Analysis. How eMAG is working to become “go-to” platform for retailers

Ovidiu Posirca 18/07/2017 | 09:54

Online retailer eMAG, controlled by the South African Naspers group, is looking to reach the EUR 1 billion milestone in sales this year through a combination of acquisitions and investments in the marketplace platform, which handled 1.9 million orders last year.

 

 

It might look as if eMAG is trying to gobble up the Romanian e-commerce market, where it already holds a commanding position, and also to challenge the shiny retailers in shopping malls.

“For businesses, the platform is a channel worth exploiting to increase revenue from selling products, simply because it offers one-click access to 500,000 unique customers each day and hassle-free listings in more than 1,600 product categories,” Florin Filote, director of eMAG Marketplace, told BR in an interview.

The platform currently hosts 3,500 sellers and more than 1.4 million products. Filote says that eMAG wants to reach 7,000 partner stores this year.

“Through eMAG Marketplace, we want to make available to all Romanian businesses the widest traffic channel, which has more than 20 million visits each month, exceeding by far the top 10 Romanian malls’ monthly traffic,” he added.

 

How the retailer monetizes the platform

The online retailer takes its cut from each sale recorded on its platform. Commission varies from 7 to 25 percent, depending on the product category.

Filote says that eMAG’s commissioning policy is based on the costs its partners have or would have when selling through various sales channels. “We keep in mind the rental costs for offline stores as well as the costs a partner would have online to become relevant,” he added.

The retailer invested EUR 24 million in technology last year, in external technology, equipment and in platform software development. Out of this figure, EUR 5 million went into the marketplace.

And the growing importance of the platform is seen clearly in eMAG’s overall results.

“In other words, we generated more than EUR 100 million and over 1.9 million orders for marketplace partners,” said Filote.

The platform has been growing fast since 2015, when it got almost 1,000 stores to sell their products through eMAG infrastructure. The figure doubled the next year and the same expansion is expected for 2016.

The retailer, headed by Iulian Stanciu, wants customers to have a complete shopping experience on its platform, creating an ecosystem that of late includes even its own delivery services.

Filote said that auto, home & deco, children & toys, fashion and sport are the categories that have posted high sales and look set to continue to do well on the marketplace.

 

How companies get enrolled

eMAG has developed a clear policy when it comes to the retailers that it accepts on its sales platform, and some companies have been rejected.

“Registration on the eMAG Marketplace platform is very easy; all you have to do is fill in a form with the company’s profile on the website and send us some documents. After a short period of evaluation and validation of the profile, the partner store can display its products directly on the site in the proper section. At the moment eMAG Marketplace is the simplest way to start selling products in less than 30 days,” said Filote.

He added, “One of our selection criteria is to meet the quality standards for products and services. This means describing the product characteristics accurately, quality pictures, customer reviews, and compliance with delivery commitments.” The director says that the retailer imposes a mix of quality standards for its products and for those on the marketplace. Asked if there have been retailers whose requests have been turned down, Filote says there has been “a relatively small number of rejections on the platform”.

At the start of this year, the e-commerce player launched a separate initiative called Open Romania which targets small business owners, including NGOs. Some 400 small producers were set to be enrolled on the marketplace in the first year since launch, according to eMAG. In this category, the retailer reduced the commission in order to attract more Romanian producers.

One of the firms selling through eMAG’s infrastructure is Care Spot. The online store, specialized in the beauty industry, generated 47 percent of its total revenues through the marketplace in 2016. Representatives of the company said they are able to sell their products to clients in Bulgaria and Hungary through the platform, while the website also targets clients in Italy.

“While up to now we have focused on cosmetics and perfumes, in the future we want to sell fashion and jewelry products,” representatives of Care Spot told BR. They added that perfumes are the most popular with foreign buyers.

 

Moving into the delivery market and targeted investments

Since the start of the year, eMAG has made some surprising moves, taking over a Romanian firm that focuses on same-day deliveries and investing in another IT firm specialized in online apps.

The retailer took over an 80 percent stake in Sameday Courier and the fresh funding will be used for new investments in technology and the network for deliveries across Romania.

eMAG’s move into the delivery sector underpins its efforts to keep up with the number of orders, which grew by 50 percent year-on-year, said Stanciu. The retailer works with a series of delivery firms in Romania and in the past few years there have been issues in the industry, which is trying to keep up with surging demand in the e-commerce sector.

Earlier this year, eMAG invested EUR 1.7 million in Zitec, a Romanian IT company founded by Alexandru Lapusan.

Although it is too early to say if this investment is part of a new strategy for eMAG, to support entrepreneurial firms in Romania, what is for sure is that Zitec will use the money to hire more people, expand across Romania and create a department tasked with attracting EU funds and grants.

The group headed by Stanciu might have chosen Zitec because the Romanian company is an active buyer of stakes in other emerging firms across the globe. Its investments include Zipongo.com (the US), cosQuare.com (the Netherlands) and publishing house HAC!BD (Romania).

Zitec also develops mobile solutions, which are becoming the main channel that generates sales for eMAG.

“E-commerce has entered the mobile era and this trend will continue. The mobile phone has become the mall in our pocket and in 2017 we expect over 70 percent of eMAG’s traffic to come from mobile devices. It’s a market with significant growth potential,” Stanciu told Bursa newspaper in early June.

The growth of the local e-commerce market will remain in double digits for the next year, according to estimates. The Association of Online Stores in Romania (AMRO) forecasted that the industry will double its value by 2020 from the EUR 2.5 billion estimated for this year.

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