Andrew Cooper

Andrew Cooper, chief executive of online retailer dStore, has waited the best part of a decade for Australia’s big department stores to set up websites and revolutionise Australian retail with a multi-channel sales strategy.

In fact, he’s waited so long that he’s decided to have a go himself. In the next two years, Cooper plans to start opening dStore retail outlets around Australia, with the aim of eventually building a network of stores in every Australian city and major regional centres.

He expects to open the first store in Brisbane early next year. Depending on how it goes, he will look to open two or three more in the second half of 2010.

“All the feedback we are getting from our customers is that they would love us to have an offline channel,” Cooper says.

“Our strategy is that if the offline players aren’t going to turn themselves into multi-channel retailers than we’ll have a go at it ourselves.”

Cooper took over dStore in September 2001 after founder David Gold became a high-profiled victim of the tech wreck. The company now has revenue of $10 million and while those early dot-com days are well and truly in the past, the plan to set up a store network was actually part of Gold’s original vision.

While Australia has seen very few examples of online retailers going offline, Cooper says British retailer Argos, which has 600 stores across Britain and annual sales of around $8.1 billion, is an example of a business which has developed a strong multi-channel approach.

Cooper is scouting stores that are around 800 square metres; the front half of the store will contain merchandise while the back half will be a small warehouse. Customers will be able to order in-store web kiosks and either pick up their goods on the spot (if in range) or have them delivered the next day.

“It’s a kind of a meld of Ikea and the best of department stores.”

Cooper says the key will be to create a seamless customer experience between the online and offline stores. He believes many of the big retailers have been hesitant to enter the online retail space because “a lot of them have real conflicts built into their business”.

For example, individual store managers on performance sales contracts aren’t too keen to be undercut by a web special, or many even discount certain items below a web price for a short-term sales boost. Cooper hopes to avoid these situations. “We are free to build out our business in whatever way makes sense for the customers.”

Cooper, who also owns video stores, car washes and some other IT businesses, says dstore can fund the first few stores internally, but further expansion will require further funding and he is already talking to private investors and venture capitalists.

Another option may be to buy the assets of a failed retailer that has an existing store network. Cooper did put in a bid for the EzyDVD business which collapsed early last year and says he is watching a number of independent retail chains which are close to collapse.

“There are chains that are getting themselves into trouble, so we would expect that a retailer with an existing store network may well become available.”

While building a retail network will be a big challenge for Cooper and his team of around 20 staff, he is under no illusions that the big retailer such as Myer and David Jones will eventually move online.

But he is cheered by the experience of the British market, where the establishment of an online entry of big retailers such as Marks & Spencer grew the entire market, as consumers who had not previously shopped online started to do so.

“We anticipate it would be challenging if they moved into our space but there would still be opportunity to grow.”

Cooper expects any such move could also speed up the process of consolidation among Australia’s top online retailers. There have already been some moves in this area: in late August, DealsDirect acquired Dinosaur Deals, following previous takeovers of TotalDVD and Stuff.com.au.

But Cooper believes the ability of any sties for force consolidation – including his own – has been limited by a lack of financing options.

“I don’t think there is anyone around that can make the deal happen at the moment. We’re just running along trying to run a good business.”

This could be another challenge over the next 12 months.

Cooper started to become worried about the state of the economy in March last year and by July had put a downturn strategy in place. He cut marketing costs, shifted offices to cut down on property expenses and put a selective hiring freeze in place.

In the end, this turned out to be an over-reaction. Revenue growth was around 15% last year, and is currently running at around 20%. But Cooper admits sales can be volatile from week to week and wonders what impact rising interest rates and a lack of handouts from the Federal Government may have on the retail sector.

“It is really patchy and we are wondering whether we are in a sustained recovery or whether we will just be bouncing around for the next year or so,” he says.