Defying Australian Consumer Rights was probably the biggest mistake online bookstore Booktopia (ASX: BKG) made. So much so that the Australian Competition & Consumer Commission (ACCC) took it to court for refusing refunds to customers after two days of delivery. It has cost Booktopia over $2 million.
Between January 10, 2020, and November 2, 2021, Booktopia claimed on its website that customers were required to inform them within two days of delivery if a product was faulty, damaged, or incorrect to be eligible for a refund or other resolution. Additionally, it stated that certain products, such as digital content and eBooks, were not eligible for refunds. Australia’s consumer guarantee rights say otherwise, asserting they do not have a “two-day expiration date”.
The consumer law breach ultimately cost Booktopia a $6 million settlement with the ACCC of which $2.2 million has been logged by the Company and more to be paid off over the next four years.
Attempting to put the saga behind them, Booktopia is opening a highly automated Customer Fulfilment Centre (CFC). It will launch in November, in the come-up to Black Friday and Christmas.
Over the next six months, it will transition from two existing CFCs to a new CFC at South Strathfield. The Company has hired specialists to build its robust designs formally and plans to mitigate transition risks. Funding for the transition was announced in early February. The $12 million investment will allow growth to at least $360 million in annual revenue.
Booktopia Chairman Peter George commented, “We are optimistic the new Customer Fulfilment Centre (CFC) at South Strathfield will improve margins and lower operating costs and we are now focused on ensuring a smooth transition to the new facility in November and securing longer-term funding.”
The Company will also utilise a third-party Warehouse Management System (WMS), which will deliver further efficiencies in the new CFC, replacing some elements of the company’s current proprietary technology platform.
In H1 FY23, Booktopia’s revenue fell by 15.3% to $110.08 million from $130 million in H1 FY22. The Company believes the previous period was bolstered by Covid-induced online shopping demand. In the first half of FY23, the total units shipped also fell 16.7% to 3.94 million, with people spending less on its products. The average selling price was down 2.4% to $27.60.
Earnings in the first half fell considerably by 67.7% to $1.32 million as Booktopia reported a net loss of $3.90 million, increasing by over 100% from $630k. It also suffered a $2.72 million loss for the accelerated depreciation of assets in the current CFC.
George added, “The first half presented difficult trading conditions with various economic headwinds combined with volatile conditions as consumer behaviour adjusted to the post-COVID retail environment. We have taken the necessary action to build a better business for the long term. We believe we have the right people, strategy, and brand to return to more traditional levels of growth in the future.”
Booktopia’s results have reinforced its commitment to the strategic end-of-lease migration of operations from Lidcombe to South Strathfield with the new facility to provide lower costs and greater flexibility to respond to changing consumer demands.
Alinda is a Business Reporter for The Sentiment
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