Ferrit’s gone bust – what a surprise.

Twitter was buzzing with the news this morning, so I imagine I’m a little slow on the uptake.

Since the launch of Ferrit a couple of years ago, the generally accepted wisdom in the NZ tech community is that the site didn’t stand a chance. I’m still not 100% sure what they even do, other than aggregate products from various shops in one place. Lance, as always has all the stats and details behind it, but I thought I’d add my two cents:

Startups and corporates are two VERY different things.

Telecom is one of NZ’s biggest companies and from day one they went against almost every normal technique to nurture a startup into profitability. To name a few:

  • They spent a FORTUNE on advertising
  • They made their business hard to understand (I went there once and gave up when I felt stupid because I didn’t ‘get’ it
  • Their value proposition was kind of unclear – I’m still not sure why I’d go there over going to a store directly

We always hear about the necessity of entrepreneurs to leave their startups behind when they reach a certain stage. At that stage the skillset needed for success is entirely different. Apparently it works in reverse too. It must be hard to think small and simple when you are part of a massive complex corporate.

Balance your spending with your income

Yes, when you start out, your expenses WILL be above your income, but lets keep things in proportion. I’ve seen this exact problem before – money thrown continuously at a product that doesn’t make enough to justify it. I’m not sure what the strategy is behind this because I can’t think of any that make sense other than a lack of confidence in the strategy of the company and the desire for money to fix everything.

The Ferrit ads were stupid. They appealed only to the likes of my mother who doesn’t DO internet shopping. So the money was probably wasted anyway, but also made them the laughing stock of the very people who should have been their core initial customer base – techies and raked up expenses that ensured it would take years to even break even.

Listen to advice

I’m not sure who was giving advice to the CEO of Ferrit, but I am yet to read an article (from the past few years) from a NZ tech expert raving about the probability of Ferrit’s success.

Most of the advice was actually pretty relevent and most people tended to agree. However all I’ve heard from the Ferrit end is that the company was performing as planned… Which may well have been the problem.

Telecom may be a large company but it doesn’t meant they know this stuff. I think this was their first foray into the internet world. They would have been a lot more successful if they followed the strategy I’ve since seen another corporate take and gather as many movers and shakers in the web community around them to pump for advice.

Admit failure and move on

I was pointed to an article on Ireland’s current economic woes the other day. The guy who wrote it was very smart. He openly talked about what Ireland is doing wrong and ways to improve it.

New Zealand is similar in size to Ireland, we need to learn to accept when we have done stuff wrong and how to improve, if we have any chance of becoming more internationally competitive. When a website fails, after years of people questioning its validity, the worst and most pathetic excuse is
“The Recession did it.”

It’s not an excuse, but it gives us an excuse for mediocrity.

Imagine if Ferrit came out and gave us a list of what they did wrong. It would never happen ( I suppose that’s the role of the rest of us), but maybe the attitude of cover bums at all costs is one we need to change.

Yes it is embarrassing, but the web is still in it’s relative infancy. You will be forgiven for getting it wrong, but the mistakes are what we all learn from.

6 thoughts on “Ferrit’s gone bust – what a surprise.”

  1. It’s a pity that Ferrit’s out of business because it puts a negative slant on the success of e-commerce and e-business in this country.

    Figures from the OECD show that New Zealand and Australia have a healthy B2C e-commerce spending per-capita.

    I have had personal, insider experience of both 1-day and Ferrit. Both have ambitious e-commerce models, except that 1-day has a fabulous business model and a very user friendly, simple site, and Ferrit does not.

    In our own e-commerce business, http://www.boomskateboarding.com, we have seen a growth of over 400% as consumers become more comfortable with online shopping.

    Although Ferrit’s demise is something to lament for the industry as a whole, it is important to remember that there are success stories out there… and the old adage remains true… keep it simple and keep it real!

  2. I really think this just came down to pride. The site didnt have to fail and alot of people offerd advice on what needs to change.

  3. I think the fact that Ferrit was part of Telecom doom the site, and as you noted, the way they went about things was “against almost every normal technique to nurture a startup into profitability.”
    Large companies are stuck in that large company mindset and my guess is they approached the marketing of as if it was simple a new service offering from an existing business, because that’s all they know how to do.

    Here are two ecommerce sites that don’t have the backing of a huge company like Telecom, operate on minimal marketing budgets, and do a nice little business:

    http://www.shopnewzealand.co.nz (selling NZ goods to customers worldwide)
    http://www.intletail.com/new-zealand (a shopping directory of online shops shipping to NZ)

    I’m sure there are bunch other sites that can also be cited as examples of successful ecommerce launches that big companies like Telecom would do well to study and learn from.

  4. Good comments Nat, and generally right on the button!

    One of the problems in New ZEaland today is something I call “niceitus”. It is clearly indicated in job definitions – especially for government agencies and large corporates – and is epitomised in the inclusion of ‘good/great/excellent/exemplary interpersonal skills’ in the list of requirements for the position.

    In the real world, there needs to be the option for most, if not all, people in a business to be able to point out when things are not going well, or are not as they could/should be. In today’s corporate/government NZ, it is viewed as a SIN to do such a thing as it clearly must involve suggesting ‘someone’ is not doing what they ought to do.

    Certainly, when the instigator of Ferrit suggested the structure that might be used for it, no one dared to tell her that her idea was crazy, and that an on-going overhead of $12 million per annum for a start-up business on the net was as stupid as could be! If they had they’d be out of work for ever in this and many other countries, such was this woman’s range of influence at the time.

    As we head into the start of a major recession (yep, we’ve hardly felt anything yet, just wait till the malls are full of half closed spaces like the high-streets of the early ’80s) we Kiwis are going to have to thicken our skins and get used to the idea that we don’t always get it right and we need to be DIFFERENT NOW!

    Ferrit was a classic example of the right idea the wrong way, things like XERO are examples of the right idea the right way. Let’s hope the new Management Team in Telecom can see the hundreds of other problems there, otherwise that will be another business taken over by foreign investors and adding to the balance of payments problem that is escalating everyday as the true value of our currency becomes clear.

    Happy daze :-)

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