15/07/2013 - 23:17

Renewal challenge for local online leaders

15/07/2013 - 23:17

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Renewal challenge for local online leaders

Online entrepreneurs based in Western Australia have carved out some great businesses, but there is definitely an ageing quality about them.

Last week, Business News featured the leading online-only businesses ranked in terms of web traffic analysis provided by a global group called Alexa.

To my amateur eye, most of these businesses had succeeded because they had started early in their fields – the average commencement date for the top 10 was early September 2002 – but had become bit players in industries dominated by giants.

Books, movie rentals, real estate and job search were all prevalent in the top 10, a listing that ignored many more popular sites run by groups such as newspapers and retailers that had added their online presence to more traditional business models.

National companies were not included.

Arguably, Perth Mint also fitted this description, although it was included in our list because most of its sales are done via internet and few are walk-in from its historic outlet in East Perth.

To me the mint has a more defensible position than most because it is already a major player and rare manufacturer in the niche collectibles business – online just makes it easier to reach the world.

In many other, more generic fields, the internet simply makes it easier for giant rivals to compete with geographically isolated players in Perth.

That’s not to say they can’t find a strategy to succeed. Rent.com.au, for instance, has become a national player.

Alternatively, some will make a tidy profit from selling out when the time is right. Thirteen-year-old eBooks recently sold its niche academic library service for $30 million to US group ProQuest.

The truth is, the web has enabled many people to start a business or compete in niche areas that would have been impossible more than a decade ago.

But it is unlikely those that have started in Perth (or do so in the future) will rise to global prominence in large generic fields, because this is not where the markets are.

Already many internet entrepreneurs have set sail from Perth to Silicon Valley and other tech-savvy environments because the expertise and capital backing is there, as are the consumer markets. 

That doesn’t make Perth useless for online business, however.

There are specialist niches here with global markets that will benefit from investing in online reach. I have mentioned the mint but there are other products – both goods and services – for which being Perth-based is no different to being in San Francisco. Look out for specialist service businesses in mining and petroleum that can project themselves on to the global stage.

There are also local markets that can be both online and geographically protectable.

A good example is groceries, for which there is little advantage in being global. Arguably, the biggest competition there is the major retailers but the advantage for local online grocers is they don’t have to cannibalise their own bricks and mortar networks but can, if they have them, use them as showcases.

Part of being geographically defensible relies, however, on being able to offer a better service than national or global providers can afford to bother with in such a small market.

That still creates challenges because technology is changing rapidly, especially in areas such as communications, market research and logistics. That can help overcome distance – just as much for multinational groups as it can for niche companies – to a point where it is hard to distinguish the service differential between a local company and one based on the other side of the world.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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