Linio Wants Quality Before Anything ElseBy Jan Hogewoning | Wed, 05/20/2020 - 14:25
Q: What measures have you implemented during the COVID-19 contingency?
A: We have seen different impacts as the crisis evolves, and we have reacted accordingly. The first priority was to focus on the safety of our employees, our customers and our partners. We made an early decision to have all our administrative employees work from home. As a tech company, we have been able to adapt well to different forms of communication. In the operational area, we have ensured that teams work in shifts that do not overlap. Communal lunches have stopped and all staff involved in the logistical operation of warehouses and delivery are practicing social distancing. Furthermore, they have masks, sanitizing gel and are washing their hands at least once per hour. The same measures have been mandated for our delivery partners, which have implemented them. This also allows us to help protect customers by receiving contactless deliveries.
On the commercial side, we have seen a large increase in traffic and a lot of interest from brands and retailers to sell online using our platforms. We always make sure that we adapt our commercial offering to the changing market needs. People working from home are making more purchases online as their offline options have been greatly reduced since the beginning of April. We are ensuring we have the right assortment of products through collaboration with our retail partners, particularly products in the areas of consumer-packaged goods, home office equipment, sports and health & beauty. Furthermore, we are ensuring that higher demand does not lead to excessive pricing that penalizes customers. We work with our financial partners and sellers to offer fair prices. We also communicate with our sellers when we see unusual increases in prices. In some cases, after investigating with the sellers, this might lead to removing the product from our platform. This is part of our philosophy of offering quality products from quality companies at an attractive price in a safe marketplace.
Q: Can you explain how your platform has evolved since its founding?
A: Linio was created in 2012 through the initiative of a large German investor. We started as a conventional online retailer, selling products that we bought from suppliers. In 2014, we shifted to a marketplace model, where companies sell to customers through our platform and we charge a commission for that service. We were always a B2C player and never a C2C. In the beginning, the platform was quite open, and any company could join. In 2016, we decided to implement a curated marketplace model. We started selecting only formal companies with the ability to invoice customers, ship fast and comply with our customer experience requirements, such as free returns. The goal was to ensure that the products we were offering were quality products, not used or illegal.
In 2018, we added another level by becoming a multichannel marketplace. Instead of an online shop, our goal is to be a digital mall. This digital mall allows our retail partners to sell their products online through a dedicated shop in our platform but also through their own site that we can build and run for them. By selling through our various stores, they can get a segmented market and access particular customer groups while leveraging the same system and operational infrastructure. One channel example is Club Premier, where customers can buy products using points earned as part of the Aeroméxico loyalty program.
Q: Are you also building online channels for retailers?
A: Yes, we offer retailers the option to build an online sales channel and we help them set up their whole e-commerce operation as part of the Linio ecosystem. This one-stop-shop offering includes a sales and marketing strategy, customer service, warehouse storage and delivery services. E-commerce is not easy so it is good when you can partner with someone like Linio who has been one of the first B2C e-commerce players in the region. It requires the balancing of technology, good retail strategies, logistics and proper payment facilitation for customers. I think the complexity of doing this is one reason why retailers in Mexico are deciding to delay opening an e-commerce platform. They look at the retail market and see that less than 5 percent of sales are done online today, despite the impressive double-digit growth of e-commerce in our country over the last 5 years. In addition, Mexico still has fewer physical stores per capita than other countries such as the US or even China, which means there are still opportunities to open physical stores. However, one important factor we need to observe is that the Mexican population is able to leapfrog physical buying because most people are connected to the internet through their smartphone. They do not need to wait for a physical shop to open or even get an expensive desktop or laptop. Cheap smartphones are the key to growing e-commerce and having our region catch up with other parts of the world where e-commerce started more than 20 years ago. The current COVID-19 situation gives our young industry an opportunity to show its value and accelerate its relevance.
Q: How do you overcome the challenge of operating in a country with such a large informal economy?
A: It is tempting to think you can buy cheaper if products are from informal or illegal sources. However, this comes with a variety of consequences for the customer. You are unprotected, exposed to bad surprises and you have no guarantee that allows you to return the product so all-in prices for informal products are higher than they seem. In addition, as a customer buying these products, you are promoting the informal economy, which does not help anyone.
Of course, prices will always be important. Studies show that in Mexico, the first perception of a customer regarding e-commerce is that they can purchase the same product for a lower price. Another fact is that the biggest hurdle to buying online is trust. We believe that our solution, providing that sense of formality and assured quality, helps built trust with the customer. Due to our quality standards, we experience fewer returns than the typical e-commerce marketplace. We provide a much better customer experience, evidenced by our customer feedback. On top of that, our way of working with retail partners goes beyond a simple digital transaction because we really create a relationship that can help them improve their online offering and grow in the digital space.
Q: What financing solutions do you offer to create attractive product deals?
A: To build a “digital mall” concept, we also needed to create partnerships with financing institutions. We were one of the first platforms to offer a variety of payment alternatives. In 2012, before the competition, we introduced the option to pay with cash on delivery. In terms of financing, we work with different banks to offer interest-free options to customers. With Scotiabank, we created the first co-branded card for e-commerce in the country four years ago. Apart from banks, we also have a partnership with a microfinancing company to provide loans together with our products to their customers. We are working on other initiatives to increase the number of financing and payment options and broaden our customer base. Working with lenders is important for us because it allows us to reach more segments of the population. Many people in Mexico do not have access to banking services; they need other options to access our quality products. It is a tough challenge but we are determined to take it on by building alliances.
Q: Looking forward, how do you intend to strengthen the company’s brand image?
A: I believe our vision of ethical shopping should be more explicit. There are two types of actions we will be taking. First, we will continue to improve the customer experience. Getting the product they want where they want it, fast and in a safe manner. We want to create a relationship with the customer, using a lot of personalization, online communication and doing things such as delivering our products in distinct packaging. Second, we want to do more offline promotion of our brand. In other countries, following the acquisition by Falabella, we have done more advertising of the brand in physical places. This is expensive but an important investment to bonify our online investments. We are working on how to do it smartly and in different shapes and forms.
Linio is a digital mall-style e-commerce platform that allows retailers and brands to sell their products through its platform and 12 other online channels. In 2018, the platform was acquired by Chilean retail group Falabella