TECH DEALS: Myer's new window

Tech Deals is a weekly column covering the latest deals in one of the busiest sectors for M&A. To read previous articles go to our Tech Deals page.

Myer, Kogan.com, Ohki  

It was big week for traditional and online retailers, with Myer moving forward with its plans to turn its website from average to world class and Ruslan Kogan expanding his bag of goodies on offer at his baby Kogan.com. We start with Myer, which has managed to put forward some credible numbers despite the weakness in the retail environment. However, while significant cost management and discounting has managed to stem the bleeding to some extent the department store's management knows it needs to do more to integrate its bricks and mortar offerings with its online channels. The rise of online retail has coincided with a shift in consumer behaviour with customers, especially in urban areas, reluctant to part with their hard-earned cash and the onus is very much on the traditional retailers to start generating bigger online sales. To that effect, Myer boss Bernie Brookes has announced plans to give its online store a $9 million tune-up, designed to lift its online sales from $5 million to at least around $30 million.

Leaving aside the criticisms that the likes of Myer, David Jones and Harvey Norman have been slow off the mark when it comes to exploiting the online space and the question marks around whether Myer's stated goal of boosting its online sales to six times its current level is achievable or not, there are two things to keep in mind. Firstly, the strategy of developing a multi-channel offering has already been successfully tested by US department giants like JC Penney and Macy's. The second key weapon in Myer's arsenal is its MYER one loyalty program which provides the company with a solid database of loyal customers. The program is likely going to play a key role in supporting the retailer's multi-channel strategy. Sales to MYER one customers were over $2 billion in FY2011 and Brookes has flagged that the new look website will include a private shopping club for its top MYER one members and an online deals option, which should come in handy when it comes to shedding excess inventory. With about 11 million unique visits to its website in the last 12 months there is potential for the retailer to improve on that by melding its department store and the online operations together.  

Moving to Ruslan Kogan and Kogan.com, the online retailer has added a host of big name consumer electronics brands to its roster with Canon, Nikon, Apple and Samsung products now on sale. Kogan's philosophy has always been about cutting out the middle man, sourcing the products higher up the supply chain and then offering them at a cheaper rate to consumers. With the retailer now selling SLR cameras and tablets, like the iPad, the range of products should prove to be highly attractive. There is no doubting the prices - a Canon EOS 60D body, which sells for $1,349 at Harvey Norman and $1,296 at JB HiFi, is on offer at $839, and an Apple iPad2 3G 64G is on offer for $789, 20 per cent cheaper than at Harvey Norman and 13 per cent cheaper than at JB HiFi. The one thing we don't know is just where Kogan sources its products but arnnet.com.au speculates that the retailer is getting its goods from international distributors and shipping them under the parallel importing laws that allow most manufactured goods to be sold in Australia no matter what the distribution channel. In other online retail news, Ohki has entered into a heads of agreement to purchase Sydney-based electrical goods retail outlet Stax Electrical. The purchase details of the acquisition have not been disclosed, but Ohki said it the offer was a mixture of cash and shares in Ohki. The cash component will be funded by a new debt facility, and is subject to a due diligence of Stax Electrical and Ohki.

MAMBO on the backburner 

BPAY pulled the plug on the MAMBO project last month and it looks like any immediate plans to resuscitate the idea in any format have been put on the backburner for the time being. The hope that the major banks would regroup to reconsider their options was reportedly dashed by Commonwealth Bank of Australia's (CBA) general manager of online banking, Drew Unsworth, who told those gathered at a breakfast organised by Enterprise Ireland last week that the banks were in no hurry to revisit the idea. So, a lengthy wait is likely before payment innovation is back in the picture but that doesn't mean that there isn't a way that the big banks can't work together. As iTWire reports Gartner analyst Robin Simpson has pointed out the US Isis initiative, funded by AT&T, T-Mobile and Verizon, is an example of how the big four can put their heads together to build something like MAMBO. One suspects it's not a question of whether the banks can work together or not, it's more a question of their immediate priorities and how they align.

Fairfax Media, Living Social, nearmap.com, SoftLayer

Fairfax Media may not have picked the time for its partial float for Trade Me but the company is now on the lookout for more partnerships in the online classifieds sector after sealing a cross-selling deal with Telstra-owned classifieds website Tradingpost.com.au. The deal will see the media company's classified ad packages bolstered online, with all Fairfax Media general classifieds customers will now be able to advertise their products online and thus to reach a broader public. In return, classifieds sections of about 180 Fairfax publications will host the Tradingpost.com.au brand on their pages. Fairfax missed out on buying Tradingpost in 2004, which was then subsequently picked up by Telstra for $660 million. The value of the cross-selling deal between Fairfax and Tradingpost was not disclosed. Meanwhile, Fairfax has also stepped into a pretty lucrative segment in the online space with the launch of a new, stand alone website called Essential Kids. The site, which provide mothers of children aged 4 to 12 with parenting advice, education resources and online community support, is an extension of its successful brand Essential Baby which Fairfax acquired in 2007. Essential Baby, which receives almost one million Unique Browsers each month, produces almost 15 million page views and consistently adds over 400 new mums a week to its online community.

Just how lucrative the mums and bubs market is was highlighted in the latest data released by daily deal site, Living Social which reports the segment is a top seller when it comes to deals. According to Living Social, it sold 21,643 vouchers from retailer Mothercare in seven days, with a total pre-discount retail value of $2.9 million. The Mothercare deal offered discounts of more than 60 per cent on $99, $150 and $250 gift vouchers to be redeemed on any maternity, baby and kids fashion, targeting a new customer base for Mothercare's 20 Australia-wide and online stores. 

Netflix, Telstra

It wasn't that long ago that the local market was looking at the prospect of Netflix coming to Australian shores with rumours in July that the US media giant, that specialises in offering streaming content and DVDs by mail, was holding talks with local internet service providers to build a partnership and start operations here over the next 12 months. However, things have turned a tad sour for Netflix since then with its decision to raise prices leading to a furious backlash from its subscribers. Netflix cut its third-quarter forecast by one million subscribers last week, sending its shares into a tailspin. And there is a chance that the fallout could bleed into the company's fourth quarter. There is also the issue of Netflix potentially losing some of its popular content once its deal with providers like Liberty Media expire. The pricing decision, announced in July, has already seen Netflix shares fall nearly 40 per cent and while the company has successfully launched its service into Mexico, Central America and the Caribbean a move down under may have to wait until things calm down. The entry of Netflix will no doubt have an impact on the local scene, especially for the IPTV service providers like Fetch and Telstra which is focused on T-Hub and BigPond movies. There is some talk that Telstra boss David Thodey, who is a big fan of Netflix's model, is keen to open to content partnerships with the likes of Netflix. However, that road could complicate the telco's links with its fellow shareholders in Foxtel, Consolidated Media and News Corporation. Netflix could also possibly look to forge a link with Perth-based Quickflix, which has acquired Telstra's BigPond DVD rental business, however, any such moves may have to wait for now.  

Local Wrap

In other local news, Australian-based geospatial mapping company nearmap.com has launched its first e-commerce site for the education sector. The e-commerce site shop.nearmap.com provides access to nearmap.com's high quality aerial PhotoMaps to secondary private and public education providers under an introductory licence ranging from $1,100 through to $4,400 per year; primary schools can access nearmap.com's PhotoMaps for free. The company has signed a reseller agreement with data management and integration company, OMNILINK. Meanwhile, US internet giant SoftLayer is reportedly keen to invest some more money in Australia with ITNews reporting that America's largest and fastest-growing web hosts is in talks with facilities provider Digital Reality Trust to lease a data centre in Sydney or Melbourne. SoftLayer's CEO Lance Crosby told ITNews the company is planning to build a 4000-server pod and several telecommunications Points of Presence (PoPs) in Australia. The company's initial investment is reportedly to the tune of around $20 million.

International wrap

With Yahoo still getting used to life after Carol Bartz, the drums are beating louder about potential suitors coming out of the woodwork. While Yahoo has indicated that it's not in a rush to make deals just yet, The Wall Street Journal reports that a number of potential bidders have made contact. The list is said to include private-equity firm Silver Lake Partners, Microsoft and the Alibaba Group. Meanwhile, US wireless chip company Broadcom has paid $US3.7 billion to buy rival NetLogic Microsystems, the latest in a wave of consolidation linked to the growing number and importance of mobile devices. In other news, Match.com has acquired a 20 per cent stake in a company behind one of China's largest online dating sites. The company, Zhenai Inc, operates a Chinese dating site with more than 30 million registered users. The terms of the deal were not disclosed.