Zamro: Dutch Corporate Start-Up Entering the European Digital MRO Business

Amsterdam, 22.11.2016. 115 Mrd. USD, auf diese Größe schätzte Graingers CEO D.G. Macpherson zuletzt den MRO-Markt in Westeuropa. Bis 2020 dürften ca. 10% des MRO-Umsatzes über digitale Kanäle wie Amazon Business, Zoro Tools, Contorion & Co. laufen. Von diesem Kuchen möchte auch der niederländische MRO-Handelskonzern Eriks etwas abhaben und hat vor kurzem mit Zamro sein eigenes Corporate Start-up gelauncht. Ein mutiger Schritt. Ich habe mich mit Floris Jan Cuypers, Gründer und Managing Director bei Zamro, über seine Pläne mit dem neuen digitalen B2B Flagschiff unterhalten.

Lennart: Hello dear warenausgang.com readers, listeners and followers. I‘m very happy to welcome you today to our fourth interview. The digital european MRO market is getting tighter and tighter. Starting 2014 with foundations like Contorion or Zoro in Germany, it is now widely spread. There are new companies coming up in all over europe. This year for example the Dutch heavyweight Eriks has launched their digital start-up Zamro in the Netherlands. Floris Jan, thank you very much for your time and your willingness to tell us about Zamro and your plans. Could you please tell us a little more about yourself and your background.

Floris Jan: Well thanks Lennart and it‘s really good to talk to you and a pleasure to spend some time with you and with Warenausgang, which is a great blog about the industry. I‘m a physicist-turned-internet guy as I always say. I started my career in fluid dynamics at Shell Oil Company, then worked at Philips Electronics and after that built out and scaled up a couple of companies in e-commerce and software. I also worked at Google in their B2B marketing team in Europe and in Germany at Home24, a furniture e-commerce company. Currently, I‘m driving Zamro, a B2B e-commerce company, together with another co-founder, Eric Croon. Personally I am an avid sailor and I really believe in the strength of teamwork with great people and trying to change the market.

Lennart: So, being a sailor helps you to navigate your new company. Zamro is an Eriks corporate start-up. For those who don‘t know much about Eriks, can you please give us a short overview who Eriks is and what they do.

Floris Jan: Yes, sure. We‘re indeed in the same group as Eriks. Eriks is a pretty large multinational company in the MRO space. They are a multi-product specialist. They have trusted brands and serve their customers that vary from medium to large sized industrial companies. The interesting thing is that they not only have have a wide capability and range of products, but also have the technical know-how to support their companies and their customers and to also help them with engineering and customized products. So it is really a large international player across the MRO spectrum in mechanical parts and tools and engineering solutions for medium and large-sized companies.

Lennart: So, a lot of corporates see founding a digital start-up as their approach to conquer digitalization and digital transformation, which are two very big buzzwords right now. This trend has also spread to the B2B market and there is still a lot of room to prove this starting of companies or going through Silicon Valley for a start-up safari in contributing to the overall digital readiness of a large corporation. So, what was the intention of Eriks to found a digital start-up as a greenfield development?

Floris Jan: Yeah that‘s interesting, I‘ve actually worked on both sides. I worked with bigger companies like Philips Electronics making razors, but also in small companies and medium-sized internet companies like Google. I spent a lot of time also in San Francisco and Silicon Valley and some of the other innovation hubs in Europe. These big large corporates go and need a safari in Silicon Valley. My friends call it “innovation theatre”. Which means that it‘s not: you say you come and look at Facebook or at Google, and then all of a sudden understand how it is to innovate and how it is to build from company in the internet space from nothing.

I truly think that it starts with the customer. What the customer needs, there is the opportunity. I think that where we see the opportunity, is in the small customers on the technical side. I always explain it like this: I as a customer, e.g. running a small workshop, having a couple of mechanical engineers employed, go to Zalando or Asos or Amazon when I’m at home. There I buy my furniture, fashion, shoes or clothing. Then I go to work and the user experience is totally different. There are walls, you can not buy stuff and you can not find your supplies, you can not find your missing parts, you need to login, you need to request to become a customer. There is a major opportunity to increase the ease-of-order, where for smaller companies Zamro will be a solution. Ease-of-order is not that widely available yet. I think we can provide this. Structuring it as a separate company enables us to move fast and with the customer in mind build a software technology which really makes us able to deliver on that promise of ease-of-order and a wide assortment. So it is really a transactional pureplay e-commerce company.

Lennart: Another big trend is creating marketplaces as industry platforms. What kind of business model is the foundation of Zamro?

Floris Jan: We indeed see various type of business models. We truly believe that you need to fold yourself around the customer to understand their needs. What we do is really e-commerce. So we are not a marketplace. We sell these products. Some of them we take into our inventory and ship them to our customers. We are the prime shop. We are not a marketplace, but really an e-commerce webshop, where we have a broad assortment coming either from our inventory or third party suppliers that ship the products to our customers.

Lennart: Now we‘ve talked a little about your background and the background of your company. Can you elaborate a little more about what your target group is and which people you‘re appealing to?

Floris Jan: If you look in general at small and medium-sized companies, small companies that do not have dedicated purchasing departments and are small in size and operate in a field where they would need technical supplies in the broadest sense, those are our target customers.

The difference with large customers is that they have ERP systems or EDI couplings where there is really a structured and defined buying process. We focus on companies with an unstructured buying process and tend to use the internet in terms of finding their products. If you look at our assortment, it is very broad, so we really have a differentiating element there. We also sell machine parts and other technical supplies. So really the breadth of our assortment is an area of 500.000 SKUs in our shop. So it is really about these small companies that need an easy solution to find, navigate and get the merchandise.

 

Lennart: Frederick Roehder, one of the founders of Contorion from Berlin just stated a couple of weeks ago, in an interview with kassenzone.de and Alexander Graf, that right now it‘s not really hard for Contorion to first acquire a B2B customer through classic performance marketing. And I think he was also talking about what you just described with SMEs. Do you see the same trend for your business and is SEA and SEO still working in B2B MRO in customer acquisition?

Floris Jan: Contorion is a great company. It is very impressive what they have built in Germany over the last two years. If I look at Zamro, we have launched our webshop in the Netherlands six weeks ago. We see very good first results in search engine advertising. We are testing and optimizing all the time. The general sense for us is that we truly believe that performance marketing is a strong means, a strong channel, for us to attract customers.

I agree with him, when people have their first transaction and become a customer, the essence now is to have them come to become a loyal customer. If you look at the various marketing channels which you can employ, online or offline, you want to create the efficiency in cost. To manage your costs per order or customer acquisition costs in such a way that you then have a healthy percentage of your spending on marketing. So for SEA and SEO I think there is a lot of opportunity in the B2B space, because not all competitors are at the same level of either experience, content or product data readiness.

Lennart: As stated in the intro, you at Zamro are not the only ones to start a digital MRO business in these times. Companies like Contorion, Zoro in Mainland Europe or Cromwell in the UK which are both companies that belong to Grainger from the US. The EDE in Germany just started something about a year ago. They are also building their houses in the same alley as you do. How is Zamro different and how do you guys differentiate yourself from the competition?

Floris Jan: Well, I think there are great initiatives all around in Europe. I think that in parts of Asia and the USA you see some more further progressed parties being active. I think there is a huge opportunity. For Zamro, I think that we differentiate ourself with our focus on the customer. So we put the customer first. We are diving deep into their needs. What type of products do they seek? What kind of content is needed? I think using some of the smart things that we learned for B2C and applying them for B2B and breaking down barriers that exist in the B2B area is key to be successful. We are making it a lot easier to find and order your products.

Also transparency and pricing is something that is very new to B2B. Because it was very much customer-specific pricing. Where you have a transparent webshop there is openness and easy-access. I think that two things to add to this is our very broad assortment. We have a deep and broad assortment across categories. Not just in tools, but also in machine parts and technical supplies. That is what differentiates us from the companies that you mentioned. Last but not least it is about to also about the continuous innovation about how you guide your customers through this flow of selecting what they need and also being a partner to them with your know-how.

Lennart: Do you believe that differentiation in the future will also be providing additional digital services as a value-add. Is that something that you see besides the product oriented business?

Floris Jan: Mainly our customers come to us because they have a job to be done. They need to fix a machine or to build something new or an office to supply stuff to. That is the core of our business and that is what we will keep doing. We will not expand to other digital services in that sense. We really believe in pure focus. In understanding our customers needs at the deepest level having the right data, also in segmentation and using our data analyses to target our office in the best way possible. That is what we will be doing.

Lennart: A couple of weeks ago, this is another quote which I am going to use from one of your competitors, the managing director of Zoro Tools Europe said that they go where the customers are. By that he meant that he is selling on Amazon because that is where the customers are today and where the demand is. Is selling in marketplaces something that you pursue with Zamro?

Floris Jan: I think Amazon is a great company. I do think that the MRO market in Europe is very large. Some estimates put at it at over 100 billion in size. We also believe that a significant piece of this lies with the small companies. So it is good that many companies are selling at companies. This will help customers understand that there is an alternative to the printed catalogue, or that sales person coming to them.

So “evangelizing” the way to very simply order their products online is good. It is good for us and good for others. We truly believe that we differentiate ourselves with our technical knowledge, so we understand the assortment, we understand for instance hydraulics, pneumatics and tools. We truly know and want to leverage that technical knowledge. We have an obsessive focus on our customer needs and being very close to our customers. The marketplace could be a distribution channel or topline revenue generator but it is not something that we are doing at this moment.

Lennart: We will get back to Amazon in just a moment. Earlier we talked about your customer groups, the SMEs. What I see from my personal and professional experience is that even in SMEs the trend in purchasing is supplier consolidation, professionalization of purchasing processes and so forth. Do you believe that suppliers no matter whether they are start-ups or established companies have to invest in their capability of serving customers through channels like EDI, their own purchasing platforms, into their own ERPs, electronic catalogues and so on?

Floris Jan: I think that what we see is that these type of things are about more structured buying or EDI which for sure is happening on a large part of the MRO market. Particularly with more established companies with a larger size. It might even be related to smaller customers if these solutions are lower in cost or more easily accessible if they want to use those. It might have to do with how to accommodate them. For Zamro, this business of Zamro will be especially attractive for small businesses that don‘t have a structured purchasing department. We are focusing on the ease-of-order. Make it as easy as possible to find a product.

Search and selection should therefore be very easy. We want to take away the barriers in information gathering, e.g. by online communication through chat and WhatsApp. So customers can communicate with us through WhatsApp. We try to understand them on a technical level, especially what they need. You need to combine this. We combine this with track-and-trace for transparency.

It is also about doing what you promise. If you say that you will fulfill the order on date „x“, then you should provide the transparency. I think it would be a pitfall for companies that start with small customers and in a manner where they spend a lot of resources on EDI. Then you‘re mimicking almost the large-scale, more traditional companies that are very well positioned for  large customer needs. But then you are diluting the model I would say.

Lennart: Today, the western european MRO market is about 115 billion US$ in size. Including UK, Germany, France, Spain, Italy, Switzerland, Austria, Denmark and of course the Benelux market. How long will it take until your company Zamro will grow out of your home-turf and go international?

Floris Jan: Our ambition is to become a strong player in Europe. We have built our e-commerce platform to be suitable for multiple countries. We have launched the Netherlands webshop six weeks ago. We will launch our Belgium webshop soon. If you look at the market you see that there is a huge potential. If you look at the potential in terms of readiness in e-commerce you can pick one, two, three other countries in Europe that are appealing. We want to build a large company, so in five years Zamro will certainly be present in a couple of more countries.

A company should watch out to not “overstretch” too fast and not do the countries really well. But for sure we will look behind the borders.

Lennart: Would you also expand to a very competitive market such as the United States?

Floris Jan: Currently we set our goal to be very active here in Europe. We really want to build a strong foundation as a European MRO e-commerce player.

Lennart: So the message is clear for Zamro: think big and think global. At least European for the start. There are other competitors in your market. I‘m talking about the ones which have always been there. Such as Würth, which is also big in the Netherlands, or Berner, Brammer or Fabory, also a Grainger company. Even Eriks, your own mother company, might be a direct competitor. What are your chances at Zamro in competing against those mainly multi-channel companies.

Floris Jan: That is a good question. We believe that some of the names that you mentioned are well positioned there. Zamro is really grabbing a large opportunity at small sized customers and has a huge opportunity. The companies like Brammer really have a focus on large customers. We serve a different segment through a pureplay transactional e-commerce company taking away the complexity. Taking the complexity out is key for us. Also the transparency in prices and a data-driven approach is important for us. Identifying where the best customers are and finding them.

Lennart: You just described your very data driven approach. Do you think that on the long run it is going to outperform multi-channel approaches that usually rely on legacy IT and a lot of weight put in brick and mortar?

Floris Jan: I think the benefit of Zamro and the reason that we are structured how we are structured is because we do not have this legacy. We really build it from the ground up. I believe these larger companies have migrations issues. But I also think they are well positioned to leverage EDI or even e-commerce to build a channel to serve their large customer base in a better way. I do think they need to make choices. In terms of what type of customers and why they have an e-commerce channel and how to position it. I think for Zamro it is really straight forward. We know our small customers and are purely focusing on them. If I have a multi-channel business and do not have a clear focus on which customers are the best, you have to risk of de-focusing.

Lennart: Since 2011, which was the official launch of Amazon Business, we have been waiting for Amazon to enter the european B2B market. Now finally it is pretty sure that they officially start in Germany beginning of December of this year. How do you see your chances against this digital supervillain?

Floris Jan: I have a lot of respect for Amazon. It is a really formidable company in terms of their engineering power but also their trading, the way they trade and do e-commerce. I think they will be in Europe. In that sense it‘s heating up. I do think that there are positive elements to this. As I said earlier, for B2B customers in the MRO space, Amazon will be on the forefront in showing them that there is an alternative to looking at catalogues or picking up the phone. Evangelizing the ease of order and the viable alternatives of e-commerce is great.

I do think they are a general merchandise shop. They will be really focused on the more standardized products. And they have a huge benefit there with their data and their customer base. I do think that customers will also navigate through Google, through SEO, through loyalty in new ventures like Zamro. I think we can co-exist. The market is that large. So ten percent of the total MRO market will be through online players in 5 – 6 years. There is still a lot of room for other players to play a significant role with a healthy business model focused on the right customers and building the right business. And I think at Zamro we can differentiate because we have the technical know-how around these products and a very broad assortment. Not just tools, not just standard products.

Lennart: Thank you for a lot of insights about the MRO market. In order to come to a very good ending, what I wanted to ask you: I guess building your start-up heavily relies on a lot of talent and a lot of people who are willing to work in this kind of environment, at a fast pace. So what types of people are you looking for. If someone who is listening is interested, where can they apply? What kind of offerings do you have?

Floris Jan: Here in Amsterdam we are building an employee base. We have now more than 30 employees in a central location in Amsterdam. Really a start-up and scale-up hotspot. If you also look at the way that investors are investing in this ecosystem, across the sectors, it is really an exciting place. We already employ people from eight different countries. Software developers from Portugal, from the Netherlands, from France, from Greece, Belgium, India. We truly had an international set-up from the get-go.

People can look at our jobs or on http://jobs.zamro.com. I think the exciting thing here is that we truly build innovation. We always have a place for full-stack developers and great marketing people. Data analysts are also really important because we are truly data-driven. We also invest our capital very efficiently. We try to on a unit-economic level, an order that comes in: How do we make it profitable, how do we create customer-loyalty? The customer is the number one thing in our company.

Lennart: Are you also looking for people with experience in the industry for example for category management or purchasing or stuff like that?

Floris: My background is more in the online-marketing technical space, internet, e-commerce. My co-MD Eric Croon comes from the MRO space and has more than 20 years of experience in this field. He knows the products in-depth, so yes, we already employ people in category management and are looking for people specifically in some of our product categories. In category management, on the content side and also purchasing. Because the technical knowledge, we obviously work with Eriks because they have a huge pool of people there. But also within Zamro we are investing on that side.

Lennart: Well, thank you very much for this great interview. Great insights. I‘m looking forward to following your company and to see how it develops and to see how you will conquer the digital european MRO market. Thank you very much.

Floris Jan: Thank you very much, it was pleasure being with you.