Behind the impressive growth that is channelling eMAG to become a billion-dollar player in the tech industry lie the efforts of a team of thousands of individuals. But this is not the traditional e-commerce, Amazon-like story, it’s the story of Iulian Stanciu, the man who built this company. We asked him how he managed to predict the way the financial crisis will impact the industry, what are the challenges he encountered by now or what are the main mistakes young entrepreneurs in this field can make. All these and much more from this fireside chat that took place on the main stage of How to Web Conference 2016.
Watch the video below or read the interview transcription to get the most of this insightful conversation with Iulian Stanciu, CEO eMAG.
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In this video interview Iulian Stanciu, the CEO of eMAG, shares with us:
- A short intro into his company’s history
- How he acquired eMAG
- Why young entrepreneurs must go deep in all the stack of the technology they’re using if they want to be the leader in their field
- Why eMAG is building technology behind everything
- Mistakes young entrepreneurs make in the e-commerce industry
- How he successfully overcame the financial crisis a few years ago
- Perspectives in the regional e-commerce industry
Don’t have the time to watch the video now? Save it for later and read the interview transcription below!
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Interview with Iulian Stanciu, EMAG
Q: We all know what eMAG is – an online retailer part of the Naspers Group, a group of companies evaluated at over 75 billion dollars. But just for convenience, tell us a few words about you and the company you’ve built so far, a company aiming to reach 1 billion revenue.
Iulian Stanciu: I started the business pretty young, a little bit more than 18 years ago when I was 22. I started selling computers in a small apartment. I think 500 meters from here, on Magheru. And I started to discuss with the customers. I love talking with people, I love building processes, and I also love technology. And all these principles I iterated a lot during my career and, at one point, I had a chance to buy eMAG in 2009. That was almost 8 years ago. eMAG at that time was a small e-commerce company focused on IT with a monthly revenue less than 2 million euros. I immediately left my companies and I started to manage eMAG.
I had this dream: to start crossing borders by using technology, to start selling everything, to start building a company very fast that can reach 1 billion. And from the very first moment, I started to sell this dream inside the company: that one day we will sell 1 billion per year.
And, yeah, of course, everybody said that ”You are crazy! We have a lot of issues, we have a tiny warehouse, we have a lot of problems, customers are not happy!”. But step by step, by setting a very ambitious vision and a very good mission towards the customers, we started to grow, and we started to grow pretty fast.
Q: In your path to success, you had to overcome multiple problems, you had to build so many things, including technology. Did you feel that it was your responsibility as a company to build the technological infrastructure to foster the development of the entire regional industry?
Iulian Stanciu: If you want to be the leader in your field you have to go deep in all the stack of the technology you are using. And also you have to control as good as you can the entire supply chain. An e-commerce business is a pretty complicated business because many verticals should be integrated. You have the suppliers and the suppliers have the products. You have to connect with suppliers, so you need to understand the commerce because e-commerce is just an addition, some technology on top of it. You have to understand commerce, and how to connect with suppliers, how to negotiate with them and how to sign good contracts.
After that, you have to understand the technology, all the platforms: from mobile to desktop. After that, you have to know logistics: warehousing, courier business etc. You have to understand customer service, what the customers are doing, what is the journey of the customers when they are buying something. How social, Internet and traditional media influence the customer’s journey – and this is a different journey category by category. So if you want to sell fashion, this is more like an impulse acquisition. If you want to sell TVs, for example, this is a 10-day decision taking process, the customers are going back-and-forth, online/offline, they have different interactions.
If we want to understand and to be profitable by doing this standardised (although it’s not standardised yet) business, if we want to do this business like Amazon, JD in China or other big players all around the world, we need a deep understanding of everything and we need to build our own stack of technology. Technology stands behind everything: behind negotiations with suppliers, pricing, warehousing, delivery management, communication.
We have 55 connected applications that are the solid base of our business. Only for this peak season (the interview was taken in November 2016, before Black Friday & Winter holidays) in terms of physical warehouses, we have 100 thousand square meters. That means 100 meters per 1 km. This is a huge warehousing space with days when we will ship 150 thousand packages per day. Huge volumes!
Q: Is eMAG a tech company? Is it more about technology than about e-commerce?
Iulian Stanciu: Yeah, I think we are considering ourselves a tech company. But understanding the commerce is really important as well. I saw many e-commerce companies saying: ”Ok, we are a pure technology company!”. And they don’t understand commerce or they don’t understand logistics. By doing this you are losing. You can’t be profitable if you don’t understand the business end to end. So this is a technology-powered business, but at the end is pure commerce. Is the same old commerce.
Q: The e-commerce market is very dynamic, constantly changing regarding consumers’ behaviour, trends, technologies, and to be profitable you have to keep up the pace. How likely is for a new business, a startup to be profitable in this space?
Iulian Stanciu: I think this is the right industry to put your efforts in, to put your money in because it will grow significantly in the years to come. If we are looking at the rates on a global scale, e-commerce is growing more than 10 percent year-on-year. If we are looking at emerging markets, e-commerce is growing more than 20% year-on-year. For example, Amazon is growing close to 30%. JD in China, which is let’s say our model, they are growing with 15% year-on-year. So definitely there is growth.
My suggestion is to do like we did and like we are doing with everything we are starting: start small. Start from a niche where you have control, and where you have a differentiator. A very good supply for example! Be it in fashion, shoes industry, niche products for home, or for sport. Start from something small or try to be different: maybe you have a unique way to talk with your customers, you are pampering them, maybe you are engaging with them socially, maybe you have a 1h delivery time. Start with that one thing that makes you different.
Because if you want to compete with the big ones, it will be extremely difficult. A startup doesn’t have the power to go deep into the stack of technology. They have to use technology existing in the market. And for that, they are paying a higher price than, for example, we are paying for our in-house built technology. We developed our technology, and we’re paying less per order than they will pay as a startup when they use the existing technology. So for that, you have to start small, find a differentiator and build on that. And from there, the sky is the limit.
Q: The main mistakes young entrepreneurs make in the e-commerce industry?
Iulian Stanciu: I think one mistake can be not involving the team in building the company. So trying to build on their own.
I made that mistake, and I found out when I was exhausted, around 25-26. I was pretty sick, I was in the hospital for 2 weeks because I didn’t delegate. From that moment I started to think: “Ok, I need to trust people!”. And I changed myself, I started to trust people, to give them power, give them responsibility.
95-99% of the people we are interacting with, they have good intentions! If you give them trust and responsibility, they will try to do their best and you just have to teach them. To show them the way. It will be difficult to go from one person leading the business, doing everything, to a company where you have a management that will work as a human: body, brain, everything. It’s difficult, and this must be done based on principles and based on trust. This was one of my mistakes, and I found this out the hard way.
After that, another mistake is to try to do many things at the same time. If you try to build something big from the very first day, you can make mistakes. I did that as well, and it cost me a lot of money in time. It was also very painful. And I failed. And I learned from that, I came back, I did what I was very good at, I strengthened the core of my business, and after that, I started to build again.
It took me some years, but business is a life learning experience. You never stop learning about the core of your business, about new technologies, and about people. Every day I’m learning something new. There is a lot, a lot more to learn, and it’s not possible to grow without learning and changing yourself. If you want to change the world or a small part of the society, you need to change yourself, and you need to understand the people you’re working with.
Q: How many employees do you have and out of these how many devs/engineers?
Iulian Stanciu: In all my companies I think there are close to 6.000: eMAG group 3500, eMAG alone 2.500, the rest are in Fashion Days, 400 in Depanero and some other companies inside eMAG Group and also inside my companies. And out of them 600 engineers in total.
Q: A few years ago, you managed to successfully overcome the financial crisis, a time when other retailers totally collapsed. What was the decision or the business strategy that made the difference? Was it the cash flow, was it the team working behind?
Iulian Stanciu: I think it was the access to information. Internet came with the democratization of the information. Years ago, we just sat on our couch or maybe our parents’ couch only receiving the information pushed to us by broadcasters. Nowadays, you can curate this information, and access it whenever you need it.
The Internet allowed me to research. I was reading a lot of news, what is happening in the US, what is happening in Western-Europe. And if you remember the end of 2008, all the politicians, The National Bank, everybody in Romania said: “Ok, Romania is too far away from the US, the crisis will not hit us.” But everything in the US news said: “The US will be the least hit by the crisis, the biggest hit will be in the emerging markets, and Romania was there at that point. And they explained pretty clear: “Look! When the crisis happens, the capital, which in good times is going towards the edge of the financial world, it will come back immediately. It will come home. So the dollar will strengthen because all the money will come in dollars from the US bonds. And all the small emerging markets will suffer. There is a pattern that is happening all the time.” And by reading this, I said: “Ok, the crisis is big!” And based on that I did a planning:
I made my company very agile; I predicted that the market will drop 30% (I was involved at that point in the IT distribution market). And, actually, the market dropped 50%! And when I said that the market will drop 30% all the suppliers, including Microsoft, everybody said: “Hey, you are crazy! You are destroying our perspective, our business in Romania, we invested so hard, don’t say that!” I said “No, this is my business; this is my forecast.” I adjusted the inventory, I adjusted expenses, everything. And when the crisis came, I was ready! All the others were massively hit, all the retailers were hit, and I was with 10 million dollars in my account. And with all those money I started to buy companies that had problems, including eMAG at that time.
Q: The regional e-commerce industry: perspectives
Iulian Stanciu: I think three things will not change in the customer behaviour 100 years from now.
First: the customers want products or services. If you want to do commerce or e-commerce, you need to have products available, the right products desired by your customers. Even if it sounds simple, when you start to add products on your platform, you need to have the right ones in front of the customers. To do that, you need to understand the customer’s behaviour; you need to look at the product page viewed by the customer, the interest of the customer, the engagement, the time spent and so on.
The second one is the price: the customer is asking for a good price! And the price is something I will not call a differentiator.
We didn’t use price as a differentiator. We used price for positioning. So you need to have the right price for the customers.
And the third one is the convenience, or we can call it service, or delivery time plus returning service. The customer wants a very fast delivery and a very good service. And by the rise of the Internet, with millennials changing the habits of the new generations, e-commerce will just boom. So there is only one way for a long time, a pretty big and clear road in front of us. For sure, there are some obstacles, but e-commerce will grow! Because the customers want this. They feel the value in e-commerce: e-commerce is saving time and money for them if executed correctly.
Q: How do you choose what new markets to enter?
Iulian Stanciu: It’s a pretty nice story: in Bulgaria, it was a logical decision. We looked at the map, and we saw that if we put Romania and Bulgaria together, Bucharest is in the middle. We have operations in Bucharest, warehouse, good inventory, a nice range of products. We could start selling those products in Bulgaria. It wasn’t very well planned. We started with the frontend and backend as decoupled systems. We were taking orders on a Magento platform in Bulgaria, and after that, we were manually putting the items in the backend in Romania and delivered them from here. And after that, we built our integrated system.
Afterwards, we said, ok, we should go to Moldova: it was the same language, it was something we were willing to do and we went there for a month. We studied the market and we came back and said: it’s not possible!
It was so corrupted, everything was with cash: if you wanted to buy products from a distributor you will go with cash. Euro, dollars, whatever currency you have. They accept it. If you are asking for an invoice, they are charging 4% more. So we decided we are not going there, it was too dangerous. But we had this guy who was the product manager in our company, very, very ambitious, very smart. He’s a Moldavian guy and we assigned him for Moldova, but after that, we said: “Hey, we told you that you would run a country: what if we start Hungary?” So Hungary was not, let’s say, a logical, rational, very well planned decision. We just started Hungary. And because of this guy, and with our support, Hungary is working very well.
And later on, Poland – it just came from my partner from Naspers. They had this company and gave it to me to run it.