Small Business

A good catch: the business behind CatchOfTheDay

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There are few entrepreneurial pay-offs that can top the raising of $80 million worth of funding, which values your fledgling company at around $200 million. And it’s especially satisfying if the new owners feature the likes of James Packer’s Consolidated Press Holdings and a number of local and international heavy hitters.

It is especially satisfying if you are being dragged before a US court for intellectual property breaches by one of the up-and-coming online businesses in the world.

This is the both controversial and satisfying story of Gabby and Hezi Leibovich and their CatchOfTheDay business, which is a long way from the brothers’ first business selling clothes at the Wantirna market in Melbourne.

The founders were not classic-style, Silicon Valley nerds.

“I have a degree in computer science which I completed in 1991 – pre-internet days,” Gabby explains. “Though I have to admit I have difficulties transferring photos from my digital camera to my PC!

“My brother Hezi studied chiropractic medicine, and hated it.”

 Both confess to having the selling bug in their genes.

“We have tried every form of selling, from stands at local Melbourne markets, which we ran for many years, to casual leasing in shopping centres,” Gabby recalls. “Prior to moving into online retailing, I worked for 10 years at a Melbourne electronics retailer selling audiovisual equipment.”

Immediately before starting CatchOfTheDay, the pair ran what they now call a “boring online department store”.

But eventually they had what Edward de Bono says all great businesspeople have – a lateral thinking or outside-the-square idea.

“It was a competitive space and we found that we were competing against players with much deeper pockets and a bigger range,” Gabby points out. “We decided to try something fresh and innovative and started a new venture – CatchOfTheDay – which would sell one unbelievable deal a day.”

They were not overnight successes and times were tough.

“This business was built click by click, one member at a time,” he says. “Five years on and we are Australia's most viewed online shopping site, selling thousands of orders a day and leading this fast growing segment.

“I am guessing we are pioneers in the daily deals space and we certainly chose the right path.”

And the idea has worked, thanks primarily to the value of the proposition and old fashioned word-of-mouth.

“We have never spent any funds on marketing the site,” Gabby reveals. “We find that nothing accelerates growth faster than placing a great deal on the site and letting our members talk about it.”

The brothers started with a team of five, working out of a tiny 300-square metre warehouse, with a simple dream of selling 60 products a day. They now have 120 in their team and expect that number will grow to 200 in a year’s time.

Currently they occupy a 4000-square metre warehouse that they moved into six months ago but are now eyeing off a 17,000-square metre warehouse – more than four times the size of their present base.

“We have experienced 100 per cent year-on-year growth since we started and with that comes growing pains and pressure to ensure the business can support the rapid growth,” he says.

With no marketing budget and such strong growth, Gabby was asked what explains it all?

“Our key to success has always been our ability to put forward the best deals in Australia and spot a bargain,” he says. “This is something you can’t teach at university – it is instinctive.

“This is our main point of differentiation and the reason for our success.”

They now have two websites – CatchOfTheDay for products and Scoopon for services – but there is one hitch, their online business has drawn them into some US legal action. And given that the businesses are attracting 4000 new members a day, according to Gabby, you can see why the business might attract some litigation.

There has been some history between the Scoopon team and Groupon involving the latter suing for domain name squatting and trying to register theGroupon.com.au domain name.

All of these proceedings are before the court and so Gabby was unable to make comment.

It's inappropriate for me to comment on this right now, but let me just say we are sleeping very well at night with a big smile on our faces,” he admits.

Asked to explain the spectacular growth of the company, Gabby praised hisgreat team with an amazing work ethic and optimistic attitude to life and business.

“No job is too hard for our team – we are very innovative thinkers and just as fast on the execution side,” he says. “Unlike the slow moving dinosaurs of retail that may take months to start and complete a project, we execute and build quickly and a lot of our decisions are based on gut feelings rather than long and unproductive board meetings.”

And what about the importance of social media to the growth story, given Gabby’s admission that nothing was spent on marketing?

“Twitter, Facebook, iPhone applications are welcome additions to marketing any business these days,” he suggests. “Saying that, our concept of selling one deal a day works perfectly with the short, repetitive and viral factors of social media.

“Our members love the internet and they love our deals.”

Every day 100,000 people receive a Facebook message containing the deal of the day and many of them forward it onto their friends. And some 250,000 people a day receive a push notification to their iPhone promoting the Scoopon deal of the day in their city – not a bad reach for a virtually free promotion.

This story underlines the new world of online business and it bears reflecting on how much this form of marketing would have cost us using traditional media in the old days of retail.

So, what lies ahead for the Leibovichs?

There’s no resting on their laurels with the brothers planning to launch two new sites: groceryrun.com.au, where they intend to give the big supermarkets a run for their money. And then there will be a fashion and apparel site called brandstreet.com.au, which will provide time-limited deals on clearance fashion from all the leading brands.

“As you know, we have recently made friends with a few good people like James Packer, Andrew Bassat and Tiger Global from New York, who have invested a significant amount of money in our business, which will be used to improve logistics, marketing, recruit some more great people and really build this business into Australia's number one e-commerce group for years to come,” Gabby outlines. “It's very exciting!”

Looking back on his five years of business building, Gabby was asked to share what he has learnt on his entrepreneurial journey and much of it relates to building rather than burning the bridges that can carry you across the troubled waters of business.

“Always be honest and pay your bills before they are due,” he insists. “You get more in life with honey rather than using a stick. Be nice to people, be nice to your suppliers, treat them with respect and they will repay it all back.”

He also advocates never closing a door.

“Even if you are angry with someone, keep the relationship going – it's not a matter of life or death after all,” he counsels. “Doors close and other doors open, and chances are that you will meet that person again in the future under different circumstances.”

And what about his insights on building a successful website?

“It all comes down to the user experience,” he lectures. “Understand what your customers want and make it easy for them to navigate and interact with your site.

“Make it fun, clear and above all easy to use and keep it simple too, with short and sweet copy and appropriate use of graphics to complement rather than distract from the site.”

On who has inspired him, Gabby first puts his dad on a pedestal for showing him and his brother the value of hard work, while his wife and three daughters make all the work worthwhile when he gets home.

Business-wise, Richard Branson has been an important role model.

“I really admire Richard Branson who proves that you can still have a lot fun while building a market leader,” Gabby says. “We have the same culture at CatchOfTheDay – everyone puts in a lot of effort, but we have great fun at the same time.”

A spin-off of this is an attitude of inclusiveness that Michael Eisner encouraged at Disney where everyone’s view in the business about the business needed to be surveyed to ensure that important insights were not missed.

“At our business everyone’s point of view matters regardless of your position,” Gabby explains. “The opinion of the warehouse packer is just as important as the head buyer or the operations manager, and it really makes for a great working environment.”

Finally, given the spectacular growth and the successful attraction of quality business partners to provide a solid platform for another Australian business success story, I asked how Gabby had changed as a leader as business growth can lead to life-changing revelations.

“I haven't,” he says bluntly. “I am not a great leader. I am one of the team. I work just as hard or harder than the everyone else and you can see this rubbing off on the team.”

Humility is often a quality of real leaders that might be missed by the business press but is seldom ignored by staff and customers.

Quick questions with Gabby

  • First business: Selling clothes at Wantirna market.
  • Career highlight: Coming to work everyday with a smile.
  • Best piece of business advice you ever got: Don't let perfect get in your way of better.
  • The worst:  Luckily I haven’t taken on board bad advice.
  • Most frustrating part of doing business: Talking to suppliers that still think that online shopping is not the way to go. Dinosaurs!
  • Favourite marketing technique: Viral. Word of mouth – it’s free and the most effective form of advertising
  • Business leader you most admire: Richard Branson  
  • Tell us something private about yourself: I am a soccer fanatic!

Published on: Saturday, July 02, 2011

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