Marketing Week (MW): How did musicMagpie start?
Eren Ozagir (EO): The founders – Steve Oliver and Walter Gleeson – and I were all involved in Music Zone, a music retailer that was third-largest behind HMV and Zavvi [until 2007]. Some years later, they came together, thought about second-hand music and launched a small web offering that allowed people to buy and sell music. The website was then rebranded as just a place for consumers to sell their old music. That started to gain some traction and Martin Lewis at MoneySavingExpert.com picked it up. A couple of million people saw an email, some of them responded to it and the servers blew up.
They got some more servers, went back online and said: ‘Let’s test some TV advertising and see if that works.’ The first campaign, which they built themselves, cost £15,000 for a month – which is not a lot of money in TV terms – and it worked. I got a phone call from the founders some years ago now and they said my job would take up no more than three days a week. Three days a week is now all of my entire life, three-and-a-bit years later.
MW: Why did the business need a marketer?
EO: When I first came in, we started to think about the profile of the customer. It was an online business but nobody had looked at the data. We had all the data in the world, but nobody had asked ‘Who are we targeting?’ At the time, the company was advertising on ITV2 targeting women at home, because that’s who they thought they’d be able to get at, and that’s where the cheap TV ads are.
Fifty per cent of our customers are female, but 50 per cent are men and men sell us more stuff and better stuff – with the exception of clothes, where women outperform men in the quality of goods and also the volume, as you’d expect.
MW: Why are men more lucrative customers?
EO: The reason we get more entertainment and technology products from men is that in the home it is usually men that own them. Their girlfriends, wives and partners go through them and say: ‘I’m not sure if I can sell that.’ We get a spike, where there’s something they feel comfortable and confident selling, but give the [male] owner of the product that opportunity and watch them rip through that stuff quickly – particularly on the iPhone app. The basket size is enormous.
MW: Having been involved in Music Zone, which closed in 2007, and with the high street declining, was it crucial that your next venture should be digital?
EO: The move was away from a new product to a product that has a profit margin. Selling chart DVDs, chart CDs and chart games, you can see where the industry has found itself and the margins aren’t huge. What we have done is legitimise the second-hand market and made it viable. The online piece is more about the fact that people do want to access it in that way.
MW: Do you see musicMagpie as being in competition with eBay for selling old possessions?
EO: We do research every December. This year we overtook – in the media category specifically – eBay and Amazon in unprompted awareness about where to sell things. That’s a huge deal for a small brand, but we don’t see ourselves as competition for eBay and I don’t think eBay sees us as competition. There’s a section of the market that’s going to eBay and there’s a section that aren’t going to sell things on eBay because they’re not interested – our job is to convert the people that were never going to sell.
The people who want to use eBay like the experience of eBay. They like the countdown [auctions], they like working out fees, they like getting to the post office and sticking labels on things – there’s a lot of time and effort required in managing that process. Online communities such as auction websites require you to dedicate time to managing a customer experience. We don’t do any of that, so we’re not for that audience. We’re for the audience that says: ‘I wouldn’t mind making space and if someone is willing to offer me some money for it, I feel good about that.’
MW: What makes the online experience of musicMagpie simpler than an auction site?
EO: We have one valuation engine, where you can enter pretty much anything and it will give you a price – you can even use your mobile app. At the end of that, we’ll send a courier to your door on the day you choose, for free. We’re about everyman, and everyman in our view might be a little bit lazy.
MW: You call yourselves the ‘recommerce’ company? What does that mean?
EO: Recommerce is about enabling everybody to feel that what they don’t want still has a value. We can help unlock that, and we can do it without any hassle to you. People think about online services making it easier to sit at home and spend money, but we’ve helped to change that. The majority of people use the money they get from us, 70 per cent of it, for everyday spending – on grocery shopping, on petrol in the car.
Nobody knows if you made £150 at musicMagpie because you did it between yourself, your tablet and musicMagpie, you put the money in your bank and you spent it at the supermarket. For me that means it’s an everyday reality; that recommerce is a living, breathing thing. It’s acceptable and it’s not about pressure, it’s about feeling smart about what you do.
MW: How does your valuation engine work?
EO: It’s our own technology, all built in-house. The valuation engine is a series of algorithms and while we have a variety of touchpoints around the world, including our own stock file, there’s a lot of emphasis on our own knowledge. We recognise 12.5 million entertainment barcodes, which is a huge number – we’ve physically touched more entertainment items than nearly anybody. We know what the sales patterns do and we know how the weather affects it.
If you want to sell a pair of jeans it asks you a series of questions that we have designed to inform our database and valuations. It would look at size, material, style, length. Then obviously there’s the brand.
MW: Are people generally happy with the valuations?
EO: I think they are. If there is a percentage of people that aren’t, you could go and find them online because the majority of people that are unhappy will moan about it. More than likely if you’re selling a Michelle McManus CD it’s going to become a car headlight because it will be ground down; that’s its value and that’s why you’ll get a low valuation. The key is in the words ‘offer price’ – we’re not making you sell anything. The majority of our customers don’t come back and say ‘we want more’ because they accept what it is and they accept that things like us paying the postage are a big deal.
MW: Do you sell or license your technology to other brands?
EO: No, we don’t, and there’s a reason for that. Prices, to me, are our intellectual property. I’m purely about us being a destination URL for what we do. If you want to sell your stuff, musicMagpie is the first place I want consumers to think about going to. I don’t want to compete with myself.
MW: How big an impact is mobile having on the business?
EO: The biggest challenge is that mobile traffic to our website has jumped. Those mobile visitors are hurting businesses’ sales conversion rates online if you are not optimising what you are doing. Our big challenge is to make sure that our new, optimised service starts to take iPad users, Nexus users, iPhone users and all those people, and converts them there and then.
The messages slightly change. When you use a desktop or laptop, turning it on and going to a web page is a signal of intent. It’s more passive to pick up the nearest mobile device and be a visitor. We need to live with that and trace those mobile users through to action, but also prompt them a bit.
Eren Ozagir’s tips for…
…starting up an ecommerce business
Don’t use third-party companies to build your first tech platform. Get the skills in-house, making you and what you are building smarter.
…launching a website
Don’t try to finish your website before you launch it or you will never launch. Websites don’t get finished: they evolve, they break, they go backwards, forwards and upside down.
…meeting customers’ expectations
Fix in your mind the importance of meeting the expectations of your customers. If you don’t consumers can and will litter your store front with their forum posts, reviews, tweets and comments.
The route to success is based on the same simple principles we as website owners have been using for years – presenting meaningful content that converts browsers to users fast.
…developing digital platforms
Don’t forget to keep your apps in top shape. The value you can derive from having a great app can change your business.
…how do you acquire new customers? Which channels are most effective for you?
Eren Ozagir (EO): We spend a ton of time and money online. Search is really important to us – natural rankings are really important to us – and we have put a lot of focus in the last two years on building our brand online, working with the obvious search engines – Google and Bing. Those search engines now see us as a brand. A lot of people see a TV ad, go to Google and search for musicMagpie. We need to be there, we need to be in their faces and we need to be what they expect. The listings need to look right on both paid and organic search. We have invested all that time in content on the site, keyword research and in making sure we’re doing all the day-to-day things we need to.
…how important is the user experience in attracting sellers? Do you test the valuation process?
EO: We do. It’s not uncommon for me or the CEO to do a transaction blind. A/B testing is something we are investing in heavily. We are spending a lot of time this year redeveloping the proposition online so you are going to see a new website, a fully responsive iPhone app which is about to launch and a new series of apps thereafter. It’s a reconditioned website that is really focused on that one box: enter anything, because that is where you’re going to get a valuation from.
The valuation engine is tested all the time and not just by the staff. The system knows what it is doing. It will tell us, in huge text message alerts at 3am, if something is not right. It doesn’t just go to the IT team, it goes to me, to the CEO and to other senior members of the business.