Grays Australia yesterday announced it had purchased online department store OO.com.au for an undisclosed sum.
"The purchase gives us the scale we were looking for," says Cameron Poolman, Grays CEO, in an interview with CN.
"There are significant costs associated with running these businesses. Rolf [Recklenberg, OO CEO] and I had been talking for some time."
The move has turned Grays into the largest pure online player in OZ, now with a total turnover of $350m, with OO adding $50m revenue to the online-only business.
It also allows Grays which is "synonymous with discounts" branch into mainstream retail with a fixed price site, says Poolman.
"Not every consumer likes auction sites," such as Grays Online and eBay.
The acquisition of OO also provides Grays suppliers with another channel for its products. "Vendors on Grays can now sell on OO.com in a department store environment."
Grays Australia brands include auction sites Grays Online, Outlet, Escape, which sell everything from diamonds, mining and AV equipment and homewares.
However, he admits there is "very little crossover" between the two sites in terms of consumer demographic.
Grays consumers are a little older and are skewed towards males, and "two thirds of our sales are business products like mining equipment and cars and transport." OO core demographic, on the other hand, is more the younger, bargain hungry consumers looking to buy the latest electronics and other gear.
Australia is "unique as it only has 23 million consumers so is tiny when compared to the US."
In terms of pure play retailers "we had it to ourselves for a while," he admits, "but traditional retailers (Myer, David Jones & Co) are now going online" all screaming about multi or onmi channel strategies, and going hard on e-commerce.
Australia's online scene will soon be like the US, Grays CEO predicts, with the big retailers accounting for 80% of the market, while pure play etailers like Grays taking the remainder.
He sees big growth for the traditional retailers and more consolidation for other online businesses maturing and declining.
"There will be less businesses online in the future" and "a smaller number of pure players...but there will always be some on the periphery."
"Large retailers like Woolies and Westfarmers do supply chains very well...and that is what online is all about."
The predictions that digital sales will double in the next five years seems "reasonable" he says. Web sales in Oz currently account for around 6% of total sales so still relatively small.
So, should we be prepared for rampant discounting on OO?
Not quite, says Poolman.
"We will have more products and more prominent brands but not necessarily more discounting."
"You always have to have the best products at the best price,"
But he says the e-tailer is a large user of freight services so hope to be able to offer consumer cheap delivery options, which is vital.