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Pooling Resources

Wednesday, October 1, 2008 - 09:46

In just 15 years, GraysOnline's Cameron Poolman turned a $50,000 ecommerce investment into a hugely successful venture. Here's how. By Georgina Jerums

The key to successful online ecommerce is to integrate it into your traditional business model. Don't park it as a stand-alone business with a separate advertising division or your bottom line could haemorrhage. That's Cameron Poolman's take on it. And as CEO of GraysOnline auction house, with 500,000 members and up to 15,000 new members registering each month, he ought to know.

The 45-year-old rugby union-loving businessman from Wagga Wagga, with a Sydney University engineering degree and a Business Masters from the University of Technology, Sydney (UTS), clinched the top job at GraysOnline during a management buyout at the tender age of 35.

These days his company, headquartered in Homebush on a 30,000m2 warehouse lot, employs 400 and turns up to a $15 million annual profit by online auctioning of, well, pretty much everything.

On offer are portable buildings, perfume, mining tools, surplus hotel bookings, vintage Grange, even luxury cars: "A month ago, we sold an Aston Martin DV9 for $300,000 and a Ferrari to a guy in Tasmania who never saw it before bidding," says Poolman.

Growing gains
A big fish in a small pond, GraysOnline sells about $200 million annually on the internet while Aussie competitor Deals Direct pulls in about $40 million. To grow, reviewing international online retail, warehousing and logistics is crucial. eBay, for instance, is based in the Swiss capital of Bern but has more than five million members in Australia alone who can shop in 50,000 categories.

"With so few companies running business-to-consumer (B2C) online models in Australia, you need to go overseas to know what's happening and keep ahead of the local competition," concedes Poolman, speaking from the boardroom adjacent to the warehouses where forklifts are swirling non-stop, stacking a daily consignment of 1500 wine cases.

"I've just come back from the Internet Retailers Conference in Chicago; there were 5200 delegates and only four from Australia. More than 99 per cent of the assets we sell stay within Australia and New Zealand, but we have a Grays executive each month of the year in the US, UK or Asia researching markets."

A company trophy has been the expansion into New Zealand in 2003. Not that Poolman's finding time to sit back and enjoy the trans-Tasman success. Far from it. Next in his sights is Singapore, where he hopes to open an online auction arm in 12 months.

"We can't afford to get too relaxed because the shareholders are the 16 executives here; it's like a mini public company," he figures.

Still, for the company to take on Asia is one heck of an ambitious plan. No one would have thought that even remotely viable 15 years back when Grays opened as a traditional auction concern. Then again, no one would have predicted the business would grow fivefold since its inception, either.

Getting online
GraysOnline, now the core of the Grays Group that includes asset services, traditional auctions and business sales, was born out of Gray Eisdell Timms, an auction house established in 1989 with 15 staff at Lakemba in Sydney's west.

It wasn't flash. To bid, you got in your car and drove to the warehouse at the appointed auction time. Although auctioneers were always worried it would rain and that top buyers wouldn't receive their brochures in the post on time, business was good. The early '90s 'recession we had to have' proved fortuitous as manufacturers scrambled to dump surplus stock.

Poolman came to Grays after a five-year stint at Eveready Batteries. He was looking for something more hands-on, and he joined Grays in 1996 as a trainee auctioneer and valuer.

Then, in the late '90s, the internet exploded and the likes of eBay and Amazon became household brands. All at once, Grays's localised auction operation had potential to go international and secure a bigger wedge of the business-to-business (B2B) and B2C bidding pie through an ecommerce model. Other web companies, aware of this fact, started circling and Grays faced a change management emergency.

It was, admits Poolman, a case of either get online or be 'taken on' by the big guns. "The internet threw our business into chaos. We were the largest goods and chattels auctioneers in Australia and we had 20 people walk through our door - eBay and entrepreneurs - saying, 'We're either going to take you on or you work with us'. In the end, we decided to do it ourselves. When we had a bit more money, we'd invest a bit more."

The seismic shift online was taking shape. "The board realised to grow the business they needed people who weren't the quick-talking, street-wise people who had traditionally been in auctioneering," says Poolman.

Friends outside the industry thought he had rocks in his head to go into the auction game given he'd done the hard yards to get a postgraduate masters. Poolman laughs as he recalls their concern: "A lot asked, 'What are you doing?'."

Unperturbed, he was one of five engineering or economics graduates recruited, and he presented his modest pitch to take the company onto the web.

"I remember going to the board and being very worried asking for $50,000 to get the online business going," he says, with a smile. "But it's always made money. To make an online venture work it has to be part of your business.

"The same values your business has traditionally, whether it's strong brand, reputation, customer service or choice, must permeate through the internet. I'm not having two sales forces, we pull both of them together. People have tried to set up online businesses out to the side, but it needs to be integrated. Look at media companies. They've got a sales force that sells advertising in newspapers and a sales force that sells online ads, but both speaking to the same customer. It makes no sense."

No IT scrimping
Scrimping on IT makes no sense either, Poolman insists. It's a lesson he learned firsthand by under-investing in systems. One of those first high profile online auctions was for One.Tel in 2001, which went into liquidation owing $350 million to creditors. A spike in auction traffic made the server sluggish and "many buyers had a poor buying experience". It didn't help that most people back then were on dial-up.

Poolman, who can look back now and laugh at the memory, recalls the online team having a hard time. "There were guys lying under their desks in the foetal position saying, 'I want to go home; make this go away, it's the worst day of my life!'," he jokes. Since then, the company has built greater server capacity through a new website designed by a London agency.

"It's an unstable environment. The website used to go down once every week or two, but now it will go down only every few months: that's mission-critical if an auction's closing. The worst thing is, the terms and conditions will say [that] if there is a site outage we can reinstate the sale; but it doesn't look good to customers if someone thought they'd won when they hadn't, or someone wants to access the site at the last minute to bid and are frustrated when they can't get on."

About 50 per cent of GraysOnline auctions are direct to consumers, and 50 per cent are geared to industrial and manufacturing business, such as engineering equipment and earthmoving machinery. Their biggest sales category is IT - Dell, Lenovo, HP, Toshiba - while most growth has been in warehousing and customer service.

You could say business is looking good, but Poolman isn't about to tap dance about it. That's not the company way.

"We don't talk ourselves up," he confesses. "There's not much chest beating. You look at the other multinationals and our guys are right up there. They may not look as slick as anyone else, but they're really smart and really competitive."