Australian e-commerce stalwart Catch will cease operating from 30 April, parent company Wesfarmers has announced, as increasing “competitive intensity” pushes the retail conglomerate to step away from e-commerce and refocus on its physical retail outlets.
“Challenging” financial performance – an allusion to the impact of surging sales by rivals like Amazon, Kogan and Temu – led Wesfarmers to mothball the 19-year-old Catch brand, managing director Rob Scott said in announcing the decision that will retrench 190 staff.
The decision will surprise few after years in which Wesfarmers has struggled to find a business model that would help Catch to turn a profit, despite reportedly handling over 220 million “monthly digital interactions with customers” during fiscal 2024 alone.
Catch – core to Wesfarmers’s OneDigital business unit, which also includes the OnePass loyalty program spanning retailers Bunnings, Officeworks, and Kmart – saw revenues drop from $510 million in 2022 to $354 million in 2023, and just $227 million last year.
And despite restructuring, inventory reductions and cost-cutting measures undertaken after Catch posted a $163 million loss in fiscal 2023, it lost $96 million during 2024 and will bleed up to $70 million this year – the only loss-making line item on Wesfarmers’ balance sheet.
While Wesfarmers “have gained valuable insights and capabilities that have accelerated the Group’s digital transformation” since buying Catch in 2019, Scott said, “the recent increase in competitive intensity in the Australian e-commerce sector” proved insuperable.
Walking the fine line between digital and physical
Catch’s closure comes just months after Wesfarmers said a near-term priority of the OneDigital group was to “scale OnePass and the Catch marketplace” by leveraging the customer and transactional data that its OneData division shares across its businesses.
Wesfarmers’ “investment in Catch’s third-party marketplace and its supporting supply chain capabilities is providing valuable assets, insights and relationships,” Wesfarmers OneDigital managing director Nicole Sheffield said as the company tried to capitalise on its assets.
Despite surging overall demand from deal-hungry Australian holiday shoppers, Catch struggled to fend off competitors – leaving its NSW and Victorian fulfilment centres full of unsold stock and wasted space even as its other brands’ facilities were bulging at the seams.
Catch fulfilment centres – which have handled over $3 billion in sales since Wesfarmers bought the company – are currently less than half full and will be reallocated to support Kmart by year’s end, Wesfarmers announced.
It’s a similar problem to that experienced last year by book e-commerce giant Booktopia, which called in administrators in July after a $12 million warehouse automation and consolidation project failed to deliver expected benefits.
The value of efficient logistics became clear a month later, when Booktopia was acquired by online electronics retailer digiDirect – which will use the bookseller’s new distribution centre to manage its inventory of cameras, electronics, gaming systems, computers, and more.
Australian e-commerce is consolidating
Catch isn’t the only company finding it tough to turn a profit in the face of competition from Amazon, which Roy Morgan says added 1.1 million Australians to its customer base during fiscal 2024 even as Target, David Jones, Myer and Big W saw customers defecting en masse.
Kmart joined JB Hi-Fi in marginally growing its customer base, with Australian shoppers visiting Kmart an average of 7.5 times per year – suggesting they are still more loyal even than the Amazon customers that buy from that site an average of 6 times per year.
Amidst ongoing cost-of-living pressures, cut-price discounters are also seeing customer loyalty surge, with Temu shoppers reportedly buying from the site 5.2 times per year on average and Shein seeing 4.5 purchases per customer, on average.
Temu didn’t even exist and Shein was virtually unknown in Australia in 2019, when the ACCC momentarily issued a please-explain in considering whether to allow Wesfarmer’s acquisition of Catch, before ultimately concluding competition would remain robust enough if it went through.
Catch postmortems are flying thick and fast, amidst what it told a 2021 ACCC enquiry was “intense” competition – made even more so in subsequent years as increasing use of personal data and algorithmic marketing raises new “concerning issues” for the regulator.