Online retail with a sporting chance of success

How many start-ups can say they’ve partnered with Virgin, secured sponsorship from Visa and sat on the board of a major industry body? Sydney-based business onsport can.

Established in 2011, onsport.com.au is a boutique fitness and sports online store, offering a wide range of sportswear, active wear, fitness apparel, sports leisure apparel, swimwear and more.

It was founded by Matt Brodie and Andrew Kidd, two 30-something ex-bankers. Brodie talks to StartupSmart about how onsport has managed to achieve so much in so little time.

Why did you launch onsport? What gap did you identify in the market?

We launched onsport.com.au to provide Australian consumers who are shopping for sportswear, fitness apparel and sporting goods, a better online experience and far better service than they were receiving from bricks-and-mortar retailers, many of whom view online as just one of their many marketing channels, rather than something that requires dedicated attention and focus in order to deliver an outstanding online experience.

We identified many years ago the vast gap that existed between international best practice with respect to online retailing and the average Australian retailer’s online offering.

We also analysed the sports and fitness market and realised that there was one major, incumbent retailer in the sports and fitness industry that has significant marketshare and power and yet, despite this, was largely ignoring online consumers.

So we entered the market with a mission to shake up the competition in sports and fitness online retailing.

What value do you bring to the business as former bankers?

We were both involved in the launch of Macquarie’s credit card business back in 2006/07 so we’ve already been through the start-up phase, albeit within a large established business like Macquarie.

We’ve got a broad background/experience between us – Matt (sales/marketing/product development/purchasing), Andrew (law/accounting/risk management/business development/web development), so that combined with over 20 years in the corporate world means we’ve learned key core skills for an online retail business such as delivering excellent customer service, managing budgets/costs and managing a customer portfolio.

We’ve also really benefited from an extensive network of contacts that’ve been able to help us directly or refer us to people who could, which has been very valuable.

How many staff do you have?

There are currently three of us full-time, plus we have a largely outsourced business model and use a lot of freelance/contractors where needed to keep our running costs lean.

We will be looking to take on one to two other full-time people over the coming months and are always on the lookout for people interested in doing an internship with us.

How did you fund the business and what were your start-up costs?

The business was funded through a combination of our own savings, a business loan from ANZ Bank and sponsorship from Visa.

How did you secure a loan from ANZ and sponsorship from Visa?

We launched the Macquarie Visa cards back in 2007 so had always had a good relationship with Visa.

They saw the potential in what we were proposing to do, so were keen to support us in that sense.

In order to secure our loan from ANZ, we developed a very detailed business plan/financials/strategy document.

They were also very impressed that, as a start-up, we’d secured our deal with [Virgin’s] Velocity Frequent Flyer [program] too.

How did you secure the deal with Velocity Frequent Flyer?

We pitched the idea to them back in 2010 when they were still operating as Virgin Blue and they were just starting to think about rebranding to Virgin Australia.

They wanted to increase the range of partners in their frequent flyer program, which was also being re-launched, and at the time had very limited sport-related content.

We were in the right place at the right time, but also liked to think that we presented a good opportunity to them too.

Andrew sat on the Australian Sporting Goods Association board for a year. How has this experience helped your business?

Andrew’s tenure with ASGA was useful in terms of creating awareness of the onsport.com.au brand within the industry, and helped us understand some of the broader issues and challenges currently facing the sports industry.

We specifically nominated Andrew to join the board so that there was representation from the pure-play online retailer perspective.

Unfortunately, online retailing and the structural issues that exist in the wholesale sports market – with respect to supplying online-only retailers – were not topics that received a great deal of airtime and, being extremely time-poor with the time pressures of running a start-up, Andrew felt his time was better spent growing onsport.com.au, but is open to returning to the role in the future.

Why enter the retail climate if it’s so tough?

It’s a tough retail market generally, but one of the key growth areas is online retail.

We saw what similar pure-play online sports retailers were doing in overseas markets like the US and UK, and still feel there is plenty of opportunity in Australia.

Online and mobile retail is only going one way, and we want to be part of it for the long term.

What’s your growth strategy?

Our focus is on keeping our business lean, look for new marketing and distribution channels, continue to make available more and more global and boutique sports and fitness brands, and to grow our customer database by providing the best customer service and online experience.

We both have experience in developing and managing partnerships (like Velocity), and have a lot of blue chip corporate contacts, so we will continue to work on expanding our portfolio and reach in the loyalty rewards space and through other corporate partnership avenues.

We have diversified our revenue streams so that we’re not completely reliant on the retail industry, and currently operate a golf program exclusively for Velocity Frequent Flyer as well as working with other corporates on their client hospitality requirements.

What advice would you give to other entrepreneurs operating in the retail space?

We can only comment on the online retail side of things, but we’d say keep costs as low as possible, focus on building your customer database, spend as much as your time on marketing, and make sure your customer service is first class.

It’s much harder and more expensive to acquire a new customer versus retaining an existing one, so manage your customer portfolio carefully.

We’d also say hold minimum stock levels or arrange to have products drop-shipped directly to your customers in the early days when you don’t have the capital to be tied up in stock.

It’s much better utilised as part of a marketing budget, for example.