at the time – even if the eye-watering price tag challenged Wesfarmers’ renowned credentials as hard-headed asset trader and protector of shareholder funds.
Pure online marketplace retail operators like Catch, Amazon and Kogan were a clear and present threat to brick-and-mortar groups and acquiring the enemy appeared to be a good way to learn their tricks.
The Commonwealth Bank employed a similar strategy when it took a stake in Swedish-created buy-now-pay-later (BNPL) operator Klarna. But with the BNPL company planning to float this year, CBA’s involvement looks like becoming a more profitable fairytale foray.
Wesfarmers’ acquisition of the more entrepreneurial Catch also followed the clichéd pattern of smaller company culture being drowned by larger bureaucratic organisations.
It is easy to see why in 2019 Catch looked enticing for Wesfarmers. The online marketplace’s founders had been adept at both logistics and buying and selling online operations, and had already amassed tens of millions of dollars by doing so.
And Wesfarmers was keen to discover the secret sauce and fresh from divesting Coles, was flush with funds.
Not even COVID, which turbo-charged most online retailers, was enough to stem the losses that Catch was reporting.
In the 2022 financial year Catch turned in an $88 million loss including a $44 million loss for July to December. In the 2023 financial year it made a $163 million loss, and then it reported a $96 million loss last financial year.
Thus, there won’t be too many tears from Wesfarmers shareholders that Scott has taken the decision to bite the bullet on Catch.
For an $82 billion company like Wesfarmers, even losses of this size don’t really move the dial. That said, this will certainly be a strategic experiment that Scott and his team would rather forget.
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