Bunnings may be a goldmine for Wesfarmers, but ecommerce site Catch has been a millstone since the ASX-listed retail conglomerate bought the tech startup for $230 million in 2019.
Today, Wesfarmers announced it will shut down Catch at the end of April, blaming increased competition in Australian ecommerce.
They expect Catch to post a loss before tax of between $38 million and $40 million in the half-year to 31 December, 2024.
Parts of the business, such as Catch’s e-commerce fulfilment centres in Sydney and Melbourne will be transferred to Kmart Group, while some digital capabilities will be absorbed into other retail divisions at Wesfarmers.
Catch.com.au was founded in 2006 by Gabby and Hezi Leibovich as pioneering online retailer, Catch of the Day. Coincidentally, before it launched, they used to buy Bunnings products and flip them on eBay.
They went on to launch Scoopon, and EatNow, which merged with Menulog. It was the pre-Amazon days in Australia, and Temu and Shein were a decade away from landing on local smartphones.
US VC investors piled in, most notably Tiger Global, which had a 40% stake, as well as Insight Venture Partners, Sequoia and Bessemer.
The Leibovichs bought out Tiger in 2016, sold Scoopon the following year, and then offloaded the business to Wesfarmers, which paid around 13x EBITDA (earnings before interest, taxes, depreciation, and amortisation).
It took just a year for Catch to go from posting a $20 million EBITDA in the early stages of Covid, to $24m loss in FY21 and then a staggering $88m EBITDA loss in FY22 during a period where online retail boomed through Covid lockdowns.
Competitive intensity
Wesfarmers managing director Rob Scott said the decision was in the best interests of shareholders, and while Catch’s financial performance “has been challenging”, the group business “gained valuable insights and capabilities” that accelerated its digital transformation.
“Since the acquisition of Catch in 2019, Wesfarmers’ retail divisions have significantly enhanced their data and digital operations, recording more than $3 billion in e-commerce sales and 220 million monthly digital interactions with customers in the 2024 financial year. Wesfarmers’ retail divisions currently represent the largest non-food, omnichannel retail group in Australia,” he said.
“The recent increase in competitive intensity in the Australian e-commerce sector has affected Catch’s financial performance and growth prospects. In this environment, the Group’s retail and health businesses, with their leading omnichannel offerings and trusted brands, are better positioned to respond as the market and customer expectations evolve.”
The Catch site breaks the news to its users.
Around 190 people work at Catch. Scott said redeployment within the group will be offered where possible.
Killing off Catch is expected to add $50 million and $60 million in one-off costs forWesfarmers, excluding continued operating losses Catch over the next three months. The expected one-off costs include approximately $25 million to $30 million of non-cash costs.
This use of centralised fulfilment is expected of Kmart Group’s e-commerce operations.
Kmart Group MD Ian Bailey said said Catch’s fulfilment centres are currently less than 50% utilised, with the handover expected to improve the customer experience and efficiency.
“The transition will result in faster deliveries to customers at a lower unit cost, while relieving pressure on our busy stores,” he said.
Tougher market
Meanwhile, the failure of Catch under Wesfarmers shouldn’t be seen as big business struggling to run a tech company, but more being trapped in the shifting sands of a fast-moving retail landscape.
The Leibovich brothers fell foul of that challenge last year too, having backed retail deals marketplace Little Birdie, which they cofounded with Jon Beros, a former Catch Group executive.
The CBA paid $30m for a 23% stake in May 2021 before it had even launched, valuing the price and product search startup at $130 million.
But three years later, Little Birdie announced it had “paused operations” in May 2024, before it was subsequently acquired by Cashrewards and relaunched late last year.
The Leibovichs had a 10% stake in Little Birdie.