Trade Me promotion needed
Trade Me has reached for the defibrillator after the value of new and secondhand "general items" sold through its website flatlined in the year to June, pegging back the company's overall growth.
Chief executive Jon Macdonald said some Kiwis might have forgotten what a good place the auction site was to buy and sell used goods, and it intended to "refresh their memories".
Trade Me shares fell 4.7 per cent to $4.48 yesterday after the company warned of slower growth in its revenues and trading earnings this financial year and of a "sizeable increase" in expenses.
It posted a 4 per cent rise in its net profit and a 15 per cent rise in revenue, thanks to higher revenues from its classified businesses. But Macdonald said a key message was that it was preparing "a reinvestment" in its business.
The action plan includes a spend-up on people and new technology to improve "customers' online experience" and on marketing.
In the clearest admission that all might not be right at the heart of its online empire, Macdonald said responsibility for its general items business had passed to "seasoned executive" and operations head Mike O'Donnell last week, in response to that business' subdued performance.
Macdonald said he did not believe Trade Me had become complacent, but, "like any business", had got bigger and needed to work harder to "react, innovate and disrupt" itself.
Macdonald said he had no regrets about the decision in October to increase success fees on most general items by between 5.3 per cent and 8.1 per cent. "Nothing gives us cause to believe the price change was a contributor when it comes to our volumes," he said.
Forsyth Barr analyst Rob Mercer said he was comfortable with the result, but some people may have been surprised the company needed to invest for growth.
"It is still a good company which is growing earnings faster than the average company."
Macdonald said Trade Me had experienced "a slower return on effort than we'd hoped" in persuading businesses to sell new goods on the auction site. He still believed Trade Me had something to offer those sellers, given that more than 600,000 people visited the site each day.
Classified revenues from listing vehicles, property and jobs rose 29 per cent and Macdonald said Trade Me's FindSomeone dating service had turned in an "excellent" performance.
The company announced the acquisition of 11-person Wellington insurance broker LifeDirect and chief financial officer Jonathan Klouwens said it might find an avenue to encourage the sale of new vehicles through its website before the end of this financial year. It also hoped to boost its property-listing revenues by encouraging real estate agents to pass on listing fees to house-sellers.
The company retracted a statement that it expected its bottom-line net profit would this year grow by less than the 4 per cent rate it recorded for the year to June. Macdonald said that was an error, but that did not mean it was forecasting faster than 4 per cent profit growth.
- The Dominion Post
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