The acquisition of a smaller online competitor will help Wesfarmers adapt to the digital age, according to the managing director of the conglomerate that owns Kmart, Target and Bunnings.
Wesfarmers announced plans this week to acquire Catch Group, formerly known as Catch of the Day, for $230 million. The deal is still waiting on approval from the ACCC.
Catch launched in 2006 as a platform offering one discounted item every day. It is now an online marketplace stocking tens of thousands of products encompassing food and drinks, clothing, electronics and furniture.
A big part of the reason why Wesfarmers wanted to buy the online business was to help with the digital efforts of its own companies, including Kmart and Target, its managing director Rob Scott said.
“This acquisition represents an opportunity to accelerate Wesfarmers and Kmart Group’s digital and ecommerce capabilities whilst continuing to invest in the unique customer and supplier proposition provided by Catch Group,” Scott said.
“Catch Group has a high calibre management team and a leading e-commerce platform with quality fulfillment assets.”
Catch CEO Nati Harpaz said his company would “continue to deliver innovation in the online market in Australia”.
Catch Group founders Gabby and Hezi Leibovic are set to net more than $200 million from the sale if it is approved.
The retail giant aims to make its own brick and mortar stores more digital savvy, and to inject them with the “growth culture” that has been fostered by Catch Group.
“Catch has built a really successful and scalable business model that can continue to grow in its own right – that excites us,” Scott told the Sydney Morning Herald.
“We also think that we can learn a lot from the capability of Nati and the team at Catch; that we can learn a lot about a more entrepreneurial, growth-orientated culture.”
Kmart and Target currently do not have very large online presences, with only 3 percent of sales being made online, compared with a 10 percent average across the retail sector in Australia.
“We see the future is very much about having a high-quality store footprint complimented by a world-class digital offering,” Scott said.
“That’s what we’re building through the investment in Catch.”
In an update to the market, Wesfarmers said that Catch will continue to operate as an independent unit, but under the oversight of Kmart Group managing director Ian Bailey. This will allow Catch to “retain entrepreneurial culture”, it said.
“We are excited to work with the Catch team and look forward to leveraging our capabilities to grow the business and accelerate the customer-driven, omni-channel initiatives across Kmart and Target,” Bailey said.
The company said Catch is an “established, profitable and cash-generative business that operates an online business model offering branded products on a first-party basis and a third-party online marketplace”.
Going forward, Wesfarmers plans to improve its digital offerings by upgrading in-store technology, leveraging Catch’s capabilities and improvements in productivity.
The conglomerate has been on a spending spree recently, and last month announced plans to purchase Tesla supplier Kidman Resources for about $776 million.