The entrepreneurs behind Daily Deals have parlayed a stall in shopping centre aisle into a TV shopping business and two online retail sites turning over $10 million a year. Their supplier relationships are one of the keys to their success.
By Jacqui Walker
The entrepreneurs behind Daily Deals have parlayed a stall in shopping centre aisle into a TV shopping business and two online retail sites turning over $10 million a year. Their supplier relationships are one of the keys to their success.
Hezi Leibovich’s first business venture almost finished before it started. Leibovich (right) imported goods from China to sell at a stall in an aisle at Melbourne’s Fountaingate shopping centre. The problem was that the goods were faulty and unsaleable.
“We had spent all our money on stock. We had no experience in importing, no way of speaking to the manufacturer. We were paying the rent but we had no stock,” says Leibovich, 31.
By chance he saw a newspaper advertisement for a supplier of the same product: a handsfree wireless car phone. “I called them up and said ‘please help us’” It had already been two days and the shopping centre was going to kick them out. The supplier came up with the goods and saved the boys’ fledgling business.
He had learned his first lesson: that in retail supplier relationships are critical.
Four years later and the business has moved beyond the B-grade shopping centre aisles to become one of Australia’s largest TV shopping and direct selling companies, which turned over $10 million in 2006-07, maintains an online department store, www.dailydeals.com.au, and a website that offers a new product for sale each day: www.catchoftheday.com.au.
Leibovich and his brother, Gabby, who own the business equally, plan to double revenue this financial year.
TV shopping
The TV shopping came about after an advertising agency representative approached Leibovich at his stall one day and offered to make him a four-minute infomercial to be aired on Bert Newton’s morning television show. It would cost just $9000. They couldn’t afford it, so he offered them a half-price trial. They took the offer and it worked.
Daily Deals now sells household goods, electronics and innovative products nationally via daily advertorials on morning TV.
Initially the pair bought stock from local suppliers because of their disastrous first attempt at importing from China. But they realised they could get much better margins on goods they imported themselves and set about researching imports. Now, everything is imported directly from China.
“Quality control is very important so you need to do a lot of research on each product,” says Leibovich. “You’ve got to learn about where it is coming from and who you are dealing with. Make sure it meets Australian regulations. And make sure you have a back-up plan, and a written agreement with the factory in case things go sour.”
He says the secret of their success is their ability to source great deals through close relationships with suppliers. “Some suppliers we’ve been dealing with in past keep eye out for us because they know we can move large amount of stock very quickly. So they look out for new trends for us.” Leibovich says. “The manufacturers don’t stick to same category for too long. We expand our product range as the supplier does because we can trust them and they know us.”
One of their early challenges was competition from discount shops. “We would invest in products and advertising, and create a demand. Then a month later we would find the discount shops carrying an imitation product. They don’t have to pay the marketing costs we pay so they could always be cheaper, especially if it was an inferior product.”
The solution was to ensure exclusivity from suppliers. “Now any product we feature, we make sure we have exclusive distribution rights in Australia. A part of it is committing to volume of stock so they do take you seriously. Three years ago we couldn’t get those deals because we were small and didn’t sell the volumes. Now we do.”
At the end of 2003, online shopping was becoming more acceptable to consumers, thanks to eBay.com. Gabby Leibovitch, an online retailer, joined the group and they launched the websites, which now account for 10% of the group’s revenue. They expect this to triple next year.
Dailydeals.com is a department store selling many of the products promoted on TV, and a few extras. The other site, catchoftheday.com.au, posts a new product at midday each day for a bargain price. The offer lasts 24 hours – or until sold out – and could be anything. “Variety is quite big. We don’t just focus on one category – manchester one day, perfume the next, IT or jewellery. It is part of the mystery of 12 o’clock rollover,” Hezi Leibovitch says.
He says there are 100,000 registered members on the site. “It’s becoming an addiction for customers.” He has built traffic through traditional print advertising, email campaigns, SMS campaigns and word of mouth. “In the past year, we’ve probably spent $80,000 to $100,000.”
The next step is bricks and mortar; later this month Daily Deals will open a clearance shop in Clayton in Melbourne’s eastern suburbs.
The partners have managed to fund all the growth themselves over the past three years but if the right investor approached them, they would consider it. “We’ve never looked for capital externally, but we are coming to new opportunities to grow, and if the right investor who could add value came along, we’d consider it.”
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.
