Belinda Anderson
Inthebag, the Woolworths/ Wooltru joint-venture online shopping portal, aims to be profitable by January 2003 and, according to chief executive officer Jessica Knight, is burning less cash than it had expected to in the first year.
By June R66-million will have been spent, about R22-million less than the R88-million it had projected. Wooltru came out with a profit warning in February and, as part of that warning, it said shareholders didn’t seem to have fully taken the start-up costs into account. “We were actually ahead of plan in terms of our cash plan, but the reflection in the market wasn’t really there,” says Knight.
Inthebag’s profitability depends on the customer uptake of the online shopping service. So far it has 15 000 registered shoppers spending an average of R400 every time they shop. The break-even will come with about 50 000 customers and according to its current targets this should happen in less than two years, by January 2003. “Obviously the customer take- up is a key sensitivity. If we get there quicker, we’ll break even quicker, if we get there slower, it will take a bit longer,” she says.
Knight is upbeat about inthebag’s progress so far and its prospects. Although she won’t disclose how much money has been spent with the company online, she says shoppers tend to spend 25% more online than when they physically go into a shop. And, she says, roughly 60% of its customers so far have never shopped on the Web before. “So they’re trusting us with their first online shop. That’s been great news.”
Knight says the development of inthebag has included the rapid roll-out of delivery capacity to a greater number of areas and also some operational challenges, such as speeding up the site to meet the demands of a time-sensitive Web audience.
“They’ll wait three or five minutes in a supermarket queue, but they don’t want to wait three seconds for a page to download. We’ve had to spend a lot of time and effort speeding up the site, making sure that the site is at least living up to people’s expectations in that area. We’re now about three times faster than when we launched.”
Inthebag’s future depends on its owners putting suitable structures in place, according to Wooltru in a statement made as part of its results commentary. Knight won’t be drawn on what those structures could entail, but says there will be a transition of ownership over the next year-and-a-half as part of the unbundling of Wooltru that “will meet the interests of both parties and ensure the long-term viability of the business.”