DIY ist im E-Commerce noch eine der Branchen die auf ihr „Zalando“ wartet. Obi & Co. haben es bisher nicht geschafft ihr Geschäftsmodell sinnvoll online zu verlagern. Führend in dem Bereich ist noch Hornbach, die mit ihrer Bestpreisstrategie online punkten können und in ein paar Wochen im Podcast erklären was sie damit vorhaben. ManoMano aus Frankreich ist daher ein sehr spannendes Angebot, das in 2020 schon die Umsatzmilliarde als Marktplatz knacken kann. Es ist aber kein Amazon-artiger Markplatz, sondern ein sehr autonomes Modell mit vielen Eigenschaften eines klassischen Händlers. Deutschland steht nun im Fokus der manomano Expansion. Philippe hat im Podcast sehr offen über das Modell berichtet und regt an seinen Weg für andere Nischen nachzumachen. ManoMano wird sehr groß, davon kann man jetzt schon ausgehen.
DIY online with Phlippe de Chanville, founder of ManoMano
2020 is likely to be the year in which ManoMano breaks the billion-Euro turnover barrier. Founded back in 2013 by Philippe de Chanville and Christian Raisson, the France-based online DIY retailer is now active in five European markets, having recently expanded into Germany. Half-French, half-American by birth, Philippe describes himself as “German by heart” after a year spent studying in Freiburg and time spent in Munich, where his brother owns a house. Alex takes this as his cue to talk to him about the company’s move into the 42-billion-Euro German DIY segment, about its marketplace business model, and about the home improvements market generally.
“Our algorithms are specifically built for and trained on DIY customers buying DIY products”
Alex:You launched at the same time as Amazon started selling home improvement items, so clearly you had a good sense of timing. I read that you now have more than €600 million gross merchandise value (GMV) and that you’ve raised over €300 million in funding. Are those figures accurate?
Philippe: They are indeed. We have never grown at less than 50% year-on-year, and we reached €620 million GMV last year. This year, we are growing even faster due in no small part to Covid and the period of confinement. Starting in France, we very quickly expanded into Spain and Italy to test our capacity to internationalise before tackling the two key markets: Germany, which is Europe’s largest, and the UK, larger than France. In view of the poor standard of the DIY shopping experience, which doesn’t deliver enough choice or personalised advice and means driving out to big, ugly boxes out of town on the weekend, we have great prospects for growth.
Alex: But isn’t driving out to the ‘big ugly boxes’ what DIY enthusiasts like me really enjoy doing? A trip to the DIY store is to some men what a visit to the perfume counter is to their wives. Having said that, you’re right about the lack of advice: if you want somewhere quiet to relax of a weekend where you’re guaranteed not to be disturbed, try the service counter at your local DIY store…
On the other hand, isn’t home improvement a difficult product segment to take online? If you look at what people are putting into the cars and vans at DIY stores, you’ll find floor panels, bags of cement, and an assortment of various heavy goods. Wasn’t that a huge logistics challenge in the 2013 e-commerce environment? How did you overcome the considerable barriers?
Philippe: That’s an interesting question. The argument was always: “DIY products are too bulky to send and people want to see and touch them before they buy.” If you think about it from a customer perspective, however, it’s actually far better to get your garden shed or your back-yard pool delivered rather than trying to fit it in the boot of your Volkswagen Polo! So instead of going to the shop yourself only to have to have the bulky item delivered, e-commerce means that you can just have it delivered – within 24 hours.
Another advantage that we have as digital operators is that we can offer more choice than stores. Now, both you and I are hobby DIY-ers, so I enjoy nothing more than going to a warehouse and looking at the products: chainsaws, gardening tools, etc. In your average big-box-shop, there is an average of 50,000 SKUs. At ManoMano, however, we stock 4 million SKUs. The minute you are doing work on a building over 20 years of age, you will need non-standard products of some kind, and that’s when you as a customer find yourself driving from store to store all weekend looking for one specific product. Shops have by nature a more limited assortment.
Then there is the price issue. When you are in a shop and you find the product you need, it’s right under your nose, so you just buy it. When you are online, though, you can compare prices. That changes the equation from buying the right product to buying the right product at the right price. For a long time, DIY stores escaped that kind of scrutiny and that’s why you would find yourself paying an awful lot of money for one single piece of plastic tubing: the margins were very high – until customers started looking online. That’s before we get to the lack of advice in stores.
(Alex sticks up for the bricks-and-mortars retailers: part of the seemingly inflated price for a small piece of plastic tubing is that it might only be sold infrequently, meaning that much of the high margin goes on inventory management.)
Alex: Would I be correct in assuming that you side-step the inventory issue by being a marketplace?
Philippe: Exactly, our role is enabling merchants to sell their stock. That is why we are only a marketplace, whereas most marketplaces are also retailers, which is an attractive business model, but also puts your retail operations in direct competition with the marketplace part of your business. Say you have a green Bosch drill retailing at €50: your marketplace sellers will also have it – and will be competing against you. It’s you who decides who gets the advertising exposure on your marketplace, of course. So are you going to put your own stock or the sellers’ stock in the pay-box?
Alex: Who are your sellers: manufacturers, DIY stores themselves?
Philippe: Primarily, our sellers are importers or retailers who already have their own website and are looking to attract additional traffic and sales. I would like to highlight that we see our sellers as partners – and that we have a more restrictive policy about who can sell than traditional marketplaces. So where a standard marketplace will have 10,000s of sellers, we still have fewer than 3,000. At ManoMano, we select sellers with whom we can grow. That’s how we made it from €0 to €600 million GMV in six years: our sellers moved with us, expanding their logistics operations, product range, and customer service in line with our growth.
Alex: So how do sellers compete on products? Do they all stock the Bosch drill and try and sell it on ManoMano or do you decide who gets to list it?
Philippe: We have very little competition because we select sellers based on their assortment per brand and per category. So we say to the seller: “Congratulations! You will now be selling the green Bosch drill!” or “You can sell steel chainsaws. In return, you need to guarantee us that you will be price-competitive and that you will produce good content for online sales.”
Alex: Are you cheaper than Amazon?
Philippe: We benchmark our prices on a daily basis, and in 70% of cases, we match the best price on the internet or are lower.
(Alex asks whether any manufacturers are using ManoMano to sell straight to consumers. Philippe replies that, while ManoMano does have some partnerships with producers, most of them simply do not have the logistics and customer service competence necessary – primarily out of a lack of interest in B2C, and sometimes out of inability to develop this competence.)
Alex: I guess you have two types of customers: people who only carry out work at home every five years and DIY enthusiasts like you and me. How do we find ManoMano – or how does ManoMano find us?
Philippe: I’m going to be honest: it’s tricky and we’ve tried out lots of different things. As you will know, a lot of e-commerce is about acquiring customers at an acceptable cost. Overall, our approach has been data-driven. We built our own in-house algorithms to try and buy traffic at the right price; as a result of this, we developed a very close working relationship with Google engineers and constantly benchmarked our algorithm against theirs: they said – and these are their very words – that it was 20% better than them in terms of bidding capacity on the DIY vertical. The reason for that is that is that our algorithms are specifically built for and trained on DIY customers buying DIY products. We wouldn’t be able to replicate that in any other vertical, but in home improvement, we’ve done it.
That’s how we started finding customers. What we then did was to try and build a brand over time. So rather than spending money on Google, Idealo, and other price comparison engines, we took our budget to advertising networks. In Germany, we launched a prime-time TV spots campaign this March, for instance, and have an 85% approval rating for them (which is really quite high). What we’ve realised is that Germany is probably the country where our DNA is best aligned with that of the customers: our ads are humorous – we don’t take ourselves too seriously because DIY is a hobby and is about enjoying yourself – and that tone of voice is something we see in our German competitors, and something that you don’t necessarily get in the home improvements segment elsewhere in Europe.
(“What happens when the customers have been brought onto ManoMano?” Alex asks: do they get attracted by one product on which ManoMano placed a keyword bid and then check out with a considerably larger basket? Philippe enters into how ManoMano interprets and responds to user behaviour on the website: customers based in rural areas browse very differently to those living in apartments, for example. A rural customer might buy a swimming pool, for example, and then the highly-specialised ManoMano CRM can be used to send them targeted adverts for accessories and maintenance products at the right time of the year – as well as other suitable categories for people with a large outdoor property. Anyone who buys with a city postcode, though, will not receive ads for swimming pools in the summer, but for air conditioning units instead. Another element in the equation is proficiency, which can be inferred from which products – and above all brands – users are buying in a given category, especially tooling. With 10 million customers and data on what they buy and how they use the website, ManoMano is able to send genuinely personalised recommendations, says Philippe in response to Alex comment that retailers often claim that their recommendations are more tailored to customers’ needs than they actually are.)
Alex: ManoMano is very content heavy: does your content strategy work in attracting paying customers? There’s no shortage of “How to build your own birdhouse…” guides out there, after all!
Philippe: You’re right, there is an awful lot of content out there! However, it’s important to distinguish between content produced for SEO and content which is actually produced for the customer. Back in 2013, 2014, we were all making content for SEO – Yes, we did it too, I confess! – but none of it actually helps the customer. Yet DIY is a vertical where, as a customer, you really do need a lot of information: it’s hugely technical. Most of us are fully capable of buying a pair of jeans without advice, but I’m not sure many of us would be able to build a greenhouse without advice.
What’s interesting is that the generation of our parents had quite a lot of do-it-yourself knowledge which, for whatever reason, they did not pass on particularly well. It’s the same in all European markets. 25-40-year-olds today are learning to do things by watching YouTube videos, which is an amazingly good way to pick up DIY skills – but not quite enough. So people keep looking for helpful content on the internet, and having that content definitely helps us.
Alex: What about loyalty and customer lifetime value? Do you aim to be profitable on the first sale or do you rely on repeat business?
Philippe: Alex, you speak like a true VC investor! Both my co-founder Christian and myself have a background in finance, so although we are extremely optimistic about our business, we have also always wanted it to be profitable from Day One and with every customer – at least after variable costs, if not always after fixed costs. So we never went for lifetime value, and that was for two reasons: firstly, when you set out, you don’t have enough data to define LTV; secondly, we have more than enough growth and the market is big enough, but the difficulty is growing profitably in the long term. Getting to a couple of billion Euros GMV isn’t the issue: the issue is doing that profitably. So even though we now do have enough data, we don’t invest over LTV – even though there is a huge discrepancy between “power users”, who tend to be DIY enthusiasts based in the countryside with their own house and garden, and urban clients in rented accommodation.
Alex: Do you sell to professionals and tradespeople? A lot of them have good relationships to existing providers, right, so they must be difficult to attract?
Philippe: Yes, we have started targeting that category of customers – which is because we realised that around 10% of our existing customers were actually professionals already. That surprised us, though, because we thought – like you – that they would already have their tools and would be working closely with existing providers: “Why on earth are they coming onto ManoMano to buy stuff?” Then we realised that they were coming to us for the precisely the same reason as our B2C customers: for the choice and the prices!
When we looked into it, we realised that the B2B market is just as large as the B2C one. The total market in Europe is worth 200 billion Euros, of which Germany accounts for 60 billion…
Alex: My household alone is responsible for a good half of that!
Philippe: Right! Now for me, the professional craftsmen, handymen, builders are heroes. They get up early every morning and leave the house before their families are even sitting down to breakfast in order to get their materials early and be ready to start work at 7am; in the evening, they skip dinner to catch up on their accounting and order stuff to pick up the next morning. But that’s no way to live! These people are hard workers, but they don’t have things well organised. Our study with hundreds of professionals throughout Europe and found out that they spent around 30% of their time not working, not adding value, but just doing admin. Although these people are running businesses, they aren’t trained as businesspeople.
(Which is why, says Alex, finally answering a question anyone who has had builders in inevitably asks themselves, they end up needing to leave the site for an hour at some point later in the day to buy what they forgot in the morning…)
Alex: To beat Amazon, you have to match it in three key disciplines: selection, price, and availability. You can add fourth or fifth things like fairness or service, but customers – especially B2C customers – want the biggest possible range of products at low prices and delivered fast. How would you rate ManoMano today in these three areas?
Philippe: Selection: we have four million products. Now, Amazon has tens of millions, many in our vertical, but while only having five or ten drills on display is not enough, conversely, having 3,000 would confuse customers and drive them away; so there comes a point when you don’t need more products, but a better managed range and the right categories to help your customers filter and find them. And that is what Amazon doesn’t do well.
Alex: I agree on that. So let’s say that you have enough products and better filtering, meaning that you beat Amazon on selection.
Philippe: So pricing: we only partner with people who are able to beat Amazon on prices. What is more, although Amazon is very cheap as a retailer, when you look at the marketplace, it’s different. We can’t beat Amazon on top sellers like Bosch drills, because Amazon prioritises those and retails them at low-low prices; when it comes to medium and long-tail products, though, our pricing is better than Amazon’s.
Philippe: Even assuming that you’re able to find the new bathtub you’re looking for on Amazon and that you’ve got all the technical details you need, are you really going to need that bathtub within 24 hours? Nevertheless, we deliver all orders – even bulky ones – within 24 to 48 hours if required. What is more important for many people, though, is a planned delivery slot at the weekend when they are at home and able to make sure that the bulky item is stored in the right place in your garden or garage. But bricks-and-mortars retail will never die in our vertical, because there are always last-minute purchases on a Saturday morning because you’re suddenly out of screws, nails, plugs etc.
(Alex accepts that ManoMano is competitive against Amazon in three main disciplines and offers a little insight into his own personal DIY shopping habits. Philippe sums up ManoMano’s position vis-à-vis the Seattle-based giant as follows: launching in France at the same time as Amazon started selling home improvement and garden products, ManoMano is now bigger than Amazon in the DIY category; Philippe knows this for a fact despite the tech titan’s notoriously tight-lipped approach to providing per-category turnover figures because his CFO and COO were both previously at Amazon France.)
Alex: My rule of thumb is that successful digital companies employ one IT person per two to three million Euros of revenue – i.e. a billion-Euro-company will have about 500 people in IT/tech. In your case, GMV is not quite the same as turnover, but does the equation hold true for you?
Philippe: Yes, it does. Half of our people are tech people; we have 250 software engineers – and it’s absolutely critical to how we work.
Alex: And would it be correct for me to assume that your business grew during Corona as bricks-and-mortar shops were forced to shut? I read something in a press release about 250% month-on-month…
Philippe: That is correct. A lot of our sellers called us early on in the crisis as said that all of their other sales channels had seized up – while we saw a huge peak in demand as the shops were closed. So for two months, we were about the only company selling paint online!
Alex: A lot of companies are now moving away not only from inventory risk but away from customer risk, too. Instead, they are selling access to customers. The sellers then have to ship to the customers, deal with complaints, etc. Alibaba is the best example because it only sells ad space. Most platforms are moving towards his kind of wholly virtual business model. Do you have any revenue streams that are no longer related to basket size or product margin? Could a manufacturer buy the chainsaw category on ManoMano and put a banner there…?
Philippe: Yes, we are in the process of launching that. However, we are not necessarily headed in the exactly the same direction as Amazon and Alibaba here because we are specialists. Our goal is to own the customer and have a DIY-centred relationship with him or her – not just allow anyone to buy ads and put their products in front of the customer.
(Alex mentions that he will be speaking to ManoMano’s Germany director Nils Kernchen in the coming weeks and asks Philippe what he should talk to him about. “Ask him how he intends to build a two-billion-Euro business in Germany!” says Philippe – only half-jokingly.)