QXL has appointed a former Webvan exec as CEO.
Today’s investor market is no longer satisfied with growth rates, and wants to see profits. The changes in personnel reflect management attempts to boost the company in investors’ eyes. But investors are unlikely to be convinced until the company actually demonstrates a move to profitability. QXL’s current approach is cost-heavy, as it establishes new companies in each country it enters. It views this as necessary to exploit first-to-market advantage, by keeping country sites localized. But it means that unlike eBay, break-even point is still some years away.
The company aims to bring profitability closer. It is increasing the range of goods on offer from merchant partners, expanding membership to drive consumer to consumer sales (which will allow it to move away from the cost commitments of being a principal retailer) and expanding across Europe. Once the company raises its profile in the countries it has entered, marketing costs will fall and it will be able to work towards expanding business in each country rather than going for the landgrab strategy it has pursued so far.
QXL also plans to cut costs by concentrating on repeat business. Value-added services and marketing efforts are the best way to do this, and industry opinion is that consumers are likely to trust recognized brands when making purchases online. QXL has first-mover advantage in a number of European countries. It needs to maintain its head start by offering services across a range of digital platforms including WAP-enabled phones and interactive TV.
Targeting consumers through these emerging technologies has a potentially high return on investment. 48% of Europeans currently have a mobile phone and by 2004, 59% of mobile phones will be WAP-enabled. Mobile phones can act as sophisticated marketing tools. Following its acquisition of the Scandinavian auction operator Bidlet, it is able to offer online auction services for mobile devices – including two-way SMS bidding and a WAP service – across its other European auction sites.
QXL still has a good chance of being successful in Europe. It is much better placed than rivals such as eBay to cash in on any mCommerce boom, as well as being more suited to local market conditions (eBay’s European operations are still heavily loss-making). And investor confidence should recover as the company’s cost-reduction strategy pays off.
