Information published by Reuters regarding the sale of Allegro was not a big surprise. Exactly one year ago the same message appeared. Rumors about Naspers wanting to sell Allegro emerged before, usually in unofficial talks and of course, of no surprise. Who could potentially be interested in Allegro? The answer is obvious: Amazon, Alibaba and eBay. Reuters also mentions the biggest Polish portal Onet.pl and WP.pl and Chinese investment funds.
Reasons of sale
Let’s start with if Naspers has a reason to get rid of Allegro. The first answer is – of course. Second – at least two.
The first is related to the fact that Naspers just wants to get out of the investment to make a pretty decent rate of return. The value of $ 3 billion (the value permeated by the media) would give Naspers a pretty decent return on the investment, given that the price at which Allegro was bought. Let me remind you that it was approximately a figure in between 1.4 to 1.5 billion dollars.
The second reason is the increasing congestion in the Polish market and E-commerce. Yet, neither Amazon nor Alibaba / Aliexpress have really begun to expand in Polish market. From Naspers´ point of view, it’s better to sell Allegro now, at a pretty high appraisal than to engage in a battle with the titans; a fight which will be hard to win in the same style as before with eBay. However, outside of these major players are slightly smaller but effective competing market players such as Zalando: players who rather not buy Allegro but in selected segments may weaken the leader of Polish ecommerce.
It is also difficult to expect that such a mature business as Allegro, with such a large market share will grow rapidly. It is rather a strategy to strengthen their position; to continue fighting with the competition and rather small increases (or decreases low) – this is nothing strange or surprising.
It should be noted that Poles are reluctant to make purchases on foreign sites. Only 10% of buyers in the network spend money on foreign sites. Potential buyers for Allegro cannot count on a lot of traffic from the Polish. In this context, Allegro is seen as even more appetizing morsel (taking into account the size of Allegro, this may not be the right word).
Who buys and why?
According to information published by Reuters it’s not clear whether Naspers intends to sell only Allegro but also other companies such as; OLX.pl, Ceneo.pl, otoMoto.pl and PayU.pl. all in the hopes of making it more attractive to any potential buyers.
Why Allegro might be of interest to those entities? Here, too, the answers are fairly obvious.
The purchase of Allegro is the simplest and possibly the cheapest way to enter the Polish market, whose value of which this year is expected to be 36 billion dollars and will continue to grow in the coming years. While it is difficult to expect that the very same Allegro will rapidly increase in market share, it has to maintain its current position in the growing market, which gives pretty decent prospects. It is also a tempting argument for the aforementioned Chinese investment funds, which probably hopes that maintaining proper advantage over competitors in a few years means more money from growing Polish e-commerce market. This means that the value of the Allegro will also be higher. However, this is a risky assumption because it is difficult to expect that the market share of Allegro will remain at the same level should Amazon’s and AliBaba also enter the market.
The second reason – Poland is an ideal place to expand into CEE. On one hand very it’s close to Western Europe and on the other hand, Poland is pretty well communicated with other countries in CEE. We already have a pretty good and still improving infrastructure. Poland is also a place where many companies (from various industries) have headquarters managing other subsidiaries in CEE. Moreover, Allegro also has experience of operating in other markets of Central and Eastern Europe – not all good, but such knowledge is also very valuable.
It depends. Allegro is a very strong brand, the most recognizable service in Polish e-commerce, leaving behind (both in terms of brand awareness and the number of Real Users) potential buyers – Alibaba, eBay and Amazon. The last one didn’t even appear in top 10 in study „The most recognizable services e -handlu „published in the” Report e-commerce „(Gemius).
Of course, we can at this point recall a successful rebranding that has been made on the occasion of changes in Tablica.pl into OLX.pl. It is, however, somewhat of a different story. Tablica.pl was not such a recognizable brand name, and besides, it was behind the rebranding. In 2009 Tablica.pl was called yet Szerlok.pl, it wasn’t until 2011 that there was a change.
The truth is, that using this same example you can prove that. However, rebranding would make better sense. OLX is a player known in more than 100 markets and in many of them OLX replacing even the most popular local brands. Finally, global brand is more valuable than even the strongest but are still local, especially if we are dealing with such powerful players as the Amazon or Alibaba.
I imagine that during transitional period (even a relatively long one) Allegro will maintain its name but become a lookalike of the new owner (Polish version Aliexpress already, though perhaps it was created using Google translator) or gain only a subtle addition to the logo „Allegro part of Amazon / Alibaba Group. ”
I imagine, however, the situation in which we have Allegro in the market (now with the new owner) and the Polish version of Amazon or Aliexpress (which as I mentioned already). If you wonder why, you can visualize this (and it is a very good word in this case) on the example of a publishing house Marquard Media, which in Poland has magazines like Playboy and CKM, both pretty similar but dedicated to different target groups.
The consequences for the market
The answer to the question, what are the consequences for the Polish e-commerce market if Allegro is in hands of new owner, is not unambiguous. Here we can apply the most common phrase used by all lawyers: it depends. Because it actually does. Considering what happens next, depends on who buys Allegro and with what intent. For Allegro, a strong new owner is good news. The fight against giants such as Amazon and Alibaba is not going to be easy and it is difficult to assume that competitors would commit the same mistakes committed by eBay.
What seems to be even more certain is that the Polish market gets tighter. Also, certain e-stores may simply run out of space, especially if e-commerce will be finally treated seriously by the largest retail chains. Even without it real engagement in Polish market by players like Amazon or AliBab, things could change dramatically. Of course and ibkt if it will be something more than just a Polish language version.