Trade Me CEO sees scope to improve even as global rivals loom

Trade Me chief executive Jon Macdonald sees more options to improve the online marketplace's retail offering but isn't ready to give the game away, with Facebook's rival offering already available and the threat of Amazon still on the horizon.

The Wellington-based company has been reinvesting in its services over the past three years but can do more to make its marketplace more attractive to sellers and buyers, Mr Macdonald told analysts on a conference call today. Trade Me's marketplace segment boosted earnings 7.8% to $26.2 million on a 9.3% gain in sales to $35.2 million.

The total value of sales facilitated through the platform up 5.6% $422 million, more than half of the $789 million New Zealanders spent at non-store and commission-based retailing, which includes local online vendors, in the final six months of 2016.

Mr Macdonald said Facebook was a different competitor from other rivals who have tried and failed to take on Trade Me in that it has a very strong, ready-made network it can use. Facebook might have taken a percentage point or two in market share from Trade Me but Mr Macdonald said it had grown the size of the market in doing so.

Trade Me has already started looking at ways to deliver a better service, such as the buyer protection programme to cover disputed payments or its courier service to integrate transport into the transaction.

"There's a lot we can do on how our core retail proposition is perceived by New Zealand consumers," Mr Macdonald said. "Range and price and convenience and trust – those are the four pillars."

Mr Macdonald said buyer protection was a trust matter while the courier service was one of convenience but he was reluctant to provide any detail on future plans.

Trade Me posted a 16% gain in first-half profit to $46.1 million on a 9% increase in revenue to $114.9 million, returning to earnings growth after spending several years reinvesting funds back into the business.

Macdonald said that has put Trade Me on a much strong footing, particularly as he has a "healthy paranoia" about the threat of Amazon and Facebook and takes them "very seriously."

The need for more investment and to potentially defend against the global giants meant Trade Me's capital management was a little more conservative, and Mr Macdonald said: "I don't think we should be making big distributions back to shareholders at this point."

Trade Me's board declared an interim dividend of 8.5c a share, payable on March 21 with a March 10 record date. That's up from 7.8c a year earlier and equates to about 73% of net profit.

The company's shares rose 1% to $5.12, having gained 21% over the past 12 months.

(BusinessDesk)