Momox: Making millions with second-hand clothing

In 2016, Berlin company momox made a whopping 150 million euros in sales with used goods alone; an increase of 30 percent while profits rose by more than 50 percent. A considerable achievement for a re-commerce company that employs more than 1,000 people.

Second-hand articles are in vogue; a fact that was already known at momox 14 years ago when the company started with buying and selling used books. Till date, books take up the top position with a 60 percent share in sales. Other categories like movies, CDs, games and - since 2014 - clothes as well were added. Today, clothing is one of the company's most important growth drivers. And by now, momox is the largest supplier of used goods on Amazon and eBay in Germany and ranks second in the world as the most successful Amazon dealer.

The unique thing about momox: Whoever wants to sell used clothes via momox first enters them on the website and then immediately gets a quote for them for a price that momox would pay. Shipping is free and the amount mentioned will be automatically transferred to the seller's account. Close to 400 parcels with clothes reach the warehouse every day and have to be evaluated, photographed and prepared for momox' sales website ubup. About 350,000 articles are currently online on ubup. That is an enormous effort and to make it worth momox' while financially, every process has been perfected to the last detail, helped by specifically developed price algorithms. Momox CEO Heiner Kroke has spoken with FashionUnited about the the success story that is momox.

Mr. Kroke, currently, there is the sales platform momox, online shop ubup for fashion and medimops for media like books and movies. Why do you use different brand names?

Our customers come from both sides - buying and selling; momox is our brand on the buying side and ubup is our sales sites for fashion. The name ubup was the idea of our founder's wife.

You brought trading used clothes to a whole new level. How do you buy used articles on this scale and re-sell them successfully? What has been your biggest challenge?

That was certainly establishing the processes and scaling them up. We do not just have a simple website after all; we physically buy goods, have to unpack them, check their condition, determine the size and material and take pictures - after all, we cannot work with stock photos. Theat means we cannot photograph a pair of pants and then sell it 1000 times as the classic fashion stores do. Every single product has to be photographed individually. Then we have to store the goods of course and of course, ship them out again. With books, this is easier, as we can work with image databases. But for clothes, the customer wants a real photo of the real product the way it looks today.

Who checks the clothes?

We do that ourselves. We have more than 1,000 employees, of which 200 alone work with clothes. In our warehouses in Leipzig and Neuenhagen, close to Berlin, we have a storage capacity of approximately 76,000 square meters. We receive around 400 parcels with clothes daily, which have to be processed.

This is very time-consuming. How have you been able to build these processes?

Fashion was not the first category we started with but our fifth. That means over time, we developed standard processes that can be applied to virtually every product. Because we were already known for our book website, starting with a new category was not so difficult. That means we were in the lucky situation that we could offer our existing customers to buy their used clothing. That worked very well - we have over a million customers who sell regularly through us. However, after two weeks, we had to take the offer off the website because the demand was so huge. For the sales website ubup, we then used additional advertising to achieve a higher range of coverage - online of course but also on TV.

You do not only sell via your own website ubup. How many distribution channels do you have?

We have two distribution channels for clothes: Ebay and ubup. Everything else is too small. However, for books, we work with 15 distribution channels. Fashion is still lagging behind here but compared to our book business, this segement is much younger.

Can you tell us something about the development of sales in recent years?

In 2016, we generated 10 million euros in sales with clothing. Given that we have been offering the category for a few years only, this is a decent development.

The process for buying clothes has been set up extremely simply. Why don't you ask for much more information about the articles in the forefront, maybe then you could determine better prices?

We consciously ask very little when buying - we want to make it as easy as possible for our customers. Most of the information gathering work takes place on our end. We even measure sizes ourselves if we have doubts. Even colours and materials - we have to enter all this manually for each product. Thus, our processes are very cost intensive. That is why, above all, our core competence lies in setting up and scaling such processes cost-effectively. We receive 100,000 articles per day. We do not offer the highest price that can be achieved in the market - those who sell their clothes on Ebay may get a little more - but we make the work easier for the customers. Many like to sell; for others, it is simply too much work, too little money, and there is no assurance that the product will ever be sold.

Is there a company like yours abroad?

There is no role model abroad. Certainly in the area of e-commerce, but not in the area of re-commerce. Our business model has been developed, so to speak, by momox itself.

What companies do you compare yourself with then?

On the sales side, we compare ourselves with other e-commerce retailers. That's what our customers do. Maybe we cannot be as emotional, but we do not have to - the price is important. Photos with a model, for example, are not possible for cost reasons; also, we cannot offer consultation services.

In how much time does a product have to be sold?

There is not limited time frame but of course, our warehouse does not have an unlimited capacity. Our prices are based on algorithms and these calculate the potential that a particular article has to be sold again. About 50 percent of the clothes that we buy get re-sold within four weeks. Only about three percent of all articles do not get sold at all.

How exactly do you determine the price for a particular garment? Does its retail price play a role as well?

We do not take the retail price into account; that is not the deciding factor. We work with esperically developed, automated algorithms that determine the price at which we buy via a set of variables. Most importantly, the price is determined by supply and demand, i.e. how much stock of a particular article do we have in our warehouse and how strong is the demand for it when reselling it? Our own experiences, namily the prices on our website that were previously realised and the demand for an article on our own sales platforms are taken into account as well. For clothing, the brand is important as well and if it is a seasonal product. It is quite complicated! We have more than 10 million prices on our website, which get adjusted constantly.

What are the top brands when re-selling?

Basically everthing that we have in our own closets: Esprit, s.Oliver, Mexx, Zara, Boss, Adidas and Marc O’Polo.

How high is your profit margin?

It is a bit different for each article. When we assume a longer time for an article to be sold, we also assume a higher margin. On average, this is around 70 percent. This works because we are more cost efficient in many areas than a typical online retailer.

How high is your return rate?

It is not more than 50 percent as is the case for a typical retailer but between 20 to 30 percent.

Why is it so low?

Because of two factors: First, the price. That means, when someone buys something at a good price, he or she is more willing to keep it even if it does not meet their expectations 100 percent. Secondly, we offer a much smaller choice of comparable articles, even when it comes to size. Thus, a customer cannot order different colours and sizes for comparison and then return half of them.

Do you also buy remainders from brands and retailers?

No, but we cannot prevent smaller retailers from sending us their remainders. We probably would not recognise them as such. We want a healthy mix of merchandise and not something that does not get sold elsewhere.

But the used clothing that you get is generally 'out of fashion'.

The clothes that we buy are not always out of fashion. Some of them are not in favour any more or simply do not fit any more but still have the potential to be someone else's favourite.

What about collector's items? Old jeans and sneakers often fetch premium prices…

Let me take books as an example: If someone were to send us the Gutenberg Bible, we would not recognize it. The same is true for valuable jeans or sneakers. Basically, we want the latest merchandise, not grandfather's stuff.

In which countries do you operate?

For clothing, we are active only in Germany but overall, we operate in Germany, Austria, France and the UK. In addition, we sell in Canada and the United States but everything is shipped from Germany.

How do you explain momox' success?

Social trends certainly play an important role: Second-hand clothing is something positive and ecologically meaningful. Many people like that. Also, there is a general vintage trend in fashion and last but not least, momox offers a simply solution for making space for something new in one's closet. That is why we think that our business model could work in other countries as well.

What are your goals for the next few years?

To grow in the counries that we are already active in, to expand further internationally and to add more categories. We know how to buy and sell used articles!

Originally written by Regina Henkel for FashionUnited.de; translated by Simone Preuss

Photos: momox: warehouses in Leipzig and Neuenhagen / Heiner Kroke