Entertainment has invested around $4 million into six-month-old online shoe retailerEntertainment invested $4 million shoe retailer

Monday, May 16, 2011

Nine entertainment co.

Nine Entertainment has invested around $4 million into six-month-old online shoe retailer StyleTread, valuing the company at $20 million, in one of the most significant investments made yet in the local tech start-up sector.

And while the investment is only the latest in Nine's attempt to diversify its portfolio with a range of digital endeavours, this is by far the most sizeable pay-out yet for such a young company.

StyleTread manging director Mark Rowland - who would not confirm the investment price - says the company has received the money at a critical time in its very short history, with growth expanding at such a rate Rowland will need to break a two-year lease 18 months early.

"We've had to move out of the warehouse we leased out six months ago because we've already outgrown it," he says. "The growth has been extraordinary."

The investment certainly comes at a time when online shoe retailing is a trend beginning to take off - a similar Australian business, Shoes of Prey, has achieved runaway success by focusing on shoe personalisation.

Perhaps the biggest move in the sector was Amazon's decision to purchase shoe retailer Zappos for over $US1 billion last year - a move Rowland said he watched extremely closely.

"In America, Zappos has been around for quite some time and has generated millions and millions of sales. We want to replicate that success in Australia."

"We saw there wasn't a lot of full-service retail operations in Australia, where customers would get the same sort of service they expect from a retail store."

Rowland is calculated in his attempt to provide a high-quality retail experience. Photographs are incredibly large and detailed, customer service operatives are available on the phone and the website is easy to navigate.

But much of the site's attractiveness lies in its various delivery options - Rowland wants to lead other Australian retailers into providing cheap and reliable delivery, as many local shoppers are turned off by lengthy delays.

"We offer everything you expect in a bricks and mortar store, including delivery. So we offer next-day delivery, and we have a 100-day return policy as well."

"We want to give a full retail service to our customers online."

As reported in the Australian Financial Review, Nine made the investment as part of another step in its digital strategy, following investments in group-buying site Cudo and financial management group Yellow Brick Road.

"We're continuing to expand our presence in eCommerce, following on from our earlier investment in Cudo and our upcoming launch of Getaway Lounge," director of strategy and digital David Coleman said.

Getaway Lounge is an online extension of the Getaway travel television series.

Coleman will become part of the StyleTread board.

Such an investment could change the way the Australian tech start-up market operates. Traditionally investments for technology start-ups have been quite small, but this latest investment could prove to be the start of a Silicon Valley-style trend.

Coleman has reportedly said the company will increase its stake in the future with more capital raisings.

StyleTread's largest shareholder was Global Online Apparel, led by prominant European investors Klaus Hommels and Oliver Jung. Rowland says both have been good partners and have allowed the company to expand without interference.

Shoes of Prey managing director MIchael Fox says the valuation provides a validation to the local online and digital shoe retailing sectors.

"That's good news. It definitely shows there is confidence in people buying online," he says.

"We wouldn't necessarily view them as a competitor either, because I think their offer is quite different. But this is a fantastic validation about the marketplace at the moment, and is certainly a welcome development."