SARAH JAYNE MOKRZYCKI
The online retail world has changed a lot in the past twenty-two years, as entrepreneur and investor Gerrard Giummarra is all too aware. We talk to Giummarra about his experiences and the founding of IBSA, his online retail specialist business.
With twenty-two years in the industry, Giummarra began his online career at a time when people were "still getting used to the fax machine". He looks at the changes the industry has undergone from those early days to now as being like "starting out in the age of dinosaurs and then suddenly entering the age of the latest jet fighters". But Giummarra's extensive experiences in the online world have set him up for success after success.
Giummarra's first internet venture was propertyseeker.com.au, a business he started after his work as an architectural designer in the 1980s left him feeling there was no adequate means to display projects. When Giummarra met two IT developers who owned a domain name called realestate.com.au and suggested a merger, the rest, as they say, is history. Realestate.com.au is now an ASX listed company with a market cap of over $4 billion, and one of the country's most successful online businesses.
On top of his work with online real estate, Giummarra co-founded Australia's largest and most popular classified site for cyclists, BikeExchange.com.au, which reaches over one million visitors every month.
Giummarra brings his wealth of experience and industry know-how as an online retail strategist to IBSA, of which he is founder and managing director.
Giummarra founded IBSA in 1998 and built up the business the way he did all his online ventures: from the ground up. Originally a successful web development agency, IBSA now owns and operates an array of prominent online stores.
IBSA develops retail assets for global online retailers as well as some of Australia's most popular online shops. It specialises in retail; launching and operating successful online businesses through global logistics. ISBA is currently expanding into the US market, and Giummarra expects that the company will double in size over the next twelve months.
What is your professional background and how did this lead to the developing and founding of companies like realestate.com.au?
I started my professional career in 1984 as an architectural designer. In 1987 I was in charge of the Victorian sales and display center for a housing company. During that time, we constantly had issues with being properly able to display different projects that we built around Victoria. We used video and a portfolio of images, but that was a time consuming and very expensive process.
When I invested in a real estate company in 1988, the same issue arose and I started looking into the idea of a computer based system to solve the problem, but at the time the only computer systems available were too costly.
When I started working together with two software developers in 1991, a much cheaper Pentium computer Windows-based system had been launched. Using my previous experience, I immediately started designing the system and we began developing the software to run it. After two years of being on the poverty line, the system was ready for market. The System was and still is today, known as 'Property Seeker', a standalone PC based computer system.
A peek inside IBSA's warehouse facility.
At first, no real estate agent wanted to touch our 'Property Seeker' and it took almost a year before the first real estate agent, the Barry Plant Real Estate Group, was signed up.
Within two years of being in the market with 'Property Seeker', the first internet browser was launched. At that stage, no one commercially knew or really understood what the internet was all about. We were eager to be the first in the market so we started to develop 'Property Seeker' online and offered this package for free to our 'Property Seeker' client base.
I then met two IT developers, Carl and Martin, through the company that hosted our website. Carl and Martin were very interested in our online venture. Both of them were brilliant in the online space and when I found out that they owned a domain name called realestate.com.au, I offered them the opportunity to merge our businesses. The merger was the right move for both companies; and it worked out to be the best move for what is now known as realestate.com.au and the REA Company.
IBSA HQ – Inside Giummarra's online empire.
What did you learn from the development and success of these brands that led to you founding and launching the Bike Exchange?
Bike Exchange Pty Ltd (BikeExchange.com.au) was the last project that IBSA did as a web development agency. This was a concept of two guys, Jason Wyatt & Sam Salter, and I knew straight away that it was going to be a winner. Jason was one of the top guys at General Motors and Sam came from the cycling industry and also spent time working in the classified space. The only thing they lacked was the online experience. After three months into the development of the project, the guys brought me in as an equal partner. My intention was always to be involved for a period of five years.
I sold out of Bike Exchange approximately one year ago. Today I am very proud of the success of Bike Exchange. BikeExchange.com.au is the leader in the online cycling space and continues to grow.
The online space is about constant learning. It is a very fast moving playing field and when you are in it as a leader, you are constantly learning. The Bike Exchange's classified section is very similar to realestate.com.au, so I started the project with full knowledge of how it should be done. Entering the market with Bike Exchange was not too different from the experience I had with realestate.com.au. The market at first resisted the concept, but the uptake was a lot quicker compared to realestate.com.au, since the online space was far more mature than back in 1993. As far as the online shopping component of Bike Exchange goes, that again was second nature to me because of our highly tuned experience and success with our own online store.
Can you tell me a little about how IBSA operates?
IBSA was founded in 1998 when I decided to sell my interest in 'Property Seeker' and realestate.com.au. When IBSA first started, the aim of the company was to develop online businesses for the open market; basically, a web development agency. Soon after starting, we were invited to do some interesting joint ventures in the online shopping space, which we took up. IBSA now owns and operates multiple online shopping stores with full warehousing and logistics facilities. IBSA stopped being a web development agency about eight years ago. Today IBSA is one of the leaders in Australia for online shopping with over eight online stores, and is now expanding its operation globally.
How has e-commerce evolved from your perspective in the time you've been working in the industry?
My twenty-two years in the online space can be compared to starting out in the age of dinosaurs and then suddenly entering the age of the latest jet fighters. One day you are hunting for a brontosaurus to feed the tribe; the next day you are flying in the latest Boeing A380.
E-commerce today is big business for just about everyone – just look at Amazon with its $80 billion-a-year revenue.
Twenty-two years ago, people were still getting used to the fax machine and the Internet was purely a playground for exploration and fun. Today we use the internet for everything. Whether it is business, research, learning, connecting people globally, buying your favorite pair of jeans or ordering your next meal, the internet is part of our daily lives and we can no longer do without it.
Ten years ago, the online space was about extracting information and having fun. Today it is about running your life and doing business online. We have gone way past people wanting the internet. Today, people need the Internet.
What are the major current trends in the local industry that you believe are having the biggest effect on companies?
The word 'trend' is a big word in any industry. There are so many trends; such as company philosophies and structures, customer/end user buying trends, new trends in technology and devices etc. All these trends are a challenge for most companies and involve change.
Internet speed is one of those things that completely affects and changes what can be delivered online. There is no doubt that Internet speed will increase and provide much faster, much cheaper and unlimited downloads. The faster the Internet, the more facilities it can provide. For us online guys, we are constantly redeveloping according to speed of getting the information to the end user.
As we all know, devices such as smartphones and tablets also have a big impact on businesses, and the market swings very quickly with the introduction of these devices. In our own business, we have 25 percent of our sales coming from smartphones.
In my opinion, e-commerce is only just starting to scratch the surface – I can see exponential growth in the online space occurring for the next ten years. People are becoming more trusting of e-commerce every day. The older generation is now using the internet to communicate and more and more people are shopping and doing their banking online. The younger generation is hungry for devices and this is pushing manufacturers to produce more. Finally, markets are opening globally which means that if the product you are looking for is not available locally, you can just look elsewhere.
As customers/end users are becoming increasingly internet savvy, companies need to know how to do business online or they will face the consequences.
There is an ongoing debate about the sustainability of multichannel companies versus pureplay online companies. Do either have an advantage over the other?
I do not see advantages or disadvantages in either.
On the one hand, you have multichannel companies that have extensive business experience and know how to run a business, but have been too slow to adjust to the online space. These companies are finding it difficult to transact into that space. And then on the other hand, I see some very good pureplay online companies who have a lack of general business experience.
In terms of multichannel companies, I see the need for extensive remodeling if they are going to succeed online. The main issue that multichannel companies face is how to integrate their multichannels with their online component. I see a lot of complexity being applied into what should be simple, and I see many old mindsets with the way business is done today and not much focus on the online space. Now is the time for these multichannel companies to change and they need to do it quickly before they vanish. Once they get it right, I believe multichannel companies will enjoy the best of both worlds. The question is whether they can quickly adapt to the changes.
Consumers still like to shop the old fashion way, but also want the option to shop online. In terms of pureplay online companies, they have had a jump-start on multichannel companies when it comes to online shopping. All you need to do now is watch how much will be thrown away to gain market share. I see numerous large online companies make very little or no profit; or even in some cases make losses, which are subsidised by their investors. That is not a sustainable business model.
We are definitely in a time of rapid changes and adjustment in the market place. I believe there will be some mergers and acquisitions undertaken between multichannel companies and pureplay online companies. The next few years will see some interesting changes occur in this space.
What indicators of success can you provide on your companies mentioned above?
We as a pureplay online company can be looked at as a multichannel company in the online space. We have multiple online stores catering for different markets, with some crossovers. Although we have seen amazing growth over the years with our current model, we are now in our final planning stages to increase our product range, create more online stores, and enter new markets.
We are also finalising plans to expand our operation internationally. We are very confident we will see exponential revenue growth within the next two years, with very healthy profits. Our employee base will grow significantly, but will be closely monitored and will grow as required, as will our overall operating expenses. My business philosophy has always been to maintain a healthy balance between revenue, expenses and profit.
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