City Software swallows E-Store

Lorenzo Coppa, managing director at City Software, wouldn't reveal how much he'd paid for E-Store's physical assets that include a bricks'n'mortar outlet in Sydney, intellectual property rights, distribution deals, customer lists and Web site. “But you never pay top dollar when you're buying from the administrators,” he added.

E-Store is the second online retail brand to be acquired by City Software, which acquired International Software Warehouse (ISWH) in March 2001.

“It was [E-Store's] customer lists that were their best asset actually...We believe that E-Store established itself as a great online brand and was well-respected by customers,” Coppa said. “And acquiring E-Store expands our product range.”

E-Store.com.au will continue to function as an individual online brand, alongside the City Software and ISWH Web sites. About 20 percent of E-Store's consumer electronics and small business-focused product range was not previously carried by City Software.

The acquisition would add hardware expertise and product in particular, he said. City Software will pick up all E-Store's contracts and distribution agreements, but that was not a factor in the purchase according to Coppa. “We've been in the industry a long time so we've got relationships with pretty much anybody that sells anything.”

E-Store closed last year after failing to make payments as per the deed of company arrangement established in October 2001. Customers had complained to the NSW Department of Fair Trading that E-Store had earlier this year consistently failed to fulfil orders placed with the e-tailer. Administrator Star Dean Wilcocks liquidated the company in April.

Coppa said E-Store had problems with back-end fulfillment that City Software did not suffer from. “We have a very solid back-end fulfillment system, much better than E-Store's, much more reliable. Our average order is fulfilled in 1.3 days,” he said. “They had great technology and customers but City Software has never made a loss.”

He said City Software, which turns over $20 million a year, was profitable and had no overdrafts or debts of any kind. “Even to buy E-Store we put cash down,” Coppa said. He said City Software's 12 years of experience in the sector would help them get E-Store back off the ground. ISWH had been in liquidation when City Software acquired it, but City Software had it up and running again in two weeks, he said. “It's a fair bit of work to get a business integrated into a company, but we've done it before, we're a much bigger company now, with more experience, much better resourced in terms of systems and know-how and people,” Coppa said.

He said online ordering was increasing. City Software, prior to the acquistion of ISWH, received 15 percent of its orders via the Internet. After ISWH, it received 25 percent of its orders online. The company expects the addition of E-Store to bring online to 33 percent of its orders in 12 months, Coppa said.