Virtual tool store dominates online space

by | May 2, 2024

When Gary Kozhushnik first launched his online tool business, www.discounttrader.com.au, 17 years ago, he never would have imagined the impact it would have on the industry or predicted the rapid growth and impressive evolution it would undergo in such a short time.

Business: Discount Trader (www.discounttrader.com.au)
Owner: Gary Kozhushnik
Location: Notting Hill, Melbourne
Buying Group: Hardware and Building Traders (HBT)

Establishing an online tool business in an industry dominated by brick-and-mortar stores is no mean feat. Despite this, Discount Trader’s remarkable success proves that the online space is not only a viable channel, but a thriving marketplace for DIY enthusiasts, tradespeople, and homeowners seeking convenient access to quality tools and equipment.

In 2008, Gary established Discount Trader as an online store, launched from his small apartment in Melbourne. Leveraging his background in electrical engineering and experience as an electrician, Gary identified a growing need for hand and power tools within the expanding online marketplace.

Initially, Discount Trader served mostly contractors, but as the business expanded its customer base diversified to include a wide range of clients such as businesses, families, recruitment agencies, homeowners, and consumers from across Australia and New Zealand.

“We serve many trade customers, especially given the automotive industry’s reliance on skilled tradespeople who regularly utilise our business. In addition to this, we have a large customer base of DIY enthusiasts. Basic tools like spanners and hammers are essential for household projects and is also why our products appeal to a wide range of individuals across various demographics,”
Gary explained.

Discount Trader thrives online

The business has experienced remarkable growth since its humble beginnings when it initially offered only a limited selection of product lines. Gary attributes his success to building strong relationships with suppliers and expanding his variety of products to effectively address customer needs and preferences.

“I consistently expanded our inventory to diversify and broaden our product range. My primary goal was to increase the variety of product lines and explore new areas of business. It was crucial to take on board more suppliers and evolve our operations to meet customer demand and industry trends.”

“In the beginning, I initially focused on selling cordless power tools but this basic range quickly expanded into the mechanical and automotive industries. From there, we diversified further into outdoor gardening, home and garden, and indoor cleaning products,” Gary said.

Humble beginnings

Although Discount Trader originated from Gary’s small apartment, it was not long before he relocated his operations to a garage nearby before quickly expanding into multiple warehouses. The impressive growth emphasised just how rapid Discount Trader’s expansion was as well as its success in meeting consumer demand for tools and equipment.

“In 2009, I rented our first warehouse after the capacity of the garage was quickly surpassed. After moving into the garage, it was then that our most significant growth occurred when our major supplier introduced Discount Trader to the HBT group.”

Gary said becoming a member of the HBT group was crucial because membership granted him access to a vast network of suppliers, transforming his business significantly and fuelling its growth path.

The same year, Discount Trader secured a 250-square-metre warehouse which also included over-the-counter customer sales and pickups.

“When the pandemic struck, our online sales skyrocketed. Fortunately, we had established a robust online presence fourteen years prior to the pandemic which positioned us well during these challenging times,” he said.

Discount Trader has since broadened its product offering by implementing a new storefront in its latest 1350-square-metre warehouse in Notting Hill, Melbourne. The warehouse itself features a nine-metre-high roof which allows for substantially increased storage. Gary says that this strategic expansion improves customer access to a greater variety of products while effectively handling larger stock volumes.

Gary said the new location not only allows for a fourfold increase in storage capacity, but also enables him to purchase in bulk and provide customers with better deals. 

“Furthermore, we have partnered with leading power tool and hand tool companies to create dedicated showroom spaces that has significantly contributed to our business expansion,” he said.

Diversification and expansion

Discount Trader’s new premises include a 1350 square metre warehouse with nine metre high shelves for extra storage.

When growing an online business, Gary said that aligning product selection with market trends is crucial for business success. He says that while the effort required to manage inventory effectively is significant, a steady approach ensures product relevance and customer satisfaction, which are key factors in Discount Trader’s strategy for sustained growth and competitiveness.

“It often takes several hours over the weekend to keep our listings updated. Investing extra time and effort into the business always leads to positive results,” he said.

Today Discount Trader is staffed by six full-time employees, including family members, supplemented by contractors who oversee website updates and ensure operational efficiency. The online shop continues to thrive due to positive word-of-mouth referrals from long-term customers.

“We use Google AdWords and email campaigns to encourage customer sign-ups. We also maintain regular communications with our customers via email to inform them about our promotions, new offers and exclusive Discount Trader deals,” he says.

Despite facing strong competition online, Discount Trader also caters to local customers who prefer the convenience of shopping in-store.

“We differentiate ourselves by offering a broader product range. While most brick-and-mortar stores have limitations on their SKU selections, we can stock significantly more product lines. Our extensive inventory and high stock availability set us apart and attract customers. Maintaining adequate stock levels is crucial for competitiveness, and we strive to have 90 per cent of our items in stock to facilitate direct orders,” he said.

Gary acknowledges the competitiveness of the online space, driven by the growing number of businesses transitioning online in recent years.

“I understand the shift towards online retail as a survival strategy, especially during economic downturns. Retailers are exploring new channels to reach customers amidst challenging market conditions. It is crucial to adapt and innovate to stay competitive in today’s evolving marketplace,” he said.

Broadening horizons

Despite the recent economic slowdown, Gary believes that adapting the business to consistently meet customer needs and building strong supplier relationships to secure better deals is crucial. This proactive approach ensures Discount Trader remains resilient amidst market fluctuations, he says.

“It is for this reason that we are expanding our product range to include camping goods, 4WD products, and cleaning items. Additionally, I also aim to broaden our customer base to encompass every suburb across Australia. Our longstanding presence over the past 16 years has earned trust and recommendations from countless satisfied customers, fuelling our growth.”

In the future, Gary aims to expand warehouse storage capacity and enhance both in-store and online sales to meet growing demand and reach a broader customer base.

While he acknowledges that the business does have a solid reputation with 90 per cent of products delivered accurately and on time, Gary says there is always room for improvement.

“The website represents the main revenue stream for the business and any disruptions to its operation can have significant financial implications. Downtimes or technical issues not only lead to lost sales opportunities but also have an impact on customer satisfaction. Ensuring the website’s reliability is crucial to maintaining a steady income and providing a seamless shopping experience for customers. This is also why regular monitoring and maintenance are essential to minimise disruptions and maximise online sales performance,” he said.

The increasing shift towards online shopping also means that robust online security measures become paramount to protect customer information and transactions. As more customers embrace online purchasing, Gary says that the need to safeguard their personal data and guarantee secure transactions is critical in maintaining trust and confidence in the online shopping experience.

“We continuously monitor website performance by analysing traffic patterns and customer behaviours. Speed is critical for increasing conversions because a quick and stable website drives more sales. By prioritising these aspects, we aim to optimise the online shopping experience and maximise customer satisfaction.”

Gary also acknowledges ongoing challenges in negotiating freight costs but remains committed to securing competitive deals with courier companies. Despite the surcharges for residential deliveries, he works with multiple carriers to minimise costs and ensure efficient shipping for customers across different regions.

“Some carriers charge exorbitant fees, especially for residential deliveries. To mitigate costs, we collaborate with six carriers to identify the most competitive options. By leveraging multiple carriers, we ensure efficient and cost-effective shipping solutions for our customers.”

Gary emphasises how buying patterns correlate with population distribution across New South Wales, Victoria, and Queensland. This understanding guides Discount Trader’s strategy to meet diverse customer needs effectively in different regions.

Discount Trader stands out from competitors by offering extensive inventory and high stock availability.

“In the end, we are in an industry that feeds into housing and we are an essential service, so despite the slowing in the online and in-store space, this sector should grow across the country soon,” Gary concluded.