You might never have heard of Momox, but this German company is the world’s second largest seller on Amazon, by volume of feedback received. Momox is also the fourth largest seller on eBay, by the same measure.
That’s an amazing achievement on it’s own, but there’s more. The company’s international selling accounts feature four more times on our list of the world’s top Amazon sellers, and are again on the eBay list with their fashion brand ubup.
But what does that translate to in sales? Well, this year Momox has reached 100 million Euros in annual revenue. That’s 112 million dollars, or 73 million pounds. They have two warehouses, with about 70,000 square meters of space (750,000 square feet) and 1,000 employees.
So where did this ecommerce giant come from?
Actually the company started from nothing only twelve years ago when Christian Wegner, then unemployed, sold a few second-hand books on eBay. Last week Wegner generously spared the time to talk to me about how his business has grown over the years. Here’s what he told me.
Many thanks to Marc Jarrett of Emjay Consultancy for his help with the interview and translation. Emjay Consultancy helps companies expand into the UK, Germany and China.
What did you do before you started your ecommerce business?
Christian: I was a wood worker, and I also trained to be a buyer and seller. I was at a company for about one year, but then I lost my job. So in 2003 I went to Berlin to live with my girlfriend.
I started to search for a new job in Berlin. It’s a big city and I thought there must be some work for me there, but it wasn’t to be. I couldn’t find a job, so I stopped looking and thought I’d do something on my own – be self-employed. I tried some different things, like upgrading websites. But that didn’t work out either.
Then in 2003 I bought some used books at a local dealer in Berlin, but later realized I didn’t like them. So I sold two or three of the books on eBay. That was the moment when I realized you can earn some easy money selling books online, because I paid about two Euros per book and sold them for twenty Euros each on eBay.
I thought, wow that’s 18 Euros and I didn’t have to do much for it. So I said, yes, maybe that’s a way to earn some money. I sat at home and calculated how often I would have to go to the local book dealers and buy books to sell on eBay. I went two or three times, looking for books that I could sell for a profit, and bought ten or twenty. But it was slow work and I thought, “this isn’t what I want to be doing for the next 100 years!”
Did you find a better source of used books, or change to something else?
I realized that at eBay people were selling used CDs and DVDs in bulk, maybe 20, 50 or 100 CDs or DVDs in one package. So I tried buying some collections and found that was a better way. I bought about two or three hundred CDs, then sold them individually on eBay.
That was the end of 2003, so 12 years ago. It was a cool thing for me, and I started to buy and sell more and more collections. After two or three months I realized I could use a barcode reader, and it became much easier after that. That was the beginning of 2004. It was a good business, and I had more money than I’d ever had before.
Back then I was selling from home, and we had about 60 square meters [about 650 square feet] of living space for me and my girlfriend. I would store CDs in the living room and the bathroom and the bedroom!
It was good for me, but not for my girlfriend. She said, “Let’s get some space to live.” Every square meter was full of CDs at our home. So I looked for my first storage and office space, and found somewhere about 40 square meters [430 square feet] in size, around two kilometers from our house. That was in May 2004.
I worked there on my own for almost a year. In 2004 my revenue was about 60,000 – 70,000 Euros and around 25,000 Euros in profit, so it was OK for the first year.
When did you take on your first employee?
In 2005 an old friend lost his job as a police officer and started working for me. He still works for us after ten years. We are the best of friends, and play squash every week. They say not to work with friends, but it works well for us. If you start a company with two or three friends and each is a shareholder of the company, then maybe it’s harder. But I’m a shareholder and he’s an employee, so everything is fine.
That was in 2005, and it was working great buying on eBay and selling on Amazon. But at the beginning of 2006 I realized that we weren’t alone in doing it. The bottleneck was eBay, and I think a lot of other people had found the same way to make money. So I thought about what we could do. Selling wasn’t a problem, but we were finding it hard to purchase enough CDs and DVDs and games.
So one day I had the idea for Momox. It would be our own channel to buy online where the customer types in the barcode and I offer them a price, so they can sell directly to us.
My girlfriend came up with the name. I said, “Think fast, I need a name.” Thirty minutes later she told me, yeah, take Momox. She also thought up Medimops, the name for our selling accounts. The name of the company is not as important to me as the product.
How long did it take to create the website, and how did you get people to use it?
I needed about two or three months to create the first prototype, the first website, then we went live in May 2006 with momox.de. After that I could see that the idea was not bad! We were the first in Germany and in Europe, I think, doing something like that.
With a little bit of cheap PR we got some interviews with local radio stations and newspapers, and more and more people started selling their used CDs and DVDs at Momox. After that everything moved very fast.
We stopped buying at eBay and concentrated on Momox, because we wanted more and more people selling their stuff to us. In 2006 we had two or three new interns start with us, actually students from Cameroon, and they were very funny people. It was a lot of fun.
How did you figure out how much to pay people selling their CDs?
Before I started Momox I had a lot of free time, and I started to work on some tools for us and other marketplace sellers. I had used the Amazon API, which could provide the current marketplace price for any item. So at the beginning we just used the Amazon database to find out the actual selling price. It wasn’t very hard to find a buying price. If a CD is selling for 10 Euros at Amazon and it has a good sales rank, and you know your costs per item, then you can calculate the buying price.
So it was very easy nine years ago. Today it’s a very complex algorithm at the heart of our company which calculates the buying price.
So how has the business grown since then?
In 2007 we moved from a warehouse of about 100 or 150 square meters [1,075 or 1,600 square feet] to one of 1,000 square meters [10,750 square feet], and more and more employees started. We had about 20 employees at the end of 2007.
In 2008 we started buying books via Momox, and now books are our biggest category. But of course books are much bigger than CDs and we needed more and more storage. At the end of 2008 our warehouse was 3,000 or 4,000 square meters [33,000 or 43,000 square feet] and we had 40 people. We sold about five million Euros’ worth of items that year.
In 2009 we had revenues of about 10 million Euros, and about 60 or 70 employees. We were doubling our sales every year. In 2010 we got our first investor, a German company owned by a big German newspaper.
Did your investors come to you or did you find them?
The first investors came to me. They thought that maybe they could help me. But my mother always taught me, “Do not talk to investors, they are bad people.” But they asked again and again, so I thought OK, let’s try talking to them. That was the first two investors, and they are still onboard.
Then together we searched for a new investor in 2010, because we needed a new warehouse and money to grow faster. We found an investor after three or four months and we got five million Euros, so we were able to move to our new warehouse near Berlin with 16,000 square meters [170,000 square feet] of space. So this was very, very big.
We knew that we had to move fast because in 2010 we had a big report about us on a major German TV station, RTL. A lot of people watched it and we bought a lot of items. We filled the new warehouse very quickly.
2010 was a funny year, with the investor and new warehouse in Berlin. That year I did almost everything in the organization on my own, programming and everything else. Then we started to build the organization with HR and finance and marketing and so on. In 2010 we had about 70 employees, perhaps a bit more. We had three senior executives, one for marketing, one for logistics and me.
In 2011 we had about 40 million Euros in revenue and well over 100 employees. Then the typical start-up issues came. I hired some people that were not so good, and we had more problems in 2011 and 2012. We grew but we lost money in 2012 and 2013. But I think it’s normal for a company that grows and grows to make some mistakes here and there. By 2014 we were making money again.
This year we’ve reached 100 million Euros in revenue. That’s a great milestone for us.
Have you tried selling any other products?
We tried electronics but stopped because we realized that we can’t make money selling items like smartphones and tablets. Sellers might have a lot of books or CDs at home to sell, but only one smartphone or one tablet, so we thought it’s better for them to sell it directly on eBay or somewhere else.
We started in 2013 buying used fashion and that’s great, it works fine. We sell it through our own shop and at eBay, but more at our own shop. After a year and a half, we now sell about one million Euros of fashion per month. We think it’s cool and it’s a big category for us.
In 2011 we started five offline stores in Berlin, but we closed them about one and a half years ago. We now concentrate on the online business.
When was the company growing at its fastest?
We have always grown fast, but every year or half-year is different to the year or half-year before. Everything has always been changing over the last 12 years. It’s cool and I like it, but I don’t think there are really special years. If we stop growing I think I’d have to do something else because it’s a kind of drug for me.
When did you start buying and selling internationally?
We have momox.co.uk but it’s hard for us. You know your own country better, and we don’t have many resources for that buying channel. But we are growing very fast in France at the moment.
We started selling internationally early in 2010. Investors like international organizations, so that’s why we did it at first.
We have the one warehouse with 16,000 square meters in Berlin since 2010. Then since 2012 we have another warehouse in Leipzig in Germany. It’s a former Quelle [large German retailer] logistics center, actually the biggest logistics center in Europe, and we have a part of it. So in Leipzig we have about 60,000 square meters [650,000 square feet]. It’s really, really big.
Why did you decide to start selling clothes in particular?
Before fashion we tried to buy and sell electronics, but it was not good for us. So I thought about what a typical household has to sell, and from which category. There are books, CDs, DVDs, games and a lot of clothes at home. That’s where selling clothes and selling media are not so far away from each other, because like media you can buy a bundle of ten or twenty fashion items from one household.
But it’s very, very different to CDs because you are starting with no barcodes. We tried some different ways of doing it on the website, and the best we found was that you select three different things. First your gender, then the brand name and the sub category. For example woman, Tommy Hilfiger and jeans. Then we will offer you a price.
I started my own start-up within our company to move into fashion. I have my own team and we are apart from the rest of the company. We found a great CEO from eBay, Heiner Kroke, and he is managing the company very well. I realized I don’t want to manage a company, I want to create something new.
You fulfill so many orders and you have so much stock coming into your warehouse, how have you managed to keep up with the logistics?
I think that’s really the most important part, and it’s one of the things I like to do most. I always think about logistical processes, and how to handle the incoming and outbound items very quickly – how to design processes for people that do not earn a lot of money and do not want to think about what they do.
I think that’s one of the main success factors, to build great and scalable logistics. We handle about 50,000 or 60,000 items incoming and around the same outgoing every day and it works great.
If you sit in front of an Excel spreadsheet and type in 50,000, it’s just a number, but in the warehouse with six million items in stock you can really see what it means to handle that many items every day.
A hot topic amongst eBay and Amazon sellers is rule changes and policy violations. As one of the biggest sellers in the world on both marketplaces, are you affected by those things?
Yes, we also have problems with Amazon and eBay. But I think you have to handle it.
I know if you’re a small seller it’s harder, it’s much harder. It’s hard for us but it’s a lot harder for small sellers to get problems dealt with on Amazon in particular. One of the biggest challenges is to talk to the right person at eBay or at Amazon. We always try to have a good partnership, because we know we need the marketplaces and we try to do everything they want to stay there.
I look at eBay and I just don’t know where eBay are going in the next years. Maybe they will be acquired by Alibaba and then you’ll have to sell at Alibaba or another marketplace outside the U.S. New marketplaces are always welcome and I think another one will come along eventually.
Do you have a new business goal that you’re working towards now? You’ve achieved a huge amount but is there something else that you want to do next?
For 12 years I have always had the next goal in mind. I want to grow and if we are at 100 million Euros in revenue, the next goal is to reach 150. My own project is to grow the fashion part and make it profitable. If we reach that then I’ll think about a new goal, but the main goal is growing.
Christian, thank you so much for sparing the time to talk us. You’re a real inspiration to all the ecommerce businesses out there, and I wish you even more success in the future.