The Trade Me marketplace is easily New Zealand’s largest online retailer. Courtney Devereux talks to chief executive Jon Macdonald about the strong community that has made its mark on New Zealand, and how a deep understanding of Kiwis helps the business strong against international competition.
Profile: Jon Macdonald for Trade Me
Trade Me has seen rapid growth in the past decade under Macdonald’s command. It’s grown from 100 staff to 550, as well as bringing in growth of nearly 200 percent. Annual revenue rose from $80 million in 2007 to $235 million at the last annual report.
Trade Me was founded by Sam Morgan, who was then a young computer consultant, in 1999. Morgan and Macdonald worked together previously at Deloitte Consultants before Macdonald headed overseas to work at HSBC Investment Bank. Upon his return in 2003 Macdonald was quickly offered a job within the Trade Me team of 15 employees, a large transition for HSBC’s team of 100,000 upwards.
“When I came back to New Zealand, just talked to people I knew to see what was going on that was interesting. I had a chat to Morgan and it was then that he was looking to bring on someone help him run the tech side… The idea for working for a small company was extremely appealing to me. The idea of being able to understand everything that was going on, and to have a meaningful impact was really effective.”
It was in 2007 that Morgan handed Trade Me’s leadership over to Macdonald.
“We all wanted the transition to be super careful, so what that meant was in about mid-2007 we invented this role called general manager. The idea was that I’d look after the day to day running of the business but Sam would still be around to make sure I didn’t screw anything up too badly.”
After a year of not screwing anything up too badly, Macdonald progressed to CEO in 2008. Now, Macdonald is CEO at the forefront of a 550-strong business which last sold for $1.2 billion.
The buy-sell auction site is a Kiwi staple of shopping, seeing over 800,000 visitors on its site per day. With a large and engaged community of buyers and sellers, Trade Me prides itself on knowing its consumer.
The trust that Trade Me has from New Zealanders is well-earned. Creating a Kiwi-oriented yet diverse team has been a constant learning curve for Macdonald, who says there will always be issues when it comes to growing staff numbers.
“Even when I joined, Trade Me was starting to grow very fast, they were in the process of hiring quite a lot of people… Back in those days, we were quite homogenous, in the sense that there would have been people in their early 20’s, and 30’s in Wellington. We were a fairly inexperienced management team, and one of the things you do when you do that is you stick to what you know, so you can hire people that are quite like you. I think that as we’ve grown we’ve have matured as a business and understood the value of diversity.”
Macdonald sits sans office, out within the fray of the other team members. He says even as a digital-based operation, communication is crucial.
“No one has an office here, not even me. I’d be lonely by myself. Obviously, we are an online-based store, but we are big believers in face-to-face communication and real-world interactions. I think there is a lot of value in people sitting in common spaces and the conversations that come from that.”
Between its classified items such as housing and insurance, to its standard listings, Trade Me has over four and a half million different items for sale at any one time. The site has an average of 200,000 people selling items every month, and around 2,000 small business operators selling onsite.
The pride Macdonald has in the community and its values are clear. Trade Me’s values were created when the community had around 150 employees and have since become popular thanks to its final value: “Don’t be a dick.”
Trade Me’s seven values:
1: Deliver awesome online experiences
2: Be entrepreneurial
3: Care about our community
4: Be trusted and straight up
5: Decide and act on merit
6: Hire and grow great people
7: Don’t be a dick
“It was an awkward time for us when we created those values because it’s like, I’ve never sat down and written out my own core values and put them up on the fridge, you just kind of don’t need to do it because it’s a part of you,” says Macdonald.
“We were a bit wary that it might feel a bit like a corporate thing, like the beginning of the end. I remember when we did it we got everyone around the pitch in their ideas and launch their values. We even had an idea to carve one out of cheese, to signify the cheesiness of it all. But that proved to not be very practical. But they have served us well those values, and they’re easy to live by from a personal point of view.”
Since creating those values, the company has continued to grow, which Macdonald partially credits to remaining Kiwi-focused and run.
“It’s extremely important to keep Trade Me Kiwi-run. It’s our roots and we are very proudly a Kiwi company, like all businesses we need to be clear with what we are good at and where our strengths lie. I think it’s clear that our strengths sit in New Zealand and we’re good at understanding the New Zealand consumer.”
Macdonald acknowledges that knowing their customer is important in all retail sectors, yet doesn’t expect that their consumers view Trade Me as traditional retail.
“There has been a shift over time in what Trade Me means to that New Zealand consumer, just in terms of the way in which people use it. The key way to illustrate that is these days pretty much exactly half of all the things sold on Trade Me are brand new. It’s been a very gradual power shift.”
Macdonald says their knowledge of the local market will help them survive as more international markets touch down on New Zealand shores.
“Even when we launched we had eBay try its hand in New Zealand, one of the reasons we were able to keep them at bay was because we understood Kiwis.
“If you fast forward to today, we’ve got our work cut out for us with Amazon, Facebook, Alibaba and other global players across all parts of the business. When you ask what have we got that they don’t, local knowledge and local connection is a huge part of it.”
Macdonald credits locally-focused ambitions help them stay separate from larger international players such as Amazon.
“We ourselves don’t have these big global ambitions, whereas what we’ve found is that these international players are very rational as to how they work. So, the reality is that New Zealand isn’t at the top of their list of priorities. It would be pretty crazy if it was, so I think that gives us an edge, or rather a basis, to compete.
“We will still have to work hard with what we’re doing now around improving functionality. It’ll only be by continuing to be useful that we can stay relevant and be able to grow despite that international competition.”
Amazon has been a topic of conversation among retailers in New Zealand since its announcement of a new Melbourne headquarters this year. The ‘Amazon-apocalypse’ has caused retailers to re-think their strategies to stay on top of the game. Macdonald has credited this ominous arrival to Trade Me’s urgency to grow and improve.
“I personally, and we collectively here, operate with a healthy degree of paranoia. I think it would be dangerous and eventually fatal for us to be complacent. Inherently that means there is a degree of worry, you need to maintain your urgency and I think Facebook and Amazon have been helpful in one sense; helping to galvanise everyone we have here in terms of the work we have got to get done.”
Macdonald spends a chunk of his time each year overseas analysing international markets for his company’s growth. He says inspiration comes from communication with similar companies.
“While there are always things that will be different, there are a bunch of things that will be similar. So, international markets are a big source of inspiration. It even applies to the global players we learn from, like Facebook and Amazon, to hone our offering.”
International retailers, specifically Facebook, provided inspiration for Trade Me’s mobile platform, Macdonald says transferring the desktop directly over to mobile was not seamless enough in its operation.
“It has been a lot of work, there is still a lot of opportunities there for us to take full advantage of all the great things that come with mobile, there is opportunity for us to think more creatively and really look into how people use those devices and the additional utilities, like location awareness, that come with that.”
Although using paranoia as a catalyst for growth against international marketplaces, Macdonald praises Amazon for its ability to grow online retail, both here and globally.
“Amazon is a great business, certainly it has its own strengths and certainly it is making its presence felt here. But the world keeps spinning, and other companies are doing pretty well. If anything, one experience I had overseas that I expect to see here is Amazon will help to grow online retail activity generally. We’re a bit behind the times here, we’d estimate online retail of being around 8 percent of total retail in New Zealand, where in the UK they’re sitting at double around 16 percent.
“That helps to give us perspective - It’s not going to be a scene out of Terminator Two, where Amazon arrives crushing all of our charred skulls into the ground. There is room for us all, and I’m very confident that we can continue to grow and succeed. Having that level of urgency is an important part of us being able to do that.”
Amazon works within a large market sphere, counting as 46 percent of all online retail in the US, according to Business Insider. Yet Macdonald says working in a smaller market has contributed to Trade Me’s success.
“If you go to larger markets, say the US, it’s actually a really complicated market and a lot of things are harder to do because it’s so much larger. Things like payments, different sales tax and all these different things that make it more complicated. The benefit to a smaller market is that they’re simple, and homogeneous which makes it easier to do business and easier to grow in.
“With New Zealand being a small market, we’ve actually got a high function logistics network and it’s not too hard to shift things around the country. We have a really good payments infrastructure here.”
This payment infrastructure has been an important topic of conversation for the growth of Trade Me. The company has been quick to roll out innovations as it grows. The reverse layby system Afterpay has become popular with online retailers, and Trade Me’s May 2017 purchase of the buy-now pay-later financial arm is an example of it knowing its consumers and acting on demands.
“I think that we’ve always believed there is an opportunity to provide a more flexible payment solutions, that would have a benefit for our consumers. It would add value for our sellers because it would result in more sales and a higher transaction value.”
Macdonald says that auctions are Trade Me’s origin and will always be a strong part of the brand, yet conversations for buyers and retail sellers have changed drastically.
“If you look out into the future, what I think is that new online retail will continue to grow. The used goods side has matured, so now the new goods side will be what we are known for.”
“I think originally retailers were quite sensitive to Trade Me and what their placement on Trade Me would mean for their brand. But now I think that New Zealand retailers have become a lot more comfortable with Trade Me and the context with online retail.”
Auction sites can be an uncertainty for retailers selling new goods which can be purchased elsewhere for cheaper. Yet Macdonald is now noticing retailers are becoming more flexible in the way they offer their goods.
“New Zealand retailers are quite rightly hungrier and more flexible when it comes to different channels that are available to them to sell their goods, but also to acquire more customers, and more customers online. Our main proposal to a potential seller or retailer is that we’ll have over 800,000 people visit us every day, and that is a fabulous buying audience.”
Trade Me has recently faced queries over why buyer and seller protection was only just introduced, even though the site is well into its teenage years. Macdonald’s answer? It’s offered the same protection for years.
“Buyer and seller protection was an example of us getting better at talking about things that we’ve actually been doing for a long time. It wasn’t a case where we said, ‘Okay let’s build all these trust systems and look after people’, what had happened is that we had already been doing that for years, we thought ‘Oh we’re selling ourselves a bit short’, we should call this something specific and talk about it a bit more, both to give people more explicit confidence and to just be clear about what we already do. It was just that as opposed to big underlying changes.”
Along with improving some of its previously set offerings, Macdonald sees a lot of available growing space for the company, despite its already impressive track record in the last decade.
“There is totally opportunity for growth in two main areas. One is where we keep growing out our core businesses to make them more useful to customers and that also makes us stronger. When I say that I mean in the case of our marketplace, being more useful when it comes to payments and logistics as well as working on expanding and improving our classified sections.”
“Second area is where there are other big industries within New Zealand. And the way we think about that is that what’s our core purpose. Generally, we provide efficient and easy-to-use online marketplaces, we bring together two parties and we help them with some kind of relationship. So, we’re thinking where is there still an opportunity to do that in New Zealand? We want to do it where there is a big enough commercial industry so that we’re not spreading ourselves too thin in what ultimately is a business opportunity.”
Getting a firm grip on the New Zealand marketplace has proved beneficial to Trade Me and Macdonald’s team. The site continues to grow its offers and opportunities, with big plans already in the work for 2018.
“We have so many things to build on, and it ranges from us doing new and totally different things to improving our current models.”
Although more are in the works in terms of customer engagement and voice activation. Macdonald says he can’t reveal the extent of the empire's plan, but does admit many new exciting things are on the way as Trade Me continues to deliver for its Kiwi consumers.
This story originally appeared in NZ Retail magazine issue 753 December 2017 / January 2018.
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