Most business people look forward to a well-deserved break over Easter, but for Mark Webster, chief executive of iconic thoroughbred sales group Inglis, Easter is show time. The company’s biggest annual sales even takes place over the long weekend, with 500 horses up for grabs, with a few expected to exceed $1 million each.
While Inglis’ turnover has slipped slightly during the GFC – it is now around $200 million – Webster has focused on changing the way this very traditional business operates by introducing technology such as online bidding by acquiring Australia’s leading horse auction website.
Fortunately for Webster, he’s got experience introducing technology into traditional sectors – he was formerly head of News Interactive, the digital arm of News Limited.
Today he talks about riding out the GFC, driving change in a traditional business and why News Limited should have bought online recruitment classified giant Seek.
Does the Easter Bunny come to your house or pass by?
Well we always look forward to the Easter, probably not for the chocolate eggs, but we certainly look forward to the horses and the spectators and the participants all arriving here because there’s a great deal of excitement. Probably more excitement here than some kids may have on Easter Sunday morning.
Obviously lots of people would know the excitement of the auction process and the sales ring. Can you talk us through the process of getting a horse to the sales ring?
Well the journey for a breeder of a young thoroughbred really starts three years out from the date of the auction when they decide on where to send their broodmare, which stallion to mate them with in that year because it’s all natural conception. The mare generally carries the foal for 11 to 12 months, it’s a long gestation period and then we sell the foal at 18 months or so. It varies a little bit in terms of age so it’s about a two and a half to three year journey for them and along the way the Inglis staff, the bloodstock staff, spends a lot of time out on farms selecting the best 500 yearlings to be offered here at the Easter yearling sales. That’s 500 out of 18,000 that are born every year.
How do you get from 18,000 to 500?
A lot of the work actually starts here in the office and our staff will assess what we call the foal crop analysis each year to see how many mares each stallion has covered and we’ll identify the stallions that we think are going to be most popular, whatever’s in fashion at the time, and then we target those particular yearlings. So we can identify where they are, what farms they are on all over Australia and then get out and actually have a look at the yearlings in question.
So that’s getting the horses to auction. What about the other side, getting the buyers? The sales are always attended by all the major breeders and trainers, but is there a lot of work you need to do attracting overseas buyers or the right kind of buyers?
We work on recruiting buyers all year long. Clearly in the lead up to the sale or the three months leading up to the sale that’s when we do most of the work, but obviously we’re always engaging our clients and that involves one-on-one visits. So we visit our clients in Europe, in the Middle East, in Hong Kong, China, Singapore, South Africa.
I’ve got a team of staff here; one week they might be out selecting horses, yearlings to go into the Easter catalogue and then the next week they’re touring around South Africa meeting with the leading breeders, trainers and owners in that country promoting the product that they’ve just seen. So a lot of the work goes into recruiting buyers to come to the sale and we never take it for granted that they’ll just come because there’s a lot of global competition. We’d like to think that they just want to come to the Easter sale every year, but North America and Europe and even Japan are all major breeding jurisdictions and we all compete.
Are you seeing any changes in demographics around the types of overseas buyers that you’re attracting?
Certainly over the last 10 to 15 years we’re seeing a lot more Asian participation in our sales. If you go back 15 or 20 years, there’s always been some sort of racing in Asia but the quality of racing in Asia previously had been quite poor, so the quality of horses were quite poor. They were cheaper horses that were coming from the third and fourth fine breeding countries from around the world.
The Asians, just like most other developing countries, are certainly becoming more westernised and are very focused on being competitive and wanting to be the best. With that they need to improve the quality of their racing stock and so that’s naturally led them to come and buy out of Australia. Australia is well known for producing the best sprinting racehorses in the world, like Black Caviar, and there’s been certainly more money generated in Asia in recent years and that’s clearly helped us.
Give us your sense of how big Inglis is from a turnover perspective.
Well, Inglis turns over about $200 million a year. In the peak of trade back in 2008, just before the GFC, our turnover was $300 million. So it has dropped as a result of the GFC and it’s been steady for the last couple of years and I think it will probably remain steady at around that $200 million mark.
The thoroughbred auctions have always been a good bellwether for how high net worth individuals are tracking. What’s your sense this year?
I think it will be steady. We’re not going to see any dramatic change from last year. Our clients are in different categories. We have investors who are very serious about buying a colt that may turn into a money-making machine as a stallion. But we’ve also got people who are dreamers who just want to buy a horse and go and have fun with it. We’ve got clients who are networkers that want to race a horse because they want to network with other people and the racing community, the socialisers. And then you’ve got people that just love horses and they want to come along and buy a horse that they can have a connection with. Thankfully we do have people coming into it with different perspectives because that helps us during the tougher times.
You mentioned the GFC. As a business, obviously Inglis is more than a century old and has ridden downturns. As a CEO how do you change the way the business is managed during those periods? Are there levers you can pull to decrease some costs here or refocus efforts there?
Look, we don’t have a massive variable cost base that I can play with like some other companies do. Our permanent staff is only around 50 and we top that up when we conduct auctions or events. In many ways we’re an event business. Through the year we run major events, we bring horses and people together and we’ve got to make sure we feed them and water them and make sure they have a good time and there’s not a lot of levers in relation to that.
What we have done since I arrived about five years ago is focus on seizing every opportunity to sell a horse. So not just during the two minutes that each one is given in the auction ring, but we use technology now to help promote each of the horses before they come in the ring and if they get passed in in the ring, we use better technology to sell them post sale.
We’re very good at improving our clearance rates. An example would be our clearance rate for the yearlings that we offered last year in Sydney and Melbourne and right around the country is about 81.5% by maximising the use of technology. Whereas our closest competitor, which is not really focused on technology, Magic Millions on the Gold Coast, is under 75%. It’s really seizing every opportunity. If you’ve got something to [sell], making sure you sell it.
Has the process of introducing that technology been challenging? I know racing is an industry where things have been done a certain way for forever and I’m sure there are lots of traditions in the Inglis business. Is it hard to drive that sort of technological change?
There certainly has been a lot of work that I’ve had to put in it. Thankfully, I have a technology background. During my time at News Limited, I was lucky enough to be the CEO of News Interactive, which is the internet arm of News Limited. I did that for a number of years so I’d had some experience, not only in introducing technology but introducing it into a very traditional environment of the newspaper publishing world. So I’ve been through that before.
What are some of the keys to making it work?
You just have to be determined. Firstly, you’ve just got to put forward a very good case. You have to ask people to trust you. You’ve got to build confidence with them and then when you actually introduce something, you have to actually do whatever it is you’ve promised, whether that’s having your site or your technology up 24 hours a day or whatever.
It’s one thing to bring something in but if the others around you don’t believe in it, it won’t work. And an example of that would be we were the first here in Australia to introduce live internet bidding during a live auction in the ring. That was done four years ago, a year after I arrived, and it really has changed the way operate here. We’ve got clients that pre-register online and we pre-approve credit for them to bid online. They can’t actually bid over their credit limit, so if we set the limit at $500,000 the system won’t physically let them bid beyond that, but now as we’ve got a horse in the ring we’ve got people bidding from all over the world on those horses. We would be the only company in the world that’s really been able to pull that off.
There have been others locally and internationally that have tried to introduce online bidding but they haven’t been able to educate their client base well enough and I don’t think their staff has really believed that the technology can make a difference. It’s one of the reasons why our clearance rate is so much better than everyone else’s.
Sounds like you are monetising your digital content more successfully than perhaps the media companies you used to work at. What would you rather be doing now, selling horses or trying to bridge the digital divide in the media?
Well James, I had to run an online business for the Murdochs but also I ran The Daily Telegraph and The Australian before coming here. The challenges in print media are significant. There’s going to be a natural transfer of customers to the online world, it’s happening and there was a great argument at New Limited on whether that should be done by introducing new brands or whether it should be protecting existing brands. And during my time there, there was a lack of clarity of about which way they should go.
I think there’s great value in brands, but you can’t afford to protect a brand to the point that you risk losing your customer base. You can’t be afraid of embracing new technology even if it cannibalises to a certain extent the old. And that’s certainly something that we do here. So, aside from running an auction business, I bought bloodstock.com.au.
An analogy in the classified world would be like News Limited buying Seek.com.au 10 years ago when it was just starting off and getting in early. When I was at News Limited I recommended that we buy Seek 10 years ago and we didn’t and I think there would be a few regrets that didn’t occur. There were concerns that it would have cannibalised the core business, but it’s better to eat your own lunch than let somebody else eat it for you. Well, that’s my view.
Absolutely. If you were still there and they’d bought Seek, they’d be chairing you around the cafeteria I think.
Yes, perhaps. I just use it as a means of comparison because a year ago here I had to convince the board that we should buy the new entry, the new player in the market, which was a purely online horse trading business called bloodstock.com.au. They were some young guys that had a track record of building these businesses and flipping them to the big media companies; they were trying to do the same in our sector. And we’ve acquired that business and it’s a key part of what we do now. So, aside from running 20 auctions a year, we now sell horses 24/7. There is some cannibalisation, but that’s just the new world, isn’t it?
Is that a growth business going forward?
Definitely. I mean online is obviously a key part of our auctions but trading outside of auctions is a massive growth area and that’s where we are making the investment now. But instead of building from scratch and playing catch up I decided to buy the market leader and get going quickly.
You mentioned Black Caviar before, which was sold through your Melbourne sale in 2008. She’s an amazing horse – a few months ago I even took my three-year-old out to see her win. What does selling a horse like that do for you guys?
Look, it’s a halo effect. I don’t think it will have a dramatic effect on the sales results. But anything that generates awareness in our sport, I think is a positive thing. We’re lucky enough to have sold the mother to Black Caviar as a broodmare and we then sold Black Caviar and then we sold the next two siblings and we’re now selling the next sibling which is a half sister to Black Caviar. So we’ve got a big connection with her. We even sold Black Caviar’s sire Bel Esprit, so there’s a lot of connections back to Inglis. That’s a great story in itself and should give buyers confidence that they can come here and buy the best. This half sister that we’re selling, I think she’s going to generate a lot of mainstream media attention. We generally just get the racing industry media covering our events, but in this sale we have a half sister to Black Caviar, we’ve got the full brother to So You Think and the half brother to Makybe Diva — they’re three household names.
A bit of star power never hurts. Good luck Mark and I hope you do get an egg at some time.
Thanks very much, James.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
