Swap.com - How Engineers Became Today's Salesmen

Finland is an engineering nation where people know technology and processes but can’t do sales and marketing. Unlike countries such as the USA, UK or Sweden with long commercial history, we lack the sales culture and skills.

Looking for proof we visited Juha Koponen, the CEO and co-founder of Swap.com - a company that aims to be the largest online consignment and thrift store in the world. We met Juha in their 25 000 sqm. logistics center in Bolingbrook, suburb of Chicago, just next to Amazon and UPS main logistics centers. 

Juha, who has a PhD in Nuclear Physics and a background in software engineering and business, is now selling clothes for Americans. He and the other co-founder Jussi Koskinen started the company, called Netcycler back then, in Finland in 2008. The initial idea was to focus only on being a peer-to-peer marketplace, i.e. customers would take care of the promotion and shipping themselves. In 2012 they had already acquired a fair number of users, however, they realized that the impediment of the peer-to-peer business model is the considerable effort users needed to make for selling an inexpensive product.  It was a time to re-think the business model.

Pivoting for bucks

They soon pivoted their business model, decided to focus on the US market and cover also women’s and in later phase all kinds of clothes, acquired a local competitor and raised in total 45M investments for further growth. According to Juha, one of the main challenges of growing in Finland, besides the market size, is lack of venture capital for ecommerce. It’s not a surprise that Swap.com’s previous investor was Swedish eEquity which focuses on ecommerce ventures such as NA-KD, also founded and headed by Swedish-Finnish Jarno Vanhatapio in Stockholm. Today Swap.com employs 240 people, has an eight digit revenue and massive growth plans - Juha estimates their total market potential in the US, for apparel solely, is over $100B.

Focus on customer value

My favorite question for any business owner is: How do you really create value for your customers that is worth their money (in this case both sellers and buyers)? Swap.com started thinking what it would take to manage the entire process and eliminate the pain of marketing and storing the products from sellers while providing better customer experience for buyers. This would differentiate the company from large scale P2P-platforms such as eBay.

With the funding, they started building a “production line” in their logistics center with efficient processes for receiving and handling items and orders - including high quality product photographs that solves one of the main problems of eBay. Key matter was, and is, to scale the physical logistics operations. For interested readers, you can read Zalando’s blog post about accelerating their ecom warehouse operations.

Now, when you solve the sellers’ pain and ship the products quickly in nice and clean packages to provide good customer experience for the buyers, your sales process actually creates value for your customers that they are willing to pay for. Do you already see why sales is more and more about engineering? As you can imagine, the more the business grows, the more unique value Swap.com can provide. For example, Swap.com already has a very good understanding of second hand clothing brands’ market pricing.

Growth and future development

A significant amount of Swap.com’s visitors are old customers. Nurturing this customer group with targeted email marketing works great. They also do Google and Facebook advertising as well as affiliate marketing. However, Juha, like many other ecom influencers I’ve recently met, says that they have recently started moving their marketing spend from expensive Google advertising to having a bigger marketing team.

Personalised experiences are also becoming a de-facto customer requirement in ecommerce, says Juha. Swap.com is using a lot of data to run targeted marketing campaigns and is continuously learning more about their customers. For example, during the US Presidential elections, Republican voters purchased mainly dresses and high heels whereas Democrats were looking for mainly low heels.

I asked Juha what is their key development target at the moment. One of the most important customer problems Swap.com continuously improves is product discovery, which is extremely critical and complex in a mass market resale service with 2 million items, all different.

One key learning for us Finns though: In Swap.com’s local customer service team problems and complaints are called opportunities!

Thank You Swap.com and eCom Growth-team for welcoming us!

photos by: http://www.goodnewsfinland.com/swap-com-lands-eur-19-million-funding/