What went wrong at Siroop and what Galaxus does better

The online marketplace of Coop and Swisscom has failed two years after its launch. 21 million francs were spent on advertising for the large-scale project. In the end, a loss of 140 million francs remains - and insights into what could have been done better.

siroop-galaxus

Things were worse than expected for Siroop. The online marketplace launched by Coop and Swisscom has posted a loss of around 140 million francs, as reported by the Trade paper with reference to balance sheets at the commercial register. According to the report, Siroop generated revenue of CHF 2 million in 2017. However, the expenses exceeded this figure many times over. Wages, for example, accounted for 19 million francs. For advertising, Siroop paid 21 million francs. In the first four months of the current year, Siroop earned 1.7 million francs, almost as much as in the entire previous year. However, the loss was just as high at 27 million francs, partly due to write-downs. Against this background, it seems neither surprising that Swisscom sold its shares in Siroop to Coop in April. Nor that Coop is shutting down the shop at the end of the year and integrating the remains into Microspot.

siroop_wurst

The Zurich agency Rod Kommunikation was responsible for Siroop's partly controversial campaign.

E-commerce report provides possible answers

What remains are not only memories of sticky advertising subjects. But also the question: What did Coop and Swisscom do wrong in setting up their online department store? Wrong advertising? Wrong strategy? Wanted too much too fast?

This year's E-Commerce Report Switzerland offers possible answers. The basis for the study by the University of Applied Sciences Northwestern Switzerland is formed by interviews with Swiss CEOs and e-commerce managers. Eleven of them commented on the prospects for Siroop. Although the marketplace had not yet been declared dead at the time of the interviews, none of the statements is optimistic.

Creating a great internet startup out of a corporation almost never works.

The experts criticized above all the blurred positioning on the market. "I don't see the strategy, especially in terms of price and product range differentiation," said one study participant. An online marketplace that offers no real unique selling proposition to the existing competition? If you call up the Siroop website (which will still exist until the end of the year), the top bar reads, among other things: "Over 1 million products. Over 500 Swiss retailers." Competitor Galaxus offers more products (1.7 million). And the high number of connected merchants, which included many small ones and a few big ones like Brack.ch, also has downsides. "The basic idea of Siroop is to build an online marketplace that represents the entire diversity of the merchant community in Switzerland," explained Siroop CEO Constantin Hiltl in 2016. Actually, a nice idea. And yet it was perhaps too idealistic to want to pave the way for digitization for the broad Swiss retail trade, according to the report. Connecting too many small and not yet sufficiently prepared providers slows down the pace and ties up a lot of resources. In general, it was probably too daring to want to launch a marketplace within a very short time without an existing team, without an IT system, without a product range and without established supplier relationships. Besides, co-founder Tobias Schubert from the start-up Farmy points out, a great Internet start-up has almost never emerged from a corporate group.

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The World Cup campaign of Siroop competitor Galaxus.

Galaxus relies on the online leaders

Digitec Galaxus has a big advantage in this respect: Digitec went online in 2001 and was already maturing into the online market leader for consumer electronics when Migros acquired a stake in 2012. Galaxus, which was founded in 2010, is not a hasty exercise, but a mature, fast-moving company with its own corporate culture. This is considered "piratical" and innovative. Co-founder Florian Teuteberg is still on board as CEO. On the technology side, the third IT system developed in-house is already in use. Another difference to Siroop: instead of 500 retailers, Galaxus works with 60 providers. "They want to get the online leaders from all categories onto their platform," the report says. One study participant also praises the clear positioning in the form of a combination of price advantages and well-maintained content.

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Florian Teuteberg, CEO of Digitec Galaxus.

The sales figures seem to confirm the interviewees' impression: Digitec Galaxus is expected to break the one billion mark in sales this year. That would be a first for a Swiss e-commerce provider. However, the company also has high outlays, including for its now 1100 employees. And also for advertising, which is rumored to exceed Siroop's expenses. In addition, the planned expansion into Germany costs investments in IT and customs clearance. According to the report, the launch of Siroop has certainly contributed to the pace set. Migros head of retail Beat Zahn said at the time: "If we want to continue to be number one in Switzerland, we need resources." He added that it was time to make a very big contribution to the digital transformation of Migros Group.

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Joos Sutter, head of Coop.

Expensive know-how gain

However, the company has not yet disclosed how well Galaxus is really doing and how much profit or loss remains in the end. Other competitors, Amazon for example, are increasingly fishing in the Swiss pond. And Coop will not leave the field to Migros without a fight. The orange retail giant is now not only pouring manpower into the online retailer Microspot, but also the wealth of experience from the failed Siroop attempt. When asked about the mistakes that were made, Coop CEO Joos Sutter recently said to the Sunday paperOn the one hand, not all third parties had a grip on processes such as data quality or logistics, and on the other hand, Siroop lacked a strong motor - namely the supporting proprietary business. However, a lot of know-how is being taken along (Werbewoche reported). Know-how that, according to the disclosed balance sheets, was paid for dearly. (ank)

Things were worse than expected for Siroop. The online marketplace launched by Coop and Swisscom has posted a loss of around 140 million francs, as reported by the Trade paper with reference to balance sheets at the commercial register. According to the report, Siroop generated revenue of CHF 2 million in 2017. However, the expenses exceeded this figure many times over. Wages, for example, accounted for 19 million francs. For advertising, Siroop paid 21 million francs. In the first four months of the current year, Siroop earned 1.7 million francs, almost as much as in the entire previous year. However, the loss was just as high at 27 million francs, partly due to write-downs. Against this background, it seems neither surprising that Swisscom sold its shares in Siroop to Coop in April. Nor that Coop is shutting down the shop at the end of the year and integrating the remains into Microspot.

E-commerce report provides possible answers

What remains are not only memories of sticky advertising subjects. But also the question: What did Coop and Swisscom do wrong in setting up their online department store? Wrong advertising? Wrong strategy? Wanted too much too fast?

This year's E-Commerce Report Switzerland offers possible answers. The basis for the study by the University of Applied Sciences Northwestern Switzerland is formed by interviews with Swiss CEOs and e-commerce managers. Eleven of them commented on the prospects for Siroop. Although the marketplace had not yet been declared dead at the time of the interviews, none of the statements are optimistic.The experts criticized above all the fuzzy positioning on the market. "I don't recognise the strategy, especially with regard to price and product range differentiation," says one study participant.

An online marketplace that offers no real unique selling point compared to the competition? If you call up the Siroop website (which will still exist until the end of the year), the top bar reads, among other things: "Over 1 million products. Over 500 Swiss retailers." Competitor Galaxus offers more products (1.7 million).

And the high number of connected merchants, which included many small ones and a few big ones like Brack.ch, also has downsides. "The basic idea of Siroop is to build an online marketplace that reflects the entire diversity of the merchant community in Switzerland," explained Siroop CEO Constantin Hiltl in 2016.

A nice idea, actually. And yet it was perhaps too idealistic to want to pave the way for digitisation for the Swiss retail trade as a whole, says the report. Connecting too many small and not yet sufficiently prepared providers slows down the pace and ties up a lot of resources. In general, it was probably too daring to want to launch a marketplace within a very short time without an existing team, without an IT system, without a product range and without established supplier relationships. Besides, co-founder Tobias Schubert from the start-up Farmy points out, a great Internet start-up has almost never emerged from a corporate group.

Galaxus relies on the online leaders

Digitec Galaxus has a big advantage in this respect: Digitec went online in 2001 and was already maturing into the online market leader for consumer electronics when Migros acquired a stake in 2012. Galaxus, which was founded in 2010, is not a hasty exercise, but a mature, fast-moving company with its own corporate culture. This is considered "piratical" and innovative. Co-founder Florian Teuteberg is still on board as CEO. On the technology side, the third IT system developed in-house is already in use.

Another difference to Siroop: Instead of 500 retailers, Galaxus works with 60 providers. "They want to get the online leaders from all categories onto their platform," the report says. One study participant also praises the clear positioning in the form of a combination of price advantages and well-maintained content.

The sales figures seem to confirm the interviewees' impression: Digitec Galaxus is expected to break the one billion mark in sales this year. That would be a first for a Swiss e-commerce provider. However, the company also has high outlays, including for its now 1100 employees. And also for advertising, which is rumored to exceed Siroop's expenses. In addition, the planned expansion to Germany costs investments in IT and customs clearance.

According to the report, the launch of Siroop certainly contributed to the pace set. Migros Head of Retail Beat Zahn said at the time: "If we want to continue to be the number one in Switzerland, we need resources." It was time to make a very large contribution to the digital transformation of the Migros Group, he said.

Expensive know-how gain

However, the company has not yet disclosed how well Galaxus is really doing and how much profit or loss remains in the end. Other competitors, Amazon for example, are increasingly fishing in the Swiss pond. And Coop will not leave the field to Migros without a fight. The orange retail giant is now not only pouring manpower into the online retailer Microspot, but also the wealth of experience from the failed Siroop attempt. When asked about the mistakes that were made, Coop CEO Joos Sutter recently said to the Sunday paperOn the one hand, not all third parties had a grip on processes such as data quality or logistics, and on the other hand, Siroop lacked a strong motor - namely the supporting proprietary business. However, a lot of know-how is being taken along (Werbewoche reported). Know-how that, according to the disclosed balance sheets, was paid for dearly.

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