Although Nelly will see some pressure on margins from Zalando (marketing expenses for example) I think the targets
as conservative. At the end of Q3 2017 TTM revenues grew by 7,6% (close to expectation) but EBITDA margin was
close to 9% - well above estimates. In the Q3 call Marcus commented that “they have achieved the cost savings faster
than expected but he is no ready to upgrade the revenue growth or EBITDA margins target yet.
2. Cdon Marketplace
Cdon is a mini Amazon in the Nordics. It has a presence in all Nordic countries, but Sweden is the strongest with ca.
60% of the Gross Merchandise Value (GMV). It sells all sorts of products, although consumer electronics, media,
books and domestic appliances will make > 70%.
It has 2 revenue streams: product sales of product whole on own-inventory and the kick-back or commission on the
product sales external merchants pay Qliro for selling their products in Cdon websites.
This is a tough business with very few/no competitive advantages and tons of competition and total price
transparency. To make some money in this business the company has to be a large player in the market: size gives
purchasing scale in your own inventory, size leads to brand recognition so more organic (i.e. non-paid) traffic comes
to your website and size finally gives bargaining power vs. the external merchants to drive up the kick-back or
commissions charge for being a marketplace.
Marcus’ objective is to grow GMV by 10% per year and the marketplace (or revenues from external merchants) being
the primary driver for growth. To grow the marketplace fast an e-tailer two things needs to happen:
a) The company needs a good market place “engine” which integrates and price the products of the merchants
into Cdon site automatically and efficiently. The current marketplace engine of Cdon is not efficient, there is
tons of manual input going on, which adds as lot of costs to Cdon. To resolve this problem Marcus has hired
IT people to upgrade such market place engine. Qliro expects to have completed the development of this
market place in H1 2018.
Thus Cdon will have an inefficient cost structure until the new marketplace engine comes live. This explains
why profitability has been declining since Marcus joined.
b) Secondly Qliro has increased its marketing spend.
In terms of competition one needs to look it from two angles: first by country and then by own-inventory vs.
a) Country wise Cdon is the number 1 player in Sweden in online in their core product categories with ca. 4,5%
share. Komplette (a Norwegian company) is number 2 with 4% share. The industry remains fragmented and
thus it offers opportunities to the larger players to gain market share from small players.
Outside Sweden Cdon is sub-scale. There are very strong competitors such as Komplett (in Norway) and
Verkkokauppa (in Finland). Both very profitable with EBIT margin in the 3-5% range. Marcus has no plans to
close the operations in Norway or Finland as he benefits from purchasing scale: shipments of goods are
made from a warehouse in Stockholm. The good news is that Verkkokauppa has no plans to expand into
b) In terms of marketplace competition only Komplett offers a marketplace. It was launched very recently (June
2017) and for now it is only in the Nordics. The external merchants I spoke to told me that they are agnostic
with regards to marketplaces. If they believe marketplaces make sense for their business then they will sell
their products in all the marketplaces available.
c) The name you are missing in this list is Amazon. Amazon is indirectly present as it ships goods into the
Nordics at an affordable cost. However it does not have a Nordic site in the local language. E.g. when you
type Amazon.fi you get redirected to Amazon.de (Germany) with no option to translate the website into
Finnish. In terms of competition intensity this form of Amazon presence would be the least intense – the
highest level of competition from Amazon comes when Amazon sets a warehouse in the respective country.
About 3 weeks ago magazine Breakit.se announced that Amazon would be launching an e-commerce site in
Sweden soon. As a caveat Amazon bought the .se in April this year.