Wesfarmers Pulls the Plug on Catch.com.au: A $230 Million Loss and 190 Job Cuts

Wesfarmers, the Australian retail giant, has announced the closure of its online marketplace, Catch.com.au, sending shockwaves through the Australian e-commerce industry. The decision, effective by the end of April 2025, will result in approximately 190 job losses and a significant financial blow for the company. This move comes after Catch recorded substantial operating losses, estimated to reach between $38 million and $40 million for the six months ending December 31, 2024. The total cost of this failure for Wesfarmers is estimated to surpass $400 million. This marks a significant setback for the company, which acquired Catch in 2019 for $230 million, and leaves many questioning the future of Australian-owned e-commerce giants in an increasingly competitive global market.

The Downfall of Catch: A Timeline of Losses

Catch, originally launched in 2006 as Catch of the Day, quickly became a popular destination for bargain-hunting shoppers. However, recent years have been marked by significant financial challenges. The company's struggles started long before the announcement of its closure. After posting a $20 million EBITDA in the early stages of Covid, Catch suffered a $24 million loss in FY21, followed by a staggering $88 million EBITDA loss in FY22. This sharp decline, which occurred even during the pandemic-driven boom in online retail, indicated underlying problems that Wesfarmers' subsequent efforts could not resolve. The escalating losses, coupled with intense competition from global players like Amazon and Temu, ultimately led to the difficult decision to shut down the platform. The increasing competitive intensity in the Australian e-commerce sector ultimately proved insurmountable for Catch, impacting its ability to generate satisfactory returns.

The Impact of Global Competition

Wesfarmers managing director Rob Scott attributed the closure to the increasing competitive intensity in the Australian e-commerce sector, particularly the entry and expansion of international competitors. He emphasized that standalone, broad-based marketplaces require substantial scale and traffic to achieve profitability, an advantage that international players possess through their global reach and resources. “International players are better able to leverage their global scale, networks and technologies compared to Australian-owned broad-based marketplaces,” Scott explained in a statement. This underscores the challenges faced by local businesses competing against deeply entrenched global giants with massive resources and established supply chains.

Restructuring and Redeployment: The Future of Catch's Assets

While Catch will cease operations as a standalone entity, its assets will not be entirely lost. Wesfarmers plans to integrate Catch's e-commerce fulfillment centers into its Kmart Group, streamlining logistics and improving efficiency. The existing utilization of Kmart Group’s fulfilment centres is less than 50%, and the integration with Catch will enhance the customer experience and improve efficiency, resulting in faster deliveries at a lower unit cost. Select digital capabilities developed by Catch will also be transferred to other retail divisions within Wesfarmers. This strategic restructuring aims to maximize the value of Catch's infrastructure and expertise while mitigating the overall financial impact of the closure. Kmart Group MD Ian Bailey stated that the transition “will result in faster deliveries to customers at a lower unit cost, while relieving pressure on our busy stores.” This transition represents a pragmatic approach to salvage valuable assets from the defunct company.

A Bid to Save Catch?

The announcement of Catch's closure has also sparked controversy, with Ruslan Kogan, co-founder of ASX-listed online retailer Kogan.com, publicly stating that his company attempted to acquire Catch multiple times from Wesfarmers. Kogan expressed his disappointment with the decision, claiming that his company possessed the expertise to make Catch thrive. Kogan's statement sheds light on the potential alternatives considered before the ultimate decision to close Catch was made, highlighting the potential for alternative outcomes had a different path been taken.

The End of an Era: Reflecting on Catch's Legacy

Founded by Gabby and Hezi Leibovich in 2006, Catch started as Catch of the Day and quickly gained popularity with its daily deals. The Leibovichs’ entrepreneurial journey involved launching other businesses such as Scoopon and EatNow, demonstrating their impact on the Australian e-commerce landscape. The sale of Catch to Wesfarmers in 2019 for $230 million marked a significant moment in their business history, before ending in this current situation. The closure of Catch signals the end of an era in Australian online retail, marking the exit of a significant player and underscoring the ever-changing dynamics of the e-commerce market. The final chapter for Catch concludes with job losses and substantial financial losses.

One-off costs and the Future for Wesfarmers

The decision to wind down Catch operations will also lead to significant one-off costs for Wesfarmers. These are expected to range from $50 million to $60 million, including approximately $25 million to $30 million in non-cash costs. This additional financial burden underscores the high cost of market exit strategies in the volatile e-commerce sector. The future direction for Wesfarmers after this failure remains to be seen.

The closure of Catch.com.au serves as a cautionary tale for Australian businesses operating in the increasingly competitive global e-commerce landscape. It highlights the challenges of competing with international giants and the importance of adapting to the rapidly evolving market conditions. The legacy of Catch, however, remains as a testament to the entrepreneurial spirit and innovation that shaped the Australian online retail sector.