The deal comes as competition heats up in Australia’s growing direct-to-daigou market, with AuMake seeking to use its position to emerge as the big fish in a wave of consolidation.
Kiwi Buy has more than 38,000 customers on its online data base and will add around $18 million in annual revenue to AuMake’s books, bringing annual turnover north of the $40 million mark.
AuMake executive chairman Keong Chan said on Monday that the deal would bolster AuMake’s online capabilities and deliver the business with enhanced brand flexibility that could fuel future expansion.
He said the owners of Kiwi buy approached AuMake looking to sell due to financial and personal circumstance. “The decision made by the owners of Kiwi Buy is illustrative of the increasing competitive pressures facing smaller operators in the daigou and Chinese tourist markets,” Chan said.
“AuMake is ideally positioned to acquire businesses on attractive terms to consolidate the sector and also significantly improve the financial performance of the businesses we acquire.”
AuMake will increase the size of its store network to 14 in the acquisition, including three daigou hotspot locations in Kingsford, Chatswood and Ultimo. The business is targeting 20 stores across the country and hopes to have at least one in each capital city, with openings in Brisbane and Melbourne planned in the next twelve months.
While all the new stores are currently profitable, AuMake believes it can significantly improve the financial performance of the network with margin accretive initiatives such as stocking its own private label products.
The retailer has been focusing more on its own-branded ranges in recent months, having inked a with Chemsave’s network of 150 pharmacies to stock its private label products, including Health Essence and Medigum Honey.
AuMake’s online capabilities are also predicted to “improve dramatically”, more than doubling its existing digital database of 15,000 members. In return for the business Kiwi Buy’s owners will obtain $300,000 through the issue of 1.2 million shares at 25 cents each.
They will also receive up to $500,000 in compensation for inventory, subject to stock take. Chan said on Monday that while Kiwi Buy was a “highly synergistic” acquisition, AuMake was also looking to growth beyond its store network.
“We are also working closely with many of the influential stakeholders across Austraslia in the daigou and Chinese tourist markets to help them market and sell higher margin products (including AuMake owned brands) by leveraging AuMake operational resources and strategic partnerships,” he said.
AuMake’s increasing influence over the growing Australian daigou community comes at a time of tumultuous change in the emerging industry, as major supermarkets begin to crack down on re-sellers.
Chan expects AuMake to increasingly benefit from decisions like Coles’ move to restrict the sale of baby formula in some NSW stores earlier this month, as the local supply chain begins to adapt to the presence of specialised players.
But competition appears to be heating up. Last week Australia Post launched its own take on a daigou-specific retail channel, opening a test store that will ship health, beauty and baby formula products directly into China and nowhere else. It is just one of an increasing number of local players, big and small, looking to cash in amid sustained demand for Australian made products in China.