The Streets Online are paved with gold
Company rises without trace to bag £150m IPO
Amazon a run for its money.
This one, Streets Online, an entertainment specialist, has secured backing from BskyB, which is paying £6 million for a 14 per cent stake.
The money will come in handy in the run up to a £150 million IPO (planned for the first half of the year, the FT says).
Big bucks are required to fund Streets Online's drive into mainland Europe, a dark continent which -- with the outstanding exception of Germany -- Amazon mostly avoids.
Streets Online claims its localisation approach for European markets is superior to that of Amazon. It would, wouldn't it?
The company also needs to look over its shoulder at Jungle.com, the 3i-backed retailer, which is also planning its flotation this year.
They sell more or less the same things -- music, computer games, DVDs and (in Street Online's case) books. Streets Online differs in its emphasis on attracting affiliates -- third -party Web sites -- to carry its wares. But as far as potential investors will be concerned, Streets Online and Jungle both occupy the same Euro Amazon-wannabe pitch.
Typically, the UK stock market awards a big premium for First Mover Advantage. (In America, investors are more relaxed: they will back numbers two, three and sometimes even four entrants into the market.)
Armed with highly rated paper, and a big IPO war chest, First Movers -- like QXL and (soon) Lastminute.com -- are expected to grow much faster than their pre-IPO rivals, partly by buying up the competition. So who's going to get there first, Jungle or Streets Online? Who gets there first may very well determine which one Amazon will eventually want to buy.
Streets Online clearly grasps how to run an e-commerce Web site (even if its umbrella operation hangs out at a lousy URL, infront.co.uk). A quick run through its retail sub-brands Audio Street, Alphabet Street, DVD Street and Games Street, shows it knows what it is doing.
But just how big is it? The FT appears to have got its knickers in a right twist over the company's customer reach.
"In spite of its small marketing budget, Streets Online boasted the fifth most visited e-commerce site in December, attracting 20m users," the FT reports.
Yeah, right. Where exactly is it the fifth most visited e-commerce site -- the UK, or the world? It can't be the world, so it must be the UK.
But 20 million visitors -- that's an awful lot of overseas customers checking out Streets Online.
According to the FT, Streets Online's conversion rate is "more than twice that of most e-tailers, with 11 per cent of visits resulting in a sale".
OK, so there's 20 million users in December. Let's assume, for argument's sake, that they each visit the site one and half times on average per month. That's 30 million visits, or three and a bit million transactions per month.
Let's also assume, conservatively, that the average transaction value is £10. That works out at a run-rate of more than £30 million per month.
On those calculations, Streets Online has the most effective marketing in the universe. And still the management team is not satisfied: chairman John Croft says there is potential for even greater efficiency.
"Eventually," he told the FT, "we will know our customers so well they won't have to make an order. If we know that a customer is an Abba fan, the best of Abba album will be sent to them automatically."
Did he really say that? That sounds suspiciously like inertia selling to us. It sounds also like a recipe for an enormous overhead in post sales services, as "customers" send in their returns, and flood the switchboards with complaints.
Especially, when it's got 20 million users. For what it's worth, we guess the 20 million figure cited by the FT refers to page impressions, rather than users. This gives some indication of size, with the caveat that visitors for e-retailers have to click through an awful lot more pages than, say, a straightforward news site - in their attempt to find what they are looking for.
That's why real user figures, transaction volumes and sales totals, are more meaningful points of reference than page impressions. ®