JP Morgan’s all cash-for-equity investment sees the bank join major shareholders Rocket Internet and Swedish fund Kinnevik and the five co-founders: Haensel, Adam Jacobs, Cameron Votan, Ryan Tuohy and Andreas Otto.
The five co-founders were all working at McKinsey and Boston Consulting Group when they were approached by online incubator Rocket to start up The Iconic.
It is one of 100 or more start-ups funded by Rocket, which counts Groupon in Europe and Australia, Wimdu and Pinterest amongst its successful investments.
“We thought we were a pioneer in Australia as there was no full service one-stop shop online fashion retailer, so we saw a space but we also saw a lot of overseas retailers already in this space like ASOS, ShopBop and Net a Porter,” says Haensel.
“We thought there was space for full service, convenience orientated online retail but we did not know how big the space would be. We did not really know in the beginning how important convenience and range would be as opposed to lower price.”
Haensel says The Iconic has discovered there is a “huge market” for convenience (the retailer offers three-hour delivery in Sydney) even though many of its products are “a bit more expensive” than its overseas competitors.
He says competitors such as ASOS have significant price advantages over The Iconic and says the online retailer has to work hard to keep its pricing competitive, sometimes taking a lower margin or just selling at a more expensive price.
“ASOS in the UK very often buys directly from the brands, while we buy from local distributors, so we have to accept local Australian prices, so that is one price advantage they have.
“Also, driven by the exchange rate, the stronger the exchange rate the cheaper they can be. If you shop at ASOS they don’t have to pay GST, so it is an overseas export so they use the money to finance their free shipping from the UK,” says Haensel.
“It’s definitely the big issue for all local Australian retailers who have to compete with overseas retailers.”
SmartCompany contacted JP Morgan but no comment was available prior to publication.
