Lloyd Dorfman wasn’t short of a bob or two before today’s sale of The Office Group. Now £200 million or so wealthier, it’s worth pondering where the Travelex billionaire sees his next fortune.
The answer is fitting given the retail deals emerging over the weekend: the logistics around click and collect. Namely, the knotty detail about how to help people pick up the goods they’ve ordered online when they’re not at home to receive them.
Doddle will have 1000 bases in stores including Morrisons and Rymans by the end of next year, plus a bunch of mainline rail stations where you can pick up or return your online orders on the way to and from work. Several big retailers are now considering contracting in its IT, and five overseas companies are looking to buy in Doddle’s tech and expertise.
There’s a connection between Dorfman’s Doddle and TOG. Both focus on the side-effects of the digital revolution: fast-growing businesses’ need for trendy offices and retailers’ needs to solve their internet delivery logistics.
With that lateral view, Dorfman profits from the web without actually getting caught up in the really risky business of being at its leading edge. That’s smart because, particularly in Doddle’s world of retail, companies trying to stay in front have been driven to pursue ever more bonkers and expensive strategies.
First, Amazon. With its dizzying Silicon Valley valuation, you can forgive it for not bothering about the small matter of securing a return on shareholders’ capital. But paying $13 billion for Whole Foods defies all logic. Even in its US homeland, Whole Foods is a small, pricey niche player struggling as Walmart, Costco and Aldi launch their own, cheap, organic ranges.
Amazon is the polar opposite: a vast, highly price-conscious seller of all things to all men. Apart from the fact that neither has cracked how to sell food profitably online, these two companies have nothing in common.
Still, for Amazon chief Jeff Bezos, the Whole Foods deal is less than 3% of his company’s market value. So, who cares?
You can’t say that for Sainsbury’s current takeover strategy — a £1.4 billion deal for Argos now followed by a £130 million bid for corner shops mutual Nisa. Argos fills space in Sainsbury’s big stores, but it’s hard to see how electricals retail won’t turn into an online-only race to the bottom on margins in a few years. Meanwhile, the Nisa bid looks like a kneejerk reaction to Tesco’s tie-up with Booker.
And it is a deeply inferior deal. Even critics of Tesco-Booker concede the combined business will benefit from the skills of Booker chief Charles Wilson. Few are saying the same of Nisa chief Nick Read. Booker is a stable, strong business, whereas Nisa is a messy mutual facing a rebellion from many of its own store owners. And as for governance, it wasn’t so long ago when an 18-year-old launched a failed leadership bid.
Add in the monopoly implications of Sainsbury-Nisa supplying rivals such as McColls and it sounds increasingly desperate.
When deals like this even get on the drawing board, it’s far better to nibble around the edges of this retail mess like Dorfman.