Divan analyst No. 101. Marketplace as the aggregation of shops
Hi.
Surely you enjoyed Yandex.The market for search goods and maybe even bought certain goods on this site, directly from sellers or, as in the last time, with Yandex as a mediator. For most people in Russia Yandex.The market represents the marketplace, as he was from the first day of existence. In Russia, several teeth on edge compared to Amazon, which also is a classic marketplace, because there was already a dozen “Russian Amazon”, in the end, none was successful. Marketplace on the Internet is a marketplace where the customer can choose different product categories, compare offers from different suppliers and buy the goods directly at the site, directly from the seller, in the second case, this is a simplified version of the marketplace. To some extent, the marketplace is the aggregation of offers from various companies that exist in one place.
In 2015 Yandex.The market for the first time publicly estimated the turnover of goods on the platform, then the method of calculation was as follows: prices of goods, which moved customers to “Buy”, were summed, and then multiplied by the average conversion rate of the site. In Yandex.The market at that time did not see the actual sale, as we worked on the model CPC (Cost per click), it can be considered advertising and traditional for this kind of aggregators. Seeing the transitions of the goods, the company has not seen sales, so the turnover for 10 months of 2015 to 72.5 billion rubles can be considered very conditional. Later Yandex.The market has allocated a separate company, and Yandex did not report on turnover, but if you look at the report of Yandex for the year 2016 we will find an interesting figure, revenue e-commerce amounted to 4 billion 718 million rubles, it includes the sale of Yandex.Market. No figures even close to showing 70-80 billion roubles per year, no, this is against the background of transition to a model of CPA (Cost per Action), where Yandex money received for the sale of goods, that is, we should have seen a sharp rise in turnover, but this did not happen.
If you look at the EBITDA for the e-commerce segment, it appears that this figure is falling.
The former head of Yandex.Marketa Pavel Aleshin, leaving his post, wrote in Facebook: “so, Yandex.The market is growing at 49% of revenue, for the first 3 quarters earned 3.3 billion rubles and increased its market share of e-Commerce. And I’m with the New year starting a new life. Yes, you read that right — I was just misleading, I’m leaving Yandex.Market”. These words correlate well with the report in Yandex and show that the e-commerce segment almost entirely composed of sales Yandex.Market. Perhaps there is something else, but this is not so important.
The monthly audience of Yandex.Market at the beginning of 2016 amounted to 20 million people, in any case, this figure is constantly flashing in different presentations. And it is in presentations as 2013 and 2016. From this I conclude that the audience has stopped growing, the company has taken all possible niche. Also shows the number of shops is 20.000 pieces in different product categories. This figure also raises the question, after the transition to CPA model many players have fallen off and stopped working with Yandex.Market.
Assessment of AKIT, the e-commerce market in Russia to 2016 increased by 18% year-on-year and amounted to $ 15 billion, or roughly 870 billion. It is easy to calculate that the share of Yandex.Market in 2016, then, is only 0.5% of the total market capacity. Yandex.The market appeared at the end of 2010, that is, it can be considered one of the oldest on the Russian market.
To give the numbers of Yandex.Market in perspective, let’s look at online sales MVideo for 2016, they amounted to 25.9 billion rubles (growth year-on-year – 26.6%). Online sales in MVideo understand the order through the website with home delivery or pickup from stores. Total sales MVideo for 2016 amounted to 216.2 billion. The company is the largest player in the market Btie. Report for the year 2016 can be found here.
Hope you are not tired of the numbers, as they give perspective and describe the market goes MVideo with his project of marketplace, which was created in opposition Yandex.Market and is its direct competitor. On the other hand, the position of MVideo is that the project of the marketplace will look very different than that of Yandex, and the threat to the existence of this business for Yandex in the medium term looks very real. Let’s deal with why this is so.
Marketplace from MVideo – goods.ru – the basic principles of the platform
To understand the background of the emergence of the marketplace from MVideo, we should remember the opposition of the founder of the company Alexander Tynkovan with gray market, in particular, with Yandex.The market, which is promoting similar products and competes with sales of officially supplied equipment. For MVideo, this means a partial loss of growth potential, so as to compete with the suitcase supplies can not be too much different level of service, warranty work, and other parameters. In MVideo consciously increased its online sales, and if paying virtually any goods on the website by credit card you get 5% discount.
The movement towards online sales is typical for the market, as it allows to reduce the cost of sales, as well as contents of the shelf, increases profitability for the company. Opening of the subsidiary, which creates the marketplace, often trying to explain what MVideo wants to obtain an additional channel to market its products, usually talk like ordinary people. Marketplace Goods is a 100% daughter company of MVideo, but this business is established as an independent, so, MVideo is one of the equidistant partners, who will compete on the court with other players. Below we’ll look at why it is so and not otherwise.
According to Euromonitor, in 2015 in the UK, 35% of the market of online sales took the marketplace in the United States is 41% in India, 69% in China, 63%. Data on Russia, but on circumstantial evidence, we have not exceeded 10%, i.e. this market segment will grow, no reason to think otherwise no.
So, how does goods.ru and that offers to its customers? This is a classic marketplace, which can connect to any store (legal entity). One of the main conditions is the purity of the origin, that is, it should be the official distribution. Given the close ties new design with almost all suppliers and manufacturers to achieve verification of the goods is not difficult. At first the new design acts as a backup, which opens for goods.ru different doors and gives you the opportunity to work with major companies. This is a huge plus, because for new players it is often impossible to reach the producers, they simply ignore them. No gray goods willingly, as the company believes that the situation with the gray market will change, and gradually it will begin to decline. This process can take several years, can be extended for five years, but the result will be the same: the development of IT systems through control of sales from the regulatory authorities – all with the most, will complicate the sale of goods, imported without payment of VAT and customs duties. I want to draw your attention that for Yandex.The market in this option is the most presented goods in some categories is grey market, which, however, is not marked. In this aspect goods.ru and Yandex.Market are antagonists, the first work with the official supply, the second any, but because of the organization of the algorithm of selection of goods on the site will always win serology.
For sellers goods.ru interesting in that it offers a model of Cost per Sale (CPS), that is always executed the order. The marketplace takes care of the delivery of the goods, reception of payment from the buyer, logistics and other little things. Also for maintenance orders have a call center that can contact the buyers that makes this marketplace with major online shops. The beauty of this solution is that the seller sees the value of the fee for the goods in each product category and can choose what is beneficial and what is not.
A strong point for small merchants will low cost non-cash payments (due to the minimal turnover rates from banks and payment systems), which is impossible to achieve for small or medium shops. Another point is logistics which is built on the basis of optimum cost, that is, there will also be the minimum price of delivery, which can not achieve the many Internet shops. As you can see, in the Goods take on typical business processes and build them in the image and likeness of, as in MVideo (very conditional, but still). That is, effective selling price, you don’t need to advertise your goods, this is an additional and effective channel in addition to your usual activities.
The buyer will see not only the product but the price of this item in different stores. The charm of the Goods lies in the fact that a unified system of processing of orders on the side of the marketplace, so you can choose products from different vendors, and then they will be combined into one shipment and delivered to your home. For example, I buy a phone from one company, from another tablet, and a laptop from a third, all these products will come to me one by courier. At the moment, logistics is still a weak point of most online players, here it tries to bring a new level is one of the key indicators for the marketplace, and he is also a constraint for its development.
So, in 2017 the fall marketplace opens in Moscow and the Moscow region until 2020, it will appear in the cities, but no expansion in small towns will not. The explanation for exactly one thing – lack of proper logistics. That is, in this project the rate is made on logistics and the gradual increase in the number of orders. Let me remind you that the same enter.ru in the first year of the new year holidays could not serve most of the incoming orders, logistics simply did not cope with the influx of customers. Goods have a balanced approach, it takes into account negative experience of other players.
Initially selected the following product categories: home appliances and electronics, goods for home and repair, children’s products. Category will be gradually expanded, and by the time of the startup showcase will consist of several tens of thousands of products. Modest? The question is exactly the same balanced approach is necessary to build structure, to build a showcase and a long tail of goods. I like the approach of the Goods it is this gradualism. Talking with Solomon Kunin, CEO of the project, heard that I was won over: “that game Is long, and we understand that, no problem to solve all issues immediately”.
For the buyer of Goods will give some clear and simple advantages. First, this is an additional loyalty program: buying in the marketplace, you’ll receive points that can be redeemed for discounts on future purchases. This is the fundamental difference from the same Yandex.Market, there is no loyalty, do not say anything, but perhaps under the influence of a competitor will attempt to create them. Secondly, it is a unified payment and delivery, as already said, no matter what suppliers product, you get it one by courier. Payment is possible in cash upon receipt, and also on the website. It’s unclear whether discounts and bonuses when paying on the website, but it would be logical, as it reduces additional risks, such as attacks on couriers for the money.
Warranty and service – Goods acts as a single point of entry for all your problems and takes the solution to these issues. That is, you do not need to contact the actual seller of the goods, all communication takes on the site (you have to see how it will work in practice, but it’s a unique approach, this in the moment). Product you can pick up the courier or you can pay at the point of receipt of returns.
Best price guarantee – if you find a better price on a product that is in the marketplace (white goods in one of the shops that are not represented on the site), then you as a buyer get it at a minimal cost. Nothing like that in Yandex.The market is not, and cannot be based on the mechanism of price formation, which is at this aggregator.
I forgot to mention that, in addition to the shipping courier, you have the opportunity to take by self the goods in postmatch, there will be large number of the city.
Another important point – you have different goods in one order, but one vendor suddenly can’t deliver, for example, he ran out of diapers. The marketplace takes care of this problem, finds another supplier and for the same minimum price adds the item to your order, that is, all risks Goods, you as a buyer simply can not see.
Mechanics of Goods is radically different from what we see on Yandex.Market. This guarantee the best prices, and delivery optimization (LCL), and a loyalty program, and warranty service, and much more that comes from experience MVideo retail as a major Federal player. In Yandex just there are no people with similar experiences and look at retail sales online, they have nowhere to take. The gradual development allows to assume that Goods will be able to avoid the problems of growth, which is important.
I am impressed at how Goods I see in this project, the experience MVideo, as well as the experience of other marketplaces that have been in Russia, but for various reasons did not take place. Problem for Goods will be that area will need to gradually develop in the network, that is to attract buyers, including advertising. This is a weak point compared to the project of Yandex, where the traffic is poured through and other resources of the company. Once again, MVideo Goods acts as founder and partner, no discrimination of other traders will not.
From the technical points that I thought important, updating the product on the website is 15 minutes, that is, the seller can change prices almost instantly. Trade balances are displayed as Delta, show the actual number of residues for the marketplace there is no need.
Plans Goods – take 15% of the online trading market, apparently, is the prospect of 4-5 years. The plans are ambitious, but achievable. The development of this project will automatically mean the loss of Yandex.The market of “white” sales of goods, transfer them to the new site. That will raise the question of how to develop this project. Formally, the Goods may become a strong competitor for any of the marketplace in Russia, but will have to discuss it after the fact. I have a certain confidence in the abilities of Alexander Tynkovan to build the right business model, and the Goods looks well thought out, devoid of the weaknesses of their predecessors in Russia. In the second half of this marketplace opens and we can with you to estimate how successful left start. Meantime we can say that the idea and implementation at this stage is excellent. I hope that in Yandex.The market wakes up from sleep, forget about his throwing last semester and will start processing platform, otherwise they may lose the market, which, however, they are unable to subjugate. After all, 0.5% of the online trading market is nothing, a very small number. Apparently, never had ambitious plans and desires to fulfill them.
Links
The analyst’s divan, No. 100. Up raised to the standard why do companies repeat each other
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Divan analyst No. 98. Pilot production, or some measure to gauge success