Entrepreneurial Insights team interviewed the founder & CEO of reBuy – Lawrence Leuschner. ReBuy is a reCommerce startup initially founded in 2004 and online launched in 2009 in Berlin.
We have asked Lawrence several in-depth questions about the business model of reBuy, the market development of reCommerce, as well as Lawrence’s personal advices for other entrepreneurs!
Lawrence also provided an analogy of entrepreneurship with a soccer game!
Interviewer: Hi, today we are in Berlin with reBuy (www.rebuy.de). Lawrence, who are you and what do you do?
Lawrence: My name is Lawrence. I am the Founder and CEO of reBuy. Our business model is pretty easy, we buy media and electronic products from our customers directly through our website and sell them through our channel reBuy on the homepage as a shop.
Interviewer: When you did you start this company, and why did you start this company?
Lawrence: The question why is pretty easy. My friend and I who started doing this business, we were two founders and then we were five founders. We were just sick of working for other people, it as really hard for us because they always told us what we should do, and as a young guy who is very open-minded, who wants to do something with his life, it was pretty hard. And then we decided that we should something on our own. And then decision was then that we should found something in our community which makes sense, which fits our interest, and what we can think and what we can build big. The idea was that we should up a store in our little town in Hesse where we would buy and trade used video games. And the idea was pretty good, but then we had to decide who was going to be in the store. We were both going to school, we were very young, and then there was the problem of who should be in the store and there was no solution, so we decided we should bring it to the internet because then we can reach everybody in the country, nobody has to go after school or during school or skip school to go to the shop. And then we needed other founders to help us program the website, and then we had two friends from our community who helped us to program our idea, and then we started with Tradeagame.de as website for used video games.
Interviewer: When you first started with this offline shop, how did you finance the rental, did your parents or family help you with that?
Lawrence: We didn’t have the time to be in the store so we decided to be online, and then we could do the work from home, and the video games that we offered for the customers was in my basement where I lived in my parents’ house, so we didn’t need a lot of money in the beginning. We had through business from friends who helped us to buy the first stock for the exchange of the video games and to found the company, and each of the founders used credit from our parents to bring some money on the table to do some marketing. So it was very lean in the beginning and every one of us was very committed.
Interviewer: Let’s talk about the business model. How is the business model working right now, just the basic structure?
Lawrence: It’s very easy. You as a customer have a lot of books at home, DVDs, you may have a mobile phone that you don’t use anymore, so you have a bunch of stuff that’s in your bookshelves, in your rooms, and there is a value for it. You can bring that value to our website, it’s very easy, you go on the website and you type in the name of the product that you have, and then for every product you get one price. It’s a fixed price, it’s not a bargain, it’s not an auction model. Then, normally, the customer sends us a box of around 20 products, that’s everything in, media and electronic products. And the average value is €80-90. So you sell the products to us as a company, we check every product, we grade every product. We have a big logistics center where we have a lot of people who really really take care of the products, who clean the products, who sometimes repair the products, and then we store them. And then we offer them with a nice discount as used stuff, repaired, refurbished, cleaned, on our website. So you can sell stuff to us and you can buy used stuff from us.
Interviewer: You said that you started with these games and now you’re telling me you have got this media products and electronics, when did you start thinking about adding new product categories?
Lawrence: For me in the beginning I was very sure that we were just being a games company, and we wanted to be the biggest used retailer of games, that was our vision. After a few years, between 2004 and 2007, I had military service, the founders were going to university or to school, so we didn’t have a lot of time to develop the business. And then in 2007 we said, okay, we want to be number one in the used games sector. We needed about two years, then we made revenues of around three, four, five million Euros, and with that size we were the biggest company of used games in Germany. We said, okay, there is digitalization of media in the future, and a lot of customers said we want to have more used products, because the experience of using used products, for example a video game or a move, is just the same as you would buy it new. The game is the same, the actor plays the same role, there is no difference, but you have a nice discount of 40%. So we said with this business model we have to think bigger. And then 2009 we decided that we should expand our categories, and we started then with music, with DVDs, with consoles, and further on we saw the potential of the vision that in the future we can trade anything used, it doesn’t matter what it is. It can be clothes in the future, it can be cars, it can be everything, because there is the need of people who have products that home that they don’t want to put up in auction, e-Bay, and there are people who want to have a great discount on buying used stuff.
And 2009 was the time when Al Gore presented all his values about the climate change, and that influenced us into thinking more ecologically. And in the past we had the offer of buying new games as well, then we said we will just quit working and doing business with new stuff, we said we just want to do used stuff. So in the beginning it was very ecological, we offered the customer to sell stuff and they can do a charity for certain amount of the bank account, so there was a lot of green thinking in it. Because recommerce is very green, and it’s reusing, recycling, and that’s why we call it recommerce. It’s not ecommerce, it recommerce, recycling and reusing commerce, and that’s why we have this green touch and our culture is always thinking a bit green. But the business model itself is not a non-profit organization, it’s a business for profit. But the idea of it came in 2009.
Interviewer: And when you are sourcing these boxes of €80-90 per box, what is the value proposition that you pitch to sellers of these boxes so they sell their books or media to you and not to others?
Lawrence: We always have the three key points. It’s very easy, you just have to write the name, write the number, you can scan it with our app on the barcode on the back of the product, so you get a fixed price, very easy, and you can sell it very easy to us. It’s one box, it’s 20 products for €90. And on eBay you have to have an auction for every article, because no one’s buying your collection of your special interest. At the end the customer has to set up 20 options, 20 feedbacks to customers, because customers are asking questions, what condition the product is in, how old is it, blah, blah, blah. So we make the whole pain-in-the-ass e-Bay experience to a very convenient experience at reBuy.
Second point, it’s really fast. It takes a lot of time sending that stuff on e-bay. It can take weeks because nobody’s buying it. We always have to wait if somebody is interested in buying your products, whereas we buy directly. So when you put everything in the box you get a label from us, and then you send the products to us, it takes about two day, we check it within 24 hours, and then you get your money in the next 24 hours. So it’s five to six days in total for selling your stuff and getting you money. So it’s very fast, second point.
Third point, it’s very safe. There is nobody on the other side who tries to rip you off, there is a company behind it, and if you are not satisfied with the price you get it back, you can see the price on the website. So it’s very safe. And if you have any problems buying used stuff from us it’s very cheap.
Interviewer: One of your key competences should be the pricing of the goods when you buy them. What I would find interesting is how do you price different products, and if it depends the on quality level of the used product, what happens if the delivered is lower than promised?
Lawrence: It’s a good question. It depends. In the media segment, it’s very easy, we have a certain level of quality that we need, so we tell the customer at the beginning the sides of the book should not be ripped off, it should be in a normal, useable condition, to make it very easy. Normally there is no difference between the customer perspective and our perspective. So that’s very easy, there is no conflict. In the electronics sector it’s a bit different, because people have to grade their product. For example a mobile phone, they have to say what condition it is in overall, for example, it is very nice, it is in a very good condition, there’s no scratches, that’s what normally people say. If we get it and we see there are some scratches, maybe it was in the bathroom and inside there is water damage, so we check every product because we need to give guarantee to our customers on the selling side. So there is a certain rate of conflicts where have to tell a customer that we see it in a different way, if you don’t agree no problem, we send it back for free, it’s no problem, but our experts have really tested every product and we can give you the information on what’s wrong. For example we now take pictures so the customer is really safe to know what’s going on. And then we offer the customer a new price, a new fair price, and then the customer decides whether it is okay it is fair or not, and normally the customer says it’s fair, and then it’s a new price agreement, and then it is fine.
Interviewer: Can you tell us a little bit more about the corporate structure, where you are currently active in terms of operations, and what type of functions for the people working there and how do you make the split, for example?
Lawrence: Our business reBuy it’s just in Germany and Austria. We have one logistics center, it’s here in Rudow in Berlin. Then we have our headquarters which are in the same building. In logistics there is a big split, there are people who are taking care of the inbound, the products coming in, checking the articles, we call it grading. And there is another part of people stocking the product and then sending it to the people who are buying it. Around 250 people are working this logistics department. We have around 30 people in our customer service, taking care of our customer questions. And then we have another a hundred people in our headquarters. We try to work with small teams, tech people, product management people, marketing people, for example, who develop our website, and there are some administrative operations like financing, accounting, controlling. But we try to push the company and the headquarters more into a technology company where we try to make the customer experience better for the customer every day. So that’s the overall view.
Interviewer: Besides the pricing, what other core competencies could you identify for reBuy?
Lawrence: Pricing is one, the second one is grading. We have developed our software from inbound to outbound, so we actually known what we’re going to check when the product arrives. Our software service is so intelligent that we can add new questions very fast, so if we want to add tennis racket, for example, as a new category, sports equipment, we can drag and drop a new category. We know then that for a tennis racket we have to check out if there is any crack, that’s a question, we have to check that. So the whole grading process if one of our competences.
Customer experience is one where we really focus on getting better every day, because we try to make it very easy for the customer, we’re picking up the stuff, we’re paying for the shipment, we have a process that is really fast towards the customer. So I would say pricing, customer experience and grading, that’s all three competencies.
Interviewer: Let’s talk about the market development, especially contrasting the primary ecommerce market and the secondary ecommerce market, which is the market that you’re in. Can you elaborate on the market development in Austria and Germany over the last years in terms of which market has grown faster and in which segments, and what would be your guess or forecast for the future?
Lawrence: It’s a very underestimated and very very big market. The market data that you have is really poor, because most of the market research is on the new products. But there is some research that shows how big the market is, for example in German households there are 80 million mobile phones lying around, and that’s just stuff that’s not used anymore.
Interviewer: Really, unused?
Lawrence: Yeah, unused 80 million mobile phones somewhere in their homes. So that’s just one category of phones that are not being used anymore. And when we started with this business in 2007, we really started in our flat in Hesse. We were pretty much the only ones who started this business. And now we have 25 competitors in this recommerce sector in Germany, so it’s very tough competition now. The biggest companies, they do together around €200 million in revenues. So from zero to two hundred in three to five years, that was pretty fast. There are 20 to 30 other companies doing the same business but on a lower level, so there are a lot of players in the market.
With our website we sell the most used products in Germany in a shop, so we have a very nice position in the market. And we’re competing more with eBay and Amazon marketplace, because eBay is a big company, they have a lot of customers, and they see recommerce as a threat, they try to get into this business but they have no logistics. So we always try to make it easier and see where the problems of eBay are. But eBay is a very successful company and they do a billions of Euros in revenue in Germany, that’s a big step ahead from us, it’s where we should be in a few years, but it takes a bit of time. And Amazon is the second one in the used market, their marketplace is pretty big as well. So their numbers are growing, our number are growing, the whole market is growing, and it’s growing more into a recommerce segment. But we have to motivate, we have to tell people it is very easy selling stuff, because people used to sell a lot of stuff on eBay, but then they had bad experiences, there were some fraud problems and whatever, so the customers didn’t feel very safe anymore. For me as a customer as well, I was selling a lot of stuff on eBay. So we try to professionalize the market, make it easier, and then more of the classical used business from C2C companies should go to the C2B2C companies like reBuy.
Interviewer: And in terms of market size, etc. for other European countries, or maybe some Asian markets, can you tell us something about that?
Lawrence: Let’s talk about mobile phones. Mobile phones are growing in every country heavily, for example in India ten million phones are being used every month. So there is a lot what I would call ‘electronic waste’, which we can reuse in every country. And, as I said, every household in Germany has the potential of being one customer by selling us their stuff. So has every country, because every country is using media, is using tech equipment, mobile phones, so there is always a need. And these markets are underdeveloped in comparison to Germany. For example, UK is a bit ahead of Germany, but in other countries outside of Germany there is so much potential to use recommerce.
Interviewer: Lawrence, we always try to explain to people and give them some advice on starting companies. You told me that you always try to help your friends and give them advice, what advice can you share with our readers?
Lawrence: Well, we can talk for hours, it is a very fascinating question because after ten years of entrepreneurship you can still do so many things wrong. And what I think is pretty good is that we always try to listen to other people. Sometime we take their advice and use it, sometimes not, but it’s very important even now to listen to more experienced people to get better. And for me there is no year, no moment, no day when I don’t learn something. So it’s always important to be open, to try to get advisers, not to be in their own framework, maybe to get a mentor, maybe to surround yourself with people who are a bit more experienced or in the same situation, get experienced people into your management team who are better in a certain segment. Because as an entrepreneur you start to do everything by yourself, but then if you want to be really good in your business you need to get people who are specialists in their areas. So that’s very important to learn every day, to be open to learn.
I think the willingness, the will power is pretty important. There were so many times when we were bankrupt or almost bankrupt, and we always said, come on, we can do this, let’s go further, let’s forget the pain, we can do it. And there were many times where we said okay it is not going to work, but we had the willpower to say, okay, we’ll go on. And that’s something very important, because not every business goes like this. Most of the times the business over years goes like this, and when you have go down you always have to stand up and say, okay, that is how life is, you have to stand up and go forward and look forward. So I think willpower as a characteristic of an entrepreneur is pretty important.
Interviewer: Lawrence, you are a big soccer fan. Maybe you can give some kind of analogy between football and entrepreneurship, and what entrepreneurs can learn from soccer games, especially through the soccer world cup.
Lawrence: Okay. If you would ask my management team, they can’t hear the soccer analogies to business anymore. [chuckles] No, but really I think there are lot of things that you can compare. For example, tonight playing the last game in the group games against USA, there is a lot of pressure for the team. As I said, they were up after the first game and then they went down against Ghana to 2 and people were not excited anymore, but you have to stand up now, you have to be cool, you have to focus, and you have to think about what you can do. Believe in your strength, and if you the willpowers, if you believe you can do it, and the team is strong, then you will make it. And most of the games, most of the decisions in the business start in the head, so I think tonight if the brain is there, the concentration is there, the focus is there, and they go with a certain type of charisma on the field, for example Schweinsteiger who is on my back, we will win the game.
Interviewer: So good luck for Germany.