Sean: Today we have Steve Oliver from Music Magpie, thank you very much for joining us Steve. It would be great for you to take part in this new mini-series we’re doing which is interviewing different ecommerce business leaders about life during and after COVID-19 and how you are adapting and innovating in the world of ecommerce and marketplaces.
To kick us off, can you give us an intro about yourself, your role at Music Magpie and of course Music Magpie itself.
Steve: Wow, how long have we got? I’ll try to keep it as brief as possible. I’m Steve, the co-founder of Music Magpie. The business started in my garage in Hazel Grove in Stockport in 2007.
I’ve actually spent the morning in our first DC which we’ve still got in Macclesfield. We’re still based in Stockport, our office is at Stockport Exchange, the main DC is in Hazel Grove, and we also have the original one in Macclesfield.
From the start of launching Music Magpie I used the phrase ‘the lazy man’s eBay’. So what the model does is when we buy from consumers it allows people to sell on-site to us and get a fixed valuation. Whether it be our original product categories like DVDs and games or 70% of our business which is consumer technology, led by mobile phones but also tablets, consoles, MacBooks etc.
People go onto the site, get a valuation, we provide the logistics, you drop it off or we come and pick it up from you, and the day it arrives to us in our warehouse, we pay into your bank account on the same day.
So that’s the buying side of our business when you’re selling to us. The other half of the business is obviously what we do with that product, and the answer is we refurbish it. Again whether it’s our original categories of CDs and DVDs, we polish it and change the casing etc, make it look as close to new as possible. It’s the same with a mobile phone, we check the battery, replace the screen, give it a polish, make it look as close to new as possible. We’ll sell it with a 12-month warranty, put it in a new box, make it as close to the experience of buying a brand new product as possible.
But of course, the mantra of the business is it’s smart for you and it’s smart for the planet. Sustainability is a huge issue now, and rightly so of course. It’s something that the modern-day consumer is understanding more and more so we very much play to that of giving products a second life. I promised to keep it short, and I probably haven’t, so I’ll stop there.
Sean: A side note on that is it’s interesting as a company how you started off with the name Music Magpie. It denotes music, and obviously I’m a big fan of the business, so I follow it quite a lot and going into consumer tech you’ve still stuck with the name and you’ve still got that great fan base and great user base that still work with you. Congratulations to you on that.
Steve. We have considered the brand, it’s been a hot topic a couple of times over the years but we got such brand trust and domain authority from a fairly early stage that we decided not to get too stressed about the presence of the word music in the brand.
We do own magpie.com now as a brand name, but actually Carphone Warehouse aren’t selling car phones out of a warehouse anymore. As my nephew said many years ago ‘Selfridges don’t sell fridges’, I told him that’s a bit different.
I don’t think you can get too hung up on the brand name. I think now people know what the business is and what it stands for.
Sean: I remember when I was a kid seeing the adverts on the TV, so it’s great to see the business growing and be as busy as it is.
Ok so COVID-19, has it affected the business in any way and how has it been during lockdown?
Steve: I have to say we’re in the very fortunate position, and we have felt blessed, that the mix of good fortune for the business and good judgement along the line and along the years, that we are in that very small bracket where it’s affected us very positively in our trading.
From the early stages where our office went home in the space of 48 hours and with the world having to work from home, wanting to stay connected suddenly, people who didn’t own a tablet or a mobile phone, such as parents or elderly parents, wanted to stay connected with work, people, family and friends.
I think we’ve all done lots and lots of zooming, and looking at a screen over the past 12 or 13 weeks. But also I’ll reference our old categories of CDs, DVDs, games, and in particular even books, the warehouse that I’ve been to this morning is our book warehouse, our book sales have nearly trebled in the last quarter.
Our challenge in a sense has been in the other direction about making sure we didn’t swamp our operations with volume.
Our products were so in demand, and bear in mind people had more time at home to sell to us, as well as wanting to buy from us, so we had to be really careful. As we got our office home, for the operations we obviously had to go on-site and spend a lot of time making sure they were happy, comfortable and confident coming to work, they felt safe and we made a lot of operational changes for social distancing, so that’s been the big change for us. But I have to say we look at so many other great businesses that have been cut off at the knees, we’ve been really fortunate in that both our year on year sales are up, but also, we have had to manage that volume carefully with price at times, in real capitalist terms that means our margins have gone up a little bit.
It’s been an extraordinary time, and it could be a social and business study for generations to come with this whole thing. We do count ourselves very lucky to have traded positively.
Sean: It is certainly a moment in time. Obviously you operate in a marketplace model, with the part that you actually buy the product upfront before it’s resold. Of course, you’ve got years of historical data of what should sell and when, but the market of COVID was unknown going into it. Were you apprehensive about the volumes of the buying side of the business and were you apprehensive to outlay that cash betting on it being sold with the potential economic downturn?
Also, were you proactive or reactive to COVID coming in?
Steve: I think both is the copout answer in terms of proactive and reactive. From a very early stage, it was obvious that our products, even within the first 48 hours of people working from home, that the demand for consumer tech products started to go up. The physical media was perhaps a little bit slower, once people started to realise the football and other media wasn’t on TV, they thought ‘I’ll buy a box set’.
Of course, it’s all very fragmented with Sky, Amazon, BritBox, Netflix and now there’s Disney Plus, but people have returned to watching visual content with box sets. We have been reactive with that, but very proactive with things like our logistics.
What we observed early on is actually people selling to us, certainly in the early stages of lockdown people thought ‘I want to sell my things and the cash would be handy, but how do I get the product to Music Magpie without leaving the house?’. So we changed very early on the logistics to collect products with a contact-free courier at the door. In the same way that we’ve all taken deliveries from online businesses, consumers can leave the products on their doorsteps and we would collect it.
Sean: And that was nationwide right away?
Steve: Yes, absolutely. All but the most expensive iPhones, we were collecting from people’s doorsteps. That was a big trigger in the business, to fuel the demand we had on the sell side, us selling, we had to be able to buy more products and service the market of people who wanted to declutter, who wanted to sell their old phone for additional cash, that was a big change in the business that we had to put through.
We had to react to what the market was telling us. The biggest thing I’ve learnt in the past couple of years is, I probably should have learnt it many years before, always put the customer first.
Go and ask them, go and research them, talk to them and say ‘What do you want us to do? How can we make our services better? What could we offer you now or in the future that would service your needs?’. That is where any online business has to be very proactive in what it’s doing, so go and listen to the most important person in your business, which is the customer. It’s a bit of a cliche, but it’s absolutely true.
Sean: Well I’m glad I learned that lesson right now. How is the US side of the business going during this as well? Has it been growing?
Steve: Equally as positive. It lagged a little bit behind the UK in its performance, there were one or two interesting dynamics going on. We’re in Atlanta, Georgia and the Georgia governor is an extraordinary character, he makes Trump look like a run of the mill kind of guy. He talked about shutting down the state completely, including online fulfilment warehouses, where the UK government were always committed to keeping those open, encouraging online businesses to stay open.
So we moved all our US stock from the US overnight back to the UK, so it didn’t get trapped if we were forced to lockdown. Within a week they seemingly changed their minds and said they would keep online open. A couple of weeks after that, we were looking at our sales figures one morning and said ‘what on earth has gone on in the US? Something must be broken.’ Our sales had doubled, nearly trebled, and it was the stimulus cheques arriving.
Every US consumer got given $1200, which given that Trump hates Amazon, but 50% of online money is spent on Amazon, where do you think everyone went and spent that money? Laterally, the governor in Georgia and the local mayors have reopened faster than we have here, so they’ve opened nail bars, tattoo parlours and hairdressers before they did restaurants, which is anyway, that’s their business.
We have traded as positively, although slightly different time frames, but again the US consumer has been really keen to both sell into us and buy from us.
Sean: Amazing. It may be a little show us your crystal ball, but how do you see the future of ecommerce? Of course you operate that marketplace model where you don’t get caught holding lots of stock, whereas some retailers have been caught quite badly the last 3 or 4 months with holding stock, where do you see the biggest change in ecommerce moving forward?
Steve: I mean just the sheer permanent structural change that has occurred in consumer spending over the last quarter, you know John Roberts at AO has said 5 years worth of growth in 5 weeks, and I tend to agree with that.
The head of retail at KPMG said in China the overall retail spend pre-COVID was 28% online, post-COVID now the shops have re-opened, 50% of spend is online.
There’s a massive acceleration of new people shopping online, you know perhaps elderly or more mature people, who have now been converted from buying physically to buying online. Perhaps they had to learn how to do it with online grocery shopping, but now they will do it more and more.
I think there’s a new demographic who have come online. I’ve talked to our logistics and courier partners and they suddenly have twice the volume going through their networks, this is a massive structural change that’s happening in the world.
A bit like the queues outside Primark when it reopened, there may be one-off adjustments early on, then it may ebb down a little bit, but I think this is a permanent change. People have thought ‘actually, it’s easy isn’t it?’. I’ve always said that that’s the responsibility of digital full stop. We have to service the lazy and daft consumers that we all are, nobody more so than me. We are all lazy and daft, and we want things putting on a plate. Sites, apps and mobile sites have to be as easy, quick and hassle-free as possible, and that’s what we’ve got to do.
We’ve got to service this new generation, and that includes more mature consumers shopping online for the first time. It’s fascinating. This will be studied for many years to come I’m sure as a big moment in consumer behaviour change.
Sean: It’s a great business to be in for the future.
Steve: Yes it is, and in terms of what you asked about the dynamics of our stock, we turn over tech stock very fast. Our chairman says our stock turnover is faster than a sandwich shop, because we are literally turning over our stock so quickly, less than 7 days typically. It is a great time to be online.
Anyone that knows me knows I grew up in a shop, I was behind the counter at 11 years old, retail is in my blood, I love retail, and the Christmas before last was the first time I had no physical shops, and it felt terrible, but it is a lot of hard work for any retailer. It was becoming more and more difficult, and now it’s just accelerated and it’s going to be hellishly difficult for them.
Sean: Yes, only time will tell what successful strategies will be had on that side. Finally, have you seen more of an uplift in your third party marketplaces, the eBays and the Amazons of the world, or at MusicMagpie.co.uk?
Steve: The answer is definitely the latter. Our third party platform partners, it’s a proud claim to fame for the business, we’re the worlds biggest seller on Amazon and eBay in the history of both global platforms.
Nobody has ever done more transactions on both of those platforms than us. We have over 10 million global feedbacks on both, so that was very much the history of the business and how we scaled it to today's £150 million group turnover, but actually now in the last 2 years in particular, the Music Magpie store, the direct sell, has been the biggest channel.
It overtook the other two, then overtook the other two added together, and my CFO told me last month that we sold 94% of our phones on our own store.
So we’ve very much taken ownership of the sales customer in the same way we’ve had that long relationship with customers who we’ve bought from. That’s been a massive strategic change in the business.
You may have seen the recent TV adverts that have gone out both for the selling to us and our store. It’s like a challenge that we’ve done, here’s a new phone, here’s a refurbished one, they both do exactly the same thing, they’ve both got a 12-month warranty, they’re both a lovely phone that do all the same things, this one's hundreds of pounds cheaper. It’s smarter for you because you save money and it’s smarter for the planet. It’s a refurbished phone and all those precious metals and minerals etc are being preserved so we’re driving the agenda very much back to our own store.
Sean: That’s amazing, it’s been great catching up with you, and I really appreciate you taking the time to have a chat.
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