Growth Story: How Catawiki Is Becoming An Online Auction Powerhouse
How do you challenge global players in an established industry and succeed? This is the growth story of Catawiki, a Netherlands-based online marketplace that is taking on the likes of eBay and Sotheby’s to become the go-to destination for the sale and purchase of unique and collectible items.
Catawiki’s origins date back to 2008, when René Schoenmakers, an avid comic book collector, teamed up with a developer Marco Jensen to launch a Wikipedia-style portal that collectors of comic books, stamps, and coins could use to keep track of their inventories.
The crowdsourced catalogue grew into a loyal community, and the pair began searching for a monetization model. In late 2011, Catawiki started to host weekly online auctions to help members find special items that were missing in their collections. The auction model gained traction, and the company quickly expanded it from collectibles into luxury goods and one-off, special objects.
Today, Catawiki is a thriving online auction house and one of the fastest growing companies in Europe, according to Financial Times. With over 500 employees and 14 million unique monthly visitors, it auctions off 35,000 specialized lots each week, ranging from classic cars to the most expensive Lego sets in the world.
How has Catawiki been able to grow so fast? Here are a few lessons from their journey.
Value Proposition
As an online auction marketplace, Catawiki competes head to head with eBay and traditional auctioneers. How does its value proposition differentiate it from the competition?
Focus on specialized items
Catawiki offers online buyers an opportunity to purchase unusual, rare, and exceptional objects and collectibles. As eBay has diversified away from collectibles into a more general e-commerce space, Catawiki saw an opportunity to fill the gap in the market with a specialized offering.
When compared to the traditional auction house model, the company offers convenience of online experience. As average lot values increase and customers show willingness to bid on the more expensive items, the company will continue to be taking business away from the old guard.
Curated auctions
The company differentiates itself from eBay in that all of its auctions are curated by trusted local experts within their specialist fields. These professionals vet everything being put up for sale and advise the sellers on how to price the items. And, similar to an offline format, Catawiki auctions are moderated by live auctioneers.
This approach means that the company has to hire local curation experts as it expands into new markets, and in fact it has been one of the main drivers of headcount growth. It dampens scalability of the online model but provides the buyers with the necessary quality assurance and creates a more trusted marketplace.
Better user experience
While eBay has focused on battling Amazon and Wallmart in the e-commerce space, Catawiki has been honing the auction process at the core of its business model. The company has done a lot of testing to understand the psychology of its users and translated these insights into delivering better user experience on the platform.
All of its auctions start on Friday afternoon to take advantage of the fact that many people throttle down at work and are more likely to participate. Also, all auctions start with €1 because this pricing pulls more people into the auction and pushes the winning bid higher, the company found.
To eliminate the effect of bots on the auction outcome, which is often a problem on other auction sites, Catawiki extended every final bid with one extra minute. And the company keeps the payment in escrow for three weeks and releases it to the seller once the buyer accepts the item.
Growth strategy
Catawiki’s growth skyrocketed after 2014, following two rounds of fundraising which brought a total of over $90 million into the company’s coffers. Accel Partners, Lead Edge Capital, and other marquee investors provided Catawiki with the firepower to expand into new product categories, pursue new markets, and boost its marketing efforts.
Vertical diversification
One strategy for expanding the site’s audience was to increase the number of categories in which products are auctioned. Besides adding new categories, like wine, music, and toys, the company deepened existing categories by splitting them into subcategories.
For example, the Art & Prints category is split into classic art, modern art, art photography, cartography, and postcards, and each of these areas has further levels of segmentation. Subcategorization has made it easier for buyers and sellers to find their niche and brought new users onto the platform.
Geographic expansion
Growth has also come in the form of geographic expansion. Catawiki’s market presence grew from four countries in 2014 to over 20 today, including most of Western and Central Europe, Russia, and China.
In each market, the company offers its services in the local language, and its platform is now available in 17 languages. As Marco Jensen, co-founder, notes:
We learned that when you launch in a new language, you not only need good translators, but especially good copywriters: you want to have commercially attractive copy and that is something different than perfectly translated content.
Building a team with experiment-driven culture
In order to scale the business while being prudent with its capital, the company smartly upgraded its marketing capabilities. It brought on board its current CMO Harmen Visscher, who later pulled several graduates from Growth Tribe’s Growth Hacking Academy, Europe’s leading bootcamp for growth marketers, into the marketing team.
The new hires helped infuse the principles of growth marketing into the company DNA. Harmen Visscher is a firm believer in a data-driven approach to marketing:
Don’t consider and reconsider, create small tests and iterations and let the data tell you if you are doing the right thing.
Data-driven experimentation now permeates the company’s marketing efforts and culture. The mantra is to A/B test everything in order to avoid opinion-based decision making that can lead to unproductive arguments, suboptimal choices, and, ultimately, poor user experience.
With data analysis at the core of its product and marketing, the company created a centralized warehouse to aggregate all of its data and built its own A/B testing tool to enable customized analysis and machine learning.
Marketing strategy
The company’s marketing strategy overlays a typical customer journey, which the company breaks into two primary stages: acquisition, defined as registration on the platform, and activation, defined as first bid in an auction.
With a typical time of close to 30 days between acquisition and activation, the company decided to make a split between the two in terms of its marketing efforts. Most of its marketing spend is focused on the acquisition side, while activation and reactivation efforts primarily entail emails and push notifications.
Paid advertising
When acquiring new customers, Catawiki has had to overcome the challenge of low awareness of the type of services it offers and low intent and search volume for the relevant keywords. How did it do it? By focusing on paid advertising.
But with tens of thousands of new lots each week, how do you choose which lots to advertise and how do you manage these campaigns at scale across different channels?
Having analyzed historical auction data, the company learned that the optimal number of bidders is three to seven per lot. Marginal benefit of attracting additional bidders is not significant.
So, the company created an in-house tool which makes it possible to only run ads for lots that are on auction this week and where there are fewer than two bidders per lot.
Check out this presentation to learn how the company structures its social media campaigns and approaches the attribution problem.
Content Marketing
While paid advertising has been at the forefront of the company’s customer acquisition strategy, content marketing, a channel that has been underleveraged to date, could offer the greatest potential going forward.
The company’s content marketing program is gathering steam, as it has been ramping up its blog section aptly titled Catawiki Stories. With so many categories and unique items auctioned off on the platform, the company has a rich source of material to educate and engage with existing and potential customers.
PR
PR is an effective channel for Catawiki when it comes to bringing buyers into auctions for pricier items. Getting publicity has been made easier by the fact that the press loves telling stories of rare or unusual items of the type that Catawiki auctions.
To reach its target audience, the company places news-style promotional pieces in specialized online publications, say in the watches or jewelry space, as well as with more general outlets like Forbes to get out the news about an upcoming auction.
TV advertising
Catawiki has also had success with leveraging the reach of offline media to increase general awareness of its platform.
To measure and optimize the ROI of TV ads that it ran in several European markets in 2016, it uploaded the exact time of the airing to its data warehouse. Having a centralized data platform allowed the company to analyze uplift in traffic, uplift in registrations, and value attributed to them, and in turn, assess effectiveness of individual broadcasters, programs, and position of the spots.
Growing pains
Growth for Catawiki hasn’t come without the pains. While on the marketing side the company can scale user acquisition relatively quickly, keeping up on the operational front with new geographies and product categories has been a challenge.
Recent customer complaints focusing around the level of customer service and qualification of auction experts indicate the company needs to maintain a tighter operational discipline during this land-grab phase, especially as it sets its sights on the biggest prize of all — the US market.
Key takeaways from Catawiki’s growth journey:
- Developing a loyal community in a specific niche over a three-year timespan enabled the company to build a marketplace on top of it as a monetization strategy.
- While paid advertising and PR have been the main drivers of growth to date, the company is scaling its content marketing efforts, as growth channels evolve over time.
- By adopting the mindset of A/B testing and data-driven experimentation, Catawiki was able to improve its core product, deliver better user experience, and drive growth at optimized ROI.
What’s next for Catawiki?
The Catawiki story underscores how you can achieve scale in a market sector thought to be off limits to new entrants. It should be exciting to watch as Catawiki expands further from its European base to fulfill its ambitious goal of becoming a global auction powerhouse for exceptional objects and hard-to-find collectables.
Originally published at growthengineers.com.
