mercateo - future watch case study

MERCATEO– CASESTUDYTEAMFINLANDFUTUREWATCHREPORT,JANUARY2016DIGITALIZATIONEXAMPLESFORTHEMANUFACTURINGINDUSTRY

Case-kuvaus verkossa:bit.ly/digicase-mercateo

MERCATEO– PLATFORMECONOMY

• Platformeconomyisahottopicatthemoment,withalotofstartups aimingtoconquerdifferentconsumermarkets.Airbnb hasalreadyhadaneffectontheaccommodationbusiness,whereasUber,Lyft andotherswanttotransformtransportation,andthereareseveralotherplatformcompaniestryingtobecomethetransactionhandlerintheirownarea.

• Animportanttraitinthedigitalconsumermarketsisastrong”winnertakesitall”marketdynamic,causedbythenetworkeffect– themoredemandandofferingaplatformhas,thefasteritgrows.Inadigitalconsumermarketthebiggestplayerusuallytakesalionshareofthemarket;forexampleGoogleisdominantinwebsearchesandFacebookinsocialnetworking.Thereforeplatformcompaniesaimforveryrapidgrowthandinternationalisation,manyofthemwithsizablefundingfromventurecapitalfirms.

• Platformcompaniesdon’towntheresources(likeroomsorcars)usedtodelivertheservices,butinsteadactasintermediarieswhoconnectthecustomersandtheserviceproviderstogetherandhandlethetransactions.Thismakesitpossible toscalethebusiness veryrapidly,astheydon’tneedtoinvestintheirownproductionresources.

• B2Bmarketsontheotherhandseemtohaveadifferentdynamic– atleastsofar.Theyareusuallyhighlyfragmentedandeventhebiggestplayershavesmallmarketshares.

• Thequestionishowdoesthecontinuingdigitalizationtrendandgrowinge-commerceaffectB2Bmarkets,willtheB2Bbusinesses alsobemoreconcentratedandwhatwillthewinningplatformsbe inthefuture?

• ThiscasestudyfocusesontheEuropeanonlineB2Bmarketplaceande-procurementplatformMercateo,butalsogivesanoverviewofsomeofitscompetitors.

TeamFinlandFutureWatchReport– DigitalizationExamplesfortheManufacturingIndustry– www.insyke.fi

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MERCATEO– COMPANYOVERVIEW(1/3)• Mercateo (www.mercateo.com) isanonlinemarketplaceforB2Bcompaniestargeting

thelong-tailofbusinesspurchasing,thatisindirectpurchasesorCcategoryitemsintheABCclassification.Theseitemscould,forexample,bestandardofficesuppliesorbasicITequipment.AccordingtoMercateoitisalsoEurope’sleadinge-procurementplatformforbusinesscustomers.• Mercateoactsastheconnectorbetweenbuyersandsellersandhandlesthe

financialtransactions.SellersshiptheproductstothecustomersdirectlybasedonshippingnotescomingfromMercateo,butotherwisearedisconnectedfromthem.

• Mercateohasover1,3millionregisteredcustomers,making32000visitsand4000purchasesdaily.Onthesupplyside,theplatformhasover9700manufacturersandover500suppliersofferingintotalmorethan19milliondifferentitems.

• Mercateooperatesin13Europeancountriesandestimatesaturnoverofaround200millioneurosfor2015 (160M€ in2014).Thecompanyemployedover380peopleinJanuary2016.

• ThiscasedescriptionisbasedontheinterviewofDr. BerndSchönwälder,ManagingDirectorandMemberoftheBoardatMercateo.

• Benefitsforcustomers:• Savestime – savesalotoftimeinpurchasingaseverythingisdoneelectronically

andinasinglesystemwithanextensivecatalogue,coveringalsohard-to-finditems.Mercateoalsocutsdown invoicehandling,asallitemsarebilledinoneinvoice.

• Lowerscosts – customersneedtointegratetheirownsystemstoonlyoneplatformoralternativelytheycanuseMercateoalsoastheirinternalpurchasingsystems,asithandlespurchaseapprovals,rolemanagementandotherneededthings.

• Benefitsforsuppliersandmanufacturers:• Moresales – accesstoaverylargecustomerbaseandthepossibilitytoeasilysell

theirproductsinseveralcountries.• Smootherprocesses – Mercateoofferselectroniconlineprocessestocompaniesof

allsizes.Pricesareeasytoupdateandthesystemalsosupportcustomerspecificcataloguesandpricing,whichareessentialinB2Bbusiness.

• Lowerrisks – Mercateocarriestheriskofgettingpaymentfromthecustomerandhandlestheinvestmentsinbuildingtheonlinesystemsonbehalfofthecompaniesontheplatform.


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Dr.BerndSchönwälder

MERCATEO– GROWTHANDTHEFUTURE(2/3)

• GROWTH• MercateoAGwasestablishedin1999inMunich,Germanyandhasbeen

growingsteadily.Thecompanystartedinternationalexpansionin2012byestablishingitsAustriansubsiadaryandcurrentlyoperatesintotalof13Europeancountries.• Mercateostarteditsinternationalexpansionby“followingthecustomers”,meaningthatits

largeGermancustomerswishedtousetheplatformalsointheirEuropeansubsidiarycompanies.

• Mercateogrowthhasbeensupportedbythenetworkeffect.CustomersusingtheplatformhaveaskedtheirsupplierstooffertheircataloguesviatheserviceandalsosuppliershaveproposedusingMercateototheirotherclients.ThemoreacompanyusesMercateo,themoreitbenefitsfromit.

• THEFUTURE• Mercateodoesn’toperateinFinlandorotherNordiccountriesatthemoment,

buttheyseeitasanaturalexpansiondirectioninthenearfuture.AlsothecompanyplanstocontinueexpandingitsoperationstootherEuropeancountries.• TherearealreadysomeFinnishmanufacturerscurrentlyutilizingtheplatform,butspecific

detailsaboutthemusagewasn’tavailableforthiscasestudy.

• CurrentlyMercateoisacombinationofanonlinemarketplaceandane-procurementplatform.InthelongrunthecompanyhasthevisiontobecomeaB2Btransactionplatforminaddtion.• TherewillbesomenewsonexpandingtheMercateoserviceofferinginthefirstquarterof

2016,butasthoseplansaren’tpublicyet,theycouldn’tbecoveredinthisreport.

• Mercateoaimstogrowbyincreasingitsmarketshareinthecurrentmarkets,expandingitsoperationstonewEuropeancountriesandbyintroducingnewservices,thatcomplementtheexistingofferingandbuilduponMercateo’scurrentcustomerandsupplierbase.


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Revenuesin€ million

Numberofemployees

MERCATEO– COMPETITIVEADVANTAGES(3/3)

• Dr. SchönwälderthinksthatthenetworkeffectdoesexistalsointheB2Bworld,butthatitdiffersfromconsumermarkets.“Thenetworkeffectismostlylocaltoacountry,anditisstronginthelong-term,butuseless inthebeginning.”• Withthenetworkeffectbeinglocalmeans,thatMercateohastoinvesttimeandmoney increatingtheinitialsupplyanddemandwhenit

expandstoanewcountry.Oncethebusinessinacountryhasreachedcriticalmass,thenetworkeffectstartstohelpinfurther growingthecustomerandthesupplier/manufacturerbase.

• Onthee-procurementsideMercateocompetesSAPandotherpurchasingsystemproviders,butoperateswithasingle-instancemodel,whichgiveitcertainbenefits.JustlikeFacebook,there’sjustoneMercateoplatforminthecloudthatallusersuseorconnectto,insteadofeachcustomerhavingtobuytheirowninstanceofthesystem.• Ascompaniesdon’tneedtoinvestintheirowne-procurementsystemoriftheyhaveone,needtointegrateitwithjustoneplatform,theycan

saveinITcosts.

• MercateoalsooffersashortcutforSMEcompaniestoadopte-commerceandtodigitalizetheirprocesses.Insteadofinvestinginsettingupanownonlinestoreandprocessmanagementsystems,SMEscansimplytaketheMercateoplatformintouse.• Mercateoalsomakesitpossibleformanufacturerstostartadvertisingandsellingtheirproductsonlinewithoutupsettingtheirreseller

networks,withthefeaturesMercateooffers.


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MERCATEO– COMPETITORS– OVERVIEW

• Mercateoiscompetingwithdifferentkindofcompanieswithitsoffering.Themarketplaceisreplacingtraditionalwholesalechainsoronline-only storestargetingB2Bbusiness.WiththeMercateoe-procurementfunctionalitiesitisagainstpurchasingmanagementcompanies.Differentmarketareasalsohavedifferentcompetitors,manyofwhichareplanningtoexpandtoEuropeortogrowtheirmarketshareinEurope.• Mercateodoesn’tstockanyoftheproductsitsells,butactsonlyasthehandlerofthebusinessandfinancialtransaction.Thissetsitapartfrom

mostofitscompetitors.

• EUROPE• InEuropethebiggestwholesalecompanyisWürth Group(www.wurth.com),withtotalsalesof9,75billion euros,ofwhich4,4

billionwasinGermany.Würth hasamarketshareofabout5%inGermany.• IntheUKoneofthebiggestMROchainsisScrewfix(www.screwfix.com),thatcurrentlyhas400storesandplanstoopen200

more.ScrewfixisalsoexpandingtoGermanyandcurrentlyruns7storesandalsooperatesanGermanlanguageonlinestore.• Contorion (www.contorion.de)isayoungGermanstartupwithseedfundingfromProjectAVenturestargetingtheMROspace.

Itcurrentlyoffersover350000articlesandemploysover50people.• SAP(www.sap.com)offersbothprocurementmanagementsystemsandrunstheSAPAriba Network(www.ariba.com),which

isamarketplaceforbuying,sellingandbiddingonindustrialitems.• NORTHAMERICA• GraingeristhebiggestNorthAmericanMROcompany.Itservesbiggercustomersusingthetraditionalmulti-channelmodel

andSMEsandconsumersviatheonline-onlymodelthroughitssubsidiaries (seeseparateslide).• Amazonisthebiggeste-commercecompanyintheUSandisrenewingandtryingtogrowitsB2Bbusiness bothintheUSas

wellasinEurope (seeseparateslide).• eBayalsohasaB2Bsectionofferingbusiness andindustrialsupplies (www.ebay.com/rpp/business-industrial).• CHINAANDINDIA• InChinaAlibabaisthebiggestplayer,servingbothinternationalandlocalB2Bcustomers(seeseparateslide).• IndiaMART (www.indiamart.com)connectsbuyers(10M/month)andsuppliers (1,5M) inIndiatogether.IndiaMART also

launchedTolexo (www.tolexo.com)in2014asane-commerceplatformforSMEs,whichseemstobeseeingfastgrowth.


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MERCATEO– COMPETITORS– AMAZON

• Amazon(www.amazon.com)isthebiggestAmericane-commercecompanyfoundedbyJeffBezosin1995.Amazon’srevenuewas88,99billionUSdollarsin2014(upfrom$74,45Bin2013)anditemployedaround154000employees.

• Amazonisverystronginconsumere-commerce,butalsohasaspecificsiteforB2BcustomersintheUS.AmazonBusiness(www.amazon.com/business/)isdirectedatbusinesscustomersandoffersaround2,2millionitemsin17differentcategories.

• Amazonbothsellsitsownproducts,butalsoactsasamarketplaceforothersellers.Italsooffersstorage,shippingandcustomersupportservicestoothercompaniessellingonAmazon(Fulfillment byAmazon).AmazonBusinessalsoofferssomebasice-procurementfeaturesforcustomers,likeapprovalsandmulti-useraccounts.

• InEuropeAmazonhasopenedBusiness,Industrial&ScientificSuppliesstoresonitssitesintheUK,Germany,Italy,FranceandSpain.ForinstancetheUKsiteoffersaround680000items.

• TheEuropeanB2Bstoresstilloperateundera”beta”statusanddon’tseemtooffere-procurementfeaturescurrently.


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MERCATEO– COMPETITORS– GRAINGER

• Grainger(www.grainger.com)isabigAmericanmaintenance,repairandoperations(MRO)companywith10billiondollarsofrevenueand23600employees(2014).Itservesmainlybiggercustomerswithamultichannelmodelandhas6%marketshareintheNorthAmericanMROmarket.• Graingerhasalsoinvestedheavilyine-commerceanditisthe13thlargeste-retailerinNorthAmerica.36%ofthesales

originatedfromitonlinebusiness in2014.• GraingeralsohaspresenceinJapanthroughajointventure(51%ownership)companyMonotaRO

(www.monotaro.com),whichoperatesasanonline-onlybusiness(similartoAmazon)targetingSMEcompaniesandconsumers.

• TheMonotaRO singleonlinechannelmodelwascopiedtotheUSin2011,whenGraingerstartedaZoro Tools(www.zoro.com,lateronjustZoro).Zoro utilizesexistingGraingerresources,likestorageandlogistics,andfocusesonservingSMEsandconsumersviatheinternet.

• GraingerwantstoexpandtoEuropenext,becausethecompanyseesitasalucrativemarket,withpossibilityforgrowthandprofitablebusiness.ThecompanystartedZoro Germany(www.zorotools.de)inJuly2014andacquiredtheCromwellGroup($440Minrevenueand2150employees)intheUKinSeptember2015.


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MERCATEO– COMPETITORS– ALIBABAGROUP

• AlibabaisaChinesee-commercegiant,thatinadditiontobigconsumerbusinessesoperatesbothdomesticandinternationalwholesale(B2B)businessaswell.TotalrevenueoftheAlibabaGroupinthefiscalyear2015(ending03/2015)was12billionUSdollars,ofwhich4%(517Mdollars)comesfromtheChineseand6%fromtheinternationalwholesale(761Mdollars).• Alibaba.com (www.alibaba.com)istheinternationalwholesalemarketplace,whichoffersglobalaccesstoChinese

manufacturingresources.

• 1688.com (www.1688.com)isthedomesticmarketplaceforwholesaletradebetweenChinese companies.

• Alibabahandlesfinancialtransactions(AliPay)andoffersareputationsystemforthesuppliers.

• AlibabaiscurrentlyopeningofficesinEurope(UK,Germany,FranceandItaly),butseemsatthemomentfocusedinconsumerbusinessandinintroducingmoreEuropeanbrandstotheChinesemarket.

• AstheChineseeconomyseemstobeslowingdownAlibabaisaimingforinternationalgrowth.InthelongrunthisprobablyalsomeansinvestmentsinsellingmoreChineseproductsinEuropeandotherwesterncountries.


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MERCATEO– COMMENTSONTHECASEEXAMPLEThisslidecontainssomecommentsaboutthepresentedcaseby(MSc)Harri Lakkala (CEO,IntosomeOy),whohasalsocompiledthiscasestudy.Thisslideshouldn’tbeconsideredtobepartofthecasedescription,butanalysisofitfromtheFinnishmanufacturing industryperspective.

• Mercateoseemstohaveestablisheditselfasacredibleplatformofferingbothanonlinemarketplaceforindirectpurchasesande-procurementinEurope.HopefullyitwillexpandtotheNordicsinthenearfuturetobetterserveFinnishcompanies.

• Mercateoisandwillbeagainstseriouscompetitionboth inEuropeandglobally.Traditionalbrick-and-mortarstorechainshavealreadyembracede-commerceandforexampleGraingerisexpandingtoEuropewith itsonline-onlyZoro concept.

• Ontheotherhand,thecurrentB2Ce-commercegiantslike,AmazonandAlibaba,wanttogrowintheglobalmarketsandseeB2Basalucrativefutureopportunity.

• OverallB2Bmarketsprobablywon’tbeaffectedbythenetworkeffectasmuchasconsumermarketsoratleastwon’t beasquick.It’sstilleasytopredictthatmoreconsolidationwillprobablytakeplacewithonlinesalesgrowingandbige-commercecompaniesputtingseriouseffortingrowingtheirB2Bmarketshare.

• MostimportantlyMercateoseemstoofferFinnishmanufacturersaneasywaytogrowtheirinternationalsalesbyadoptingtheplatformandputtingeffortinadvertisingtheirproducts.HopefullythisopportunitywillbecommunicatedtoFinnishmanufacturerswithownproducts.

• AlsotheplatformcouldofferFinnishsuppliersandmanufacturersacost-effectivewaytohandleindirectpurchasesandmovetoall-electronicprocessesasthere’snoneedforsoftwareinvestments.Butthisisn’tpossiblebeforeMercateostartsoperatinginFinlandaswell.

MercateoisaninterestingB2Bplatformcompanyanditsbusinessmodelseemstobeworking.Itwillbeinterestingtoseehowthemarketswillbesharedbetweendifferentplayersinthefield.

LauraNurmi,[email protected]+358295055623

HarriLakkala,[email protected]+358452603884

Digitalisaatioesimerkkejä teollisuudelle-raporttiverkossa:http://bit.ly/digiesimerkkeja-teollisuudelle