Add Category“No-one’s focusing on those particular categories, and that’s where we think that we can position ourselves to win in the long run in the big and bulky space.”
Repeat customers on the rise
Started 10 years ago by tech entrepreneur Sean Senvirtne, MyDeal reported record gross annual sales of $218.1 million in FY21, a 111.1 per cent increase on FY20, which ended just as the impact of Covid-19 lockdowns was beginning to be seen in online spending on furniture and homewares.
Despite more than quadrupling its gross sales in Q4 FY20, MyDeal still managed to deliver 12.4 per cent growth in Q4 FY21, with $46.6 million in gross sales.
Purchases from repeat customers, a key metric in online retail where the cost of customer acquisition tends to be high, also improved in Q4, with nearly 60 per cent of transactions coming from existing customers compared to 56.1 per cent in Q3 FY21 and 44.8 per cent in Q4 FY20.
“It’s probably the thing that I’m most pleased about in the business,” Mangan said.
He expects these metrics to continue to improve following the launch of native mobile apps for iOS and Android in May. Approximately 7 per cent of MyDeal customers are now shopping via the apps, which has led to a significant uplift in user experience and retention, according to a media release the marketplace posted to the ASX last week.
“The initial results from the mobile apps are really great [with a] much higher conversion rate than even what we’re expecting,” Mangan said.
“The focus for us is to continue to invest into those mobile apps and ensure that we’re offering the best experience to the customer.”
MyDeal is also working on a brand refresh that it plans to roll out in the coming months with its first above-the-line marketing campaigns, and a loyalty program set to launch later this year.
Investment in private label
After launching a private label range in mid-2020, MyDeal now offers around 500 products in top-selling categories, such as office chairs, bed frames, mattresses, dining tables and dining chairs.
Because it sources these products directly from the manufacturer, it is able to offer them at a lower price to customers, while also controlling the entire fulfilment process to ensure a positive order and delivery experience.
MyDeal plans to continue growing this range both as a way to offer value to customers and improve margins. Currently, 5.2 per cent of its gross sales come from private label products, but it aims to lift this figure to 25 per cent in future.
“The advantage of our private label range is it delivers much higher gross margins compared to the marketplace,” Mangan said.
“We’re generating 40 per cent plus margins on them [private label products], compared to our marketplace take rate [which] hovers around 15 per cent to 16 per cent.”
However, these higher margins don’t come without risks. If MyDeal miscalculates demand, it could end up with too much inventory, an issue that forced Kogan to discount stock to clear its warehouses and impacted margins last year.
But Mangan said MyDeal doesn’t need to worry about this since it currently holds just $4.5 million in inventory.
“We’re very comfortable with the level of inventory we’re holding, but it is definitely something that we need to make sure that we optimise for. We want to have a healthy number of stock turns,” he said.
“It does tie up your working capital, having [stock] sitting there in inventory, but it’s not something that we’re really worried about.”
Mangan also noted that MyDeal has a “formidable” buying team led by Milan Direct co-founder Dean Ramler.
“The marketplace always will be our core business, but there’s a lot of benefits with having the private label,” he said.