James Thomson Editor

James Thomson is the editor of BRW. Previously he was editor and publisher of SmartCompany and a senior editor at Business Spectator. He writes regularly on Australia's wealthiest entrepreneurs and has deep expertise in small business and the mid market.

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The Iconic’s tips for our department store laggards

Published 24 January 2013 11:19, Updated 27 January 2013 17:59

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The Iconic’s tips for our department store laggards

David Jones chief Paul Zahra shops in one of his own stores. BIg conventional retailer like David Jones could use their supply chain expertise to fight back against online upstarts such as The Iconic. Photo: Michele Mossop

It’s not hard to get excited about the story of fledgling online retailer The Iconic.

Just 18 months after the company launched in Sydney, it has become the hottest name in retail, outgrowing distribution centres at a rapid rate, boosting sales by 20 per cent every month and attracting hundreds of thousands of visitors each day.

Oh, and there’s also the little matter of raising about $50 million in five months. While countless other tech companies struggle to get cash for their dreams, The Iconic appears to be having money thrown at it by overseas investors.

Yet it pays to remember that this is a company still finding its way. It’s spent a lot of money on marketing – and the two $25 million capital raisings in September then January suggest it needs to do more – and has clearly gained a strong foothold in the market.

But as a report in The Australian Financial Review today makes clear, The Iconic does not appear to be cash flow positive at this point, which means it’s some way from being profitable. And that’s understandable for a business that is still very much a start-up.

Profitable or not, the rise of The Iconic would be making the likes of Myer’s Bernie Brookes and David Jones’ Paul Zahra pretty nervous.

Unlike many online retailers, The Iconic’s value proposition isn’t built on discounting. Indeed, in many cases its prices are identical to those of the department store giants. Instead, it has been built on convenience, typified by the three-hour delivery service it offers in Sydney and eventually will offer in Melbourne.

This could provide a clue to unlocking online success for Brookes and Zahra. While David Jones and Myer have a lot of catching up to do in terms of selling online, they do have a lot of experience in supply chain management, which is clearly becoming an important element in e-commerce.

True, the supply chain IP involved in mass distribution to a department store chain is very different to three-hour delivery.

But by partnering with the right firms – notably, The Iconic outsources the execution of its three-hour delivery service to another start-up called Mail Call – and using its knowledge of warehousing, inventory management and pricing, it is not unthinkable that the department stores might be able to create delivery options that change the way they do business online.

The department stores need to take some of the initiative back from the likes of The Iconic. Could supply chains provide them with a method for doing so?

Now read: The six key trends that every retailer needs to know

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