Allegro sells for $3.3bn – time for marketplace sellers to take stock

Barry Doyle is the CFO at XSellco. In this post he looks at Polish ecommerce and the sale of Allegro.

The global media and technology conglomerate Naspers announced the sale of the Allegro Group on October 14 for $3.3bn, a tidy profit on the $1.5bn it cost them to acquire the marketplace group in 2008. Allegro, often referred to as “the Polish eBay” is the second marketplace to sell for $3.3bn after Walmart completed the purchase of Jet.com in September 2016.

While Naspers may be selling the marketplace business due to slower growth than it had hoped for, the 23% year-over year growth that Allegro has achieved is nothing short of remarkable given the current state of affairs of the European economy. The significance of the sale should not be lost on marketplace sellers, especially those based in Europe. Allegro’s growth in a changing environment is something many businesses can only dream about.

Allegro may have also gotten a boost from the Polish government, whether it was intentional or not. On September 1st, 2016, a new retail tax came into effect in Poland for large retailers. The new Retail Sales Tax levies a 0.8% to 1.4% tax on retailers with sales in excess of PLN 17m (c. $4.4m) per month. But there is a notable exception to this new tax – eCommerce – meaning that the Allegro marketplace will have a better position than some of the larger bricks and mortar chains operating in Poland. It has the potential to further stimulate online shopping in the Polish market, a market that Allegro dominates, and further fuel the growth of Europe’s third biggest marketplace.

The $3.3bn price tag for Allegro should be a wake up call to all European sellers looking for new ways to boost revenue. Clearly something big is going on. Allegro is a great opportunity. It has cornered the Central and Eastern European market and has as big a brand presence in those markets as Amazon does in the US and UK. For UK sellers, there is an even greater incentive to look to Allegro for growth opportunities, with the impact of Brexit still very uncertain.

The falling value of the British pound has helped many sellers achieve a short term boost in sales, as buyers outside the UK look for bargains through a stronger euro. It won’t be long however, before UK sellers start to feel the pain of sourcing products overseas and paying significantly more. Ultimately, imported goods to the UK will increase in price.

Will UK consumers be willing to pay more so retailers can maintain their margin? There is a real risk of falling sales or at least reduced margins for many UK sellers in the medium term so sellers should be preparing for this by expanding their overseas sales. Yes, there is uncertainty as to what tariffs if any may be imposed post Brexit. But for now, the UK is still a member of the EU and Allegro, along with all other European marketplaces, present the perfect opportunity for UK sellers to hedge and protect from the uncertain times that lie ahead, as the implications of the Brexit vote continue to unfold.