Organic Growth Masterclass: musicMagpie, backed by NVM Private Equity
Pivoting to online and rethinking the USP of the business has been key to driving the organic growth of sustainable re-commerce business musicMagpie, says NVM Investment partner Andy Leach.
musicMagpie is a sustainable re-commerce business based in Stockport, UK. The business offers consumers a sustainable way to sell and buy consumer technology and physical media products like DVDs and books. NVM made a £6m investment in the company in 2015.
Andy Leach, NVM Investment partner, says: “Historically, the business has had its own trading platform to acquire secondhand goods from people. Goods would then be resold through three routes to market online: Amazon and eBay, independent stores and That’s Entertainment, a Magpie brand with 30 physical stores. Our strategy was to build and pivot to the online customer platform, The Magpie Store. We built that up to a point that the online store has now become our biggest route to market. The success of this meant the relevance of the That’s Entertainment retail stores diminished rapidly. We took decisions in 2018 to close them. It was a hard decision to execute, a lot of the people that had been with the CEO, Steve Oliver, since day one, were in retail. But given the high fixed cost, the demise of the high street and that the online store was doing very well, it made complete sense.”
RETHINKING THE USP
He says: “The company had set itself up as the lazy man’s eBay; customers could take a box of CDs and DVDs, they’d get a price and Magpie would take everything. Even if we offered you a penny, we take it all to make it easy for you. It was a great USP, but we were getting so much stuff. The volumes of product coming in and clogging up our operational centre were growing exponentially. Volumes were growing, but profitability was not. We changed to a more selective acquisition purchasing model, instead of taking everything, we identified what we wanted from each customer. It resolved the operational log jam and we are making the same margins, while maintaining rapport with customers.”
He says: “The company began as a reseller of physical media and in 2015, it made a move into consumer tech; iPhones, consoles and tablets etc. Part of our invested capital was used to build out that vertical; it is now the biggest part of musicMagpie’s business. It didn’t come without challenges. Customers were agreeing to sell with us online, but many weren’t following through and sending the items. It was either too hard or there was a lack of trust in sending valuable items. We introduced smart kiosks and set them up at ASDA and Co-op locations, for customers to securely send and drop off their tech items. That reduced customer doubt and increased conversion rates.
Through our implemented organic growth strategies, we increased musicMagpie’s Ebitda from £1m - £13m, grew sales to £153m and made a 12.1x return on partial exit through IPO on the AIM, listing the company at £1.93 per share.”