HOW POLISH STARTUP CHASED AWAY ECOMMERCE GIANTS
This is a story of a great win. It is significant because it shows how a Polish startup can win with the world’s giants.
Sounds unbelievable, but it happened and the winner is Allegro. ccFOUND has decided to take a deep dive into their victory and further success.
One sunny day, Dutchman Arjan Bakker, who came to Poland in the early 90s, came up with the idea to build a Polish version of eBay.
The fun with the Internet was taking its first steps in Poland, but Bakker noticed that the nation was in rapid transition, not only in terms of the political and economic system, but also in terms of electronic forms of payment, cell phones development, europeanizing appearance and modifying the home interior to a more affluent one.
He noticed that they were opening businesses en masse and he decided that an auction website where you can list antiques, grandma’s old lamp, a stamp collection, clothes, furniture, and trinkets would be appealing. Polish people always liked to visit flea markets, bazaars and commission shops.
Bakker felt instinctively that here is a nation that would like an online journey through hundreds of listings.
HOW ALLEGRO GET INTO THE RING
Bakker set Christmas time of 1999, for the launch of his auction website .
It is hard to believe but Allegro.pl was launched one December night, from the basement of a computer parts warehouse in Poznan city.
The decisive move happened in 2000, when Bakker entered into cooperation with Allegro’s auctions promotion on Onet.pl. It was a golden shot for both startups — from a few thousand users the number of accounts grew to 200 000 and Allegro took Onet.pl to become the third most visited platform in the country.
Various mistakes and failures of the service did not disrupt the development and users were snooping around Allegro, as in their own drawers. They were constantly selling and buying something, from millions of auctions. Some scandals happen, such as the auction with a minimum price of 1 PLN for a sea yacht listed, which was bid by one buyer and for this amount went under the hammer, in accordance with the rules and the law the new Yacht was passed to the lucky buyer.
Look what a spectacular success!
After his first 10 thousand users registered, British investment group QXL Ricardo became interested in investing in ingenious Bakker. From the British, in turn, the business was taken over by Naspers, who then sold it to private equity Cinven, Permira, Mid Europa Partners — attention — for 3.5 billion dollars!
Today, Allegro has 21 million accounts and 194 million visits per month, making it one of the top ten global e-commerce sites. At the IPO, the Warsaw Stock Exchange valued Allegro at €12 billion, and after a week of trading, the company’s value had risen to $19 billion. Some people thought that was low.
The big eBay knockout.
Five years after Allegro.pl was launched, and as the Polish e-commerce momentum became apparent overseas, the prestigious industry giant eBay announced with a big bang his coming to Poland.
The anticipation was huge to say the least, as eBay was already well known in Poland and as a brand it was already shrouded in luxury and opulence. By the time it was owned by Jeff Bezos, eBay had taken a beating from Poland, suffered a major setback, tucked its tail under itself and pulled out of the country as quickly as it had entered.
WHAT THE REFEREE’S EVALUATION?
Economists immediately examined this phenomenon and declared that Allegro defended itself with two parameters:
absolute market density, which assumes that an ad service must have balanced supply and demand, i.e., the sum of ads must match the number of inquiries;
and
relative market density, which assumes that the company is unrivaled in the local market in terms of absolute density.
It means that if company A was the first to achieve the economy scale in the e-commerce market, it would be very difficult to catch up with it. Why? Because in the e-commerce market customers are attracted by the widest possible offers, and this means that even if two companies start like: A: 51% and B: 49% of the market share, the A company, will not overtake linearly, but exponentially.
Some experts have pointed out that the brand is the winner in this ring. When a brand is active, it stimulates positive purchase emotions, making it the first choice.
When eBay entered the Polish market Allegro had already had a number of successful advertising campaigns (such as the one with the King of Allegro) and strong marketing.
The portal is to be the first choice for 12.3 million active shoppers and 117,000 sellers, resulting in as much as 98% of Allegro’s brand recognition.
eBay knockout round recognized two blows — the first a first-mover advantage and the second being a trustworthy brand.
It may be surprising but Allegro still remains local, in Poland. It turns out that the European specificity of the technology company’s internationalization barrier is the great cultural diversity of the 27 EU members.
Allegro has 82% share of e-commerce and the big eBAY 1%.
The taste of victory has made Allegro.pl the winer again and again. In this turn Allegro win with creative management. For example, it has launched a market price comparison, the engine CENEO.pl (21 million hits) and eBILET platform with over two million tickets purchased every year. Allegro.pl accounts for 46% of the Polish clothing market and 74% of the home furnishings market. 62% of the electronics market is Allegro, 74% of the home and garden market is also Allegro, and fashion 46% of the market — obviously Allegro.
And who do you think serves over the two million Polish diaspora in the UK? — again Allegro.
And who has the highest rated mobile application with amazing delivery and payment logistics? — Allegro too.
Who came up with Allegro’s SMART marketing gimmick, a loyalty program that over 2 million people entered in 1 year? — Allegro too.
Mind you, they created an internal marketplace where 100,000 users only match merchandise with about 12 million buyers, without touching the product, charging a nice commission and making a living from this intermediation alone.
Is Allegro a monopoly?
Allegro indexes the growth of Polish e-commerce, because Allegro operates entirely. The figures show that 38 million Poles is 9% of the population of the European Union. Polish e-commerce is therefore worth 9.9 billion euros, and this is 1.9% of the entire European market to begin with.
During the e-commerce boom triggered by the covid19 pandemic, net profit jumped to €64.2 million in 1Q 20, compared to €41.7 million in the same period of 2019.
In a world dominated by international giants like eBay and Amazon, Polish startup Allegro has proven how it is important to enter the market first and how the global brand can lose out to the local competitors.
There is a place on the world map for startups that have grown locally and knocked out the foreign players.
There is also a place for technology startups from Poland that have the ambition to thumb their noses at global giants.
It’s on and ccFOUND has picked up the gauntlet.
There is never too late for any one as in business only sky is the limit.
ccFOUND is another shot at global e-commerce that investors are predicting to be extremely popular. It seems that it can absorb many more users than Allegro.
Why? Because ccFOUND will pull out from the Internet everything users need. Knowledge.
ccFOUND is e-commerce for QandA, it too brings buyers and sellers together. 90 percent of transactions, like on Allegro.pl, are just financial records on the platform, the answers go from the seller to the buyer directly.
Where? How? What and how? What’s for? Why? When? Where? With what? We repeat dozens of times daily. The future of e-commerce is to guarantee the basics. The full answer to the important question. One user asks the other. The knowledge is sold. Simple.
A platform answering these questions patiently and endlessly is no more google search, nor facebook.
And what ccFOUND do business on? The same as the owner of Allegro. A percentage of a billion clicks per month.
Alexandra
