Leading online retailer DealsDirect has acquired smaller rival Dinosaur Deals in a move that may herald the beginning of consolidation in Australia’s online retail sector.
Dinosaur Deals, which claims a customer base of around 100,000, has effectively ceased to exist, with its site already redirected to the DealsDirect site.
Details of the price paid by DealsDirect co-founders Paul Greenberg and Michael Rosenbaum have not been revealed, although Dinosaur Deals co-founder Jonathan Bass said in a statement that he was “satisfied with the terms of the deal”.
“We feel that there is good value in the deal with DealsDirect for both parties and we know that our customers will be thrilled with the DealsDirect experience.”
Jonathan Bass and his twin brother Anthony Bass will not have any role with the merged entity, although they will remain suppliers of Deals Direct through their distribution business Bass Trading, which sells mobile telecommunication hardware and related consumer electronics products.
Greenberg describes the Dinosaur Deals brothers as “frenemies” – mix of friends and enemies. “They’ve been competitors that we have some kind of collegiate connection with and at the same time they’ve been a key supplier.”
Greenberg admits he “planted the seed” with the brothers by hinting that given the current environment they might be better of focusing on either their online retail business or their distribution business
“I think they kind of realised that to cash in their chips and focus made sense.”
Greenberg says is pleased to get his hands on Dinosaur Deals’ “big, chunky” customer base, which he says is more youthful than that of DealsDirect.
But he is also particularly pleased to have picked up some valuable intellectual property, including processes and systems around sourcing, fraud prevention and outsourcing of certain parts of the supply chain.
“I think there we’ve got our money’s worth.”
DealsDirect has also taken on two of Dinosaur’s staff and is in talks to employ a few more. Greenberg pointes to Amazon’s recent acquisition of popular online shoe retailer Zappos as an example of how big online retailers are scooping up smaller rivals to tap into their energy.
“I think that does make sense. I think it’s been good for our business and good for our team to have a bit injection of that start-up culture.”
DealsDirect has been one of the more aggressive consolidators in the online retail sector, having purchased sites including TotalDVD and Stuff.com.au in recent years.
While Greenberg says he isn’t actively looking for more deals, he predicts there will be more sites up for sale in the near future as their owners realise the barriers to entry in online retail are not as low as they first thought.
“It’s quite hard work to break through the different performance and turnover levels. There might be a lot of mid-tier online entrepreneurs out there saying “what’s next?”
“We’ll look at each deal on its merits.”
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
Comments