Here you can enjoy our conversation with Tarek Müller, the co-founder and managing director of About You. Tarek Müller has walked us through the history and dynamics of this European fashion business. We also talked about their global ambitions.
We have discussed the following topics:
- 1Check out Interactive Brokers
- 2Who is Tarek Müller?
- 3About You's founding story
- 4Tarek Müller on About You's achievements
- 5Early investors of About You
- 6What attracted the first investors to About You?
- 7Independence from investors
- 8The vision of a global leadership
- 9Consistencies and changes
- 10Managing change
- 11Tarek Müller's personal development
- 12About You's employees
- 13Tarek Müller on managing the employees
- 14A company from Europe winning the online fashion game?
- 15The US Market
- 16Tarek Müller on competing with Zalando and Amazon
- 17Pricing @ About You
- 18Incubating to grow
- 19Acquiring to grow
- 20The data game
- 21Expanding to new markets
- 22Launching in Italy
- 23Tarek Müller on managing logistics
- 24Why is About You's management qualified to win?
- 25What does Tarek Müller personally get out of this all?
- 26What does Tarek Müller want to do after growing About You?
Check out Interactive Brokers
[00:00:00] Tilman Versch: This episode of Good Investing Talks is supported by Interactive Brokers. If you’re ever looking for a broker, Interactive Brokers is the place to go. I personally use their service because I think they have a great selection of stocks and markets you can access, they have super fair prices and a great tracking system to track your performance.
If you want to try out the offer of Interactive Brokers and support my channel, please click on the link below. There you will be directed to Interactive Brokers and can get an idea of what they offer for you. I really liked their tool, and it’s a high recommendation by me. And now, enjoy the video.
Who is Tarek Müller?
[00:00:38] Tilman Versch: Dear audience of Good Investing Talks, it’s great to have you back. Today, I’m happy to welcome another German. So, we will kill some th’s today. Tarek Müller us joining us from Hamburg. How’re you doing, Tarek?
[00:00:50] Tarek Müller: I’m doing fine. Sitting here in my home office. It is actually snowing here in Hamburg. Very unexpected.
[00:00:56] Tilman Versch: Yes, some people will have snow on these cold days. But here in Stuttgart, there is no snow. But it’s rare that we have snow.
[00:01:05] Tarek Müller: Yes, not good for our business. Now, this is not the weather we would wish for you. Because now we need… For us, it’s always good if there’s seasonality. And so now it should get a bit warmer, and then slightly warmer, and so on and so forth. Because then people actually want to freshen up the wardrobe.
[00:01:23] Tilman Versch: I hope it’s coming back to seasonality, which will be also good for you. and also good for the people who don’t like winter. But now let us look out a bit longer. And as I came above your materials, I got stuck with your presentation on slide three and there’s your vision. Your vision is to become
- “the global number one fashion platform”.
I want to build our interview in the first part around this vision. Are you ready for that?
[00:01:58] Tarek Müller: I am.
About You’s founding story
[00:02:00] Tilman Versch: Great. Maybe let us start with the word “become”. “Become” means that you already have a certain position from where you’re going to something.
But maybe let us take the backward view and explain a bit what you have done in the last seven years with About You. What is the founding story? What are the events there? Maybe walk us through this?
[00:02:23] Tarek Müller: Yes, happy to do that. So the company was found in 2014 by Hannes Wiese, Sebastian Betz, Benjamin Otto and me. And we found the company with a vision of digitizing the offline shopping stroll. And that is actually based on something we saw on the market. And that is actually, the majority of money spent in fashion, offline and online combined, but especially offline, is spent by people that buy something out of an impulse rather than out of a demand.
So people take a shopping stroll in the offline city center, you ask them, “What are you needing?,” and they will answer “Something”, and then they would end up buying something else. And that is a very untypical customer behavior that you don’t find in any other consumer category. So imagine, someone walks into Media Markt, it’s an electronics store, it is very unlikely that they walk in the electronics store to buy a radio and then they end up buying a TV. So this is nothing you buy out of an impulse.
In fashion though, this is the normal customer behavior and actually accounts for the majority of revenues done offline. And this was a part of the market that had not been digitized until About You came into play. Because the existing online players back then, namely Zalando, Amazon, Otto, and so on, so forth, were all centered around fulfilling a demand. Now, this is the e-commerce 1.0 model. Basically, someone goes to Amazon, you always visit Amazon if you have a demand, never without having a demand. So people are coming to a website with a demand and then the whole e-commerce platform is focused on understanding a demand and fulfilling it in the fastest way possible.
We took a different approach with About You. We are trying to invite customers to visit our smartphone app frequently even without having a demand, and then to really take a shopping stroll. So get inspired by the content, outfits, editorial stories, now also things like live shopping, and then buy something out of an impulse. And that is new to the market and that was basically the foundation idea or founding idea that we had back then in 2014.
We took a different approach with About You. We are trying to invite customers to visit our smartphone app frequently even without having a demand, and then to really take a shopping stroll. So get inspired by the content, outfits, editorial stories, now also things like live shopping, and then buy something out of an impulse.
Tarek Müller on About You’s achievements
[00:04:27] Tilman Versch: So maybe looking back at the seven years, and it’s hard to do this exercise: What are three things you’re especially proud of you’ve built in these last seven years?
[00:04:36] Tarek Müller: First of all, it’s fulfilling on the USPs that we also back then believed are the most important to crack that market.
- And that is first of all having the best smartphone app. We are having the best smartphone app when it comes to the app store ratings in the industry.
- Secondly, inspiring our consumers with great content. We have the largest and I would say best content powerhouse in fashion in Europe.
- And thirdly, it’s personalization that’s also incorporated into our name. It’s About You. If I log in, on ‘About You’, the logo changes to ‘About Tarek’. So there is not one version of About You, but there are 30 million versions of About You, representing our 30 million monthly active users. And with every click, the next click is getting better.
So there is not one version of About You, but there are 30 million versions of About You, representing our 30 million monthly active users. And with every click, the next click is getting better. With every click, the next click is getting better.
So, the first thing I’m proud of is I think we have delivered on all of these three aspects as the best in the industry.
Secondly, we started with the internationalization in October 2017, when we opened our first non-German speaking countries, being Belgium and Netherlands. And that has been a huge success for us. And I think looking back, I would have wished to internationalize earlier because internationalization is for us a huge lever in terms of growth, but also with every wave of internationalization, we managed to gain higher capital efficiency because we are optimizing our overall platform experience. And we are optimizing our internationalization playbook.
And thirdly, in 2018, we have added another business segment to our overall group strategy. And that is our work. In our financial reporting, we report this as TME, which stands for Tech Media Enabling. And this is essentially our B2B business. So here, at our core, we are taking our proprietary technology. And we license out this technology to third-party brands and retailers as a Software as a Service model. And that is heavily growing, and it’s highly profitable. So a very good addition to our commerce business.
Early investors of About You
[00:06:24] Tilman Versch: So you already mentioned the Otto family, and there’s also Anders Holch Povlsen, I hope I spell his name right, otherwise correct me, and who’s backing you. What role did they play in your founder’s journey? And how long are they planning to stay with you?
[00:06:40] Tarek Müller: They played an essential role. So the Otto Group was our founding investor. They have done the first capital commitment that brought us to 2018. And in 2018, we took Anders Povlsen on board, and for those who are not familiar with Anders, he is a kingmaker in fashion I would say. He invested very early days of ASOS. He is the largest shareholder of ASOS, which is the UK market leader. He invested very early days in Zalando, a continental European market leader. He has invested in Boost, the Scandinavian market leader. He’s one of the top investors of Klarna, for example. And he does very few investments and he has an incredibly high success rate.
The reason for this is that he’s actually the largest producer and wholesale distributor of fashion brands. So he’s also our largest supplier, and probably also the largest supplier of Zalando and ASOS. And all of these insights he has through his own business. He then invests in the companies that he believes are the future winners.
And in 2018, we were doing fundraising. We spoke to all kinds of private equity companies, etc. We had a huge interest. But at the beginning of this process, we always said Anders Povlsen would be by far the most favorable, most favorite investor because he’s the most well-educated person in the market. Since he’s not just an investor in all of those companies, but he’s also on the supervisory board. So nobody has more knowledge than him being a market leader, as a supplier, and being invested in the market leaders in other territories. And getting him as an investor is the best proof of the strengths of our business.
And yes, ultimately, we succeeded. We brought him on board. He invested 250 million out of his private pocket in our company. And that allowed us to internationalize and to really accelerate internationalization, which resulted in today 26 countries that we’re active in. And in June last year, we have an IPOed the company on the Frankfurt Stock Exchange. And on the question, sorry, what is their long-term plan? So they are in for the long term. They are a huge believer in About You. They believe we are one of the future winners of this huge market. And therefore they – from everything I know – they are in for the long term.
So they (the investors) are in for the long term. They are a huge believer in About You. They believe we are one of the future winners of this huge market.
What attracted the first investors to About You?
[00:08:55] Tilman Versch: Maybe you had such talks with them. What do they like about About You? And why did they trust you with their money? Do you have any feedback on this?
[00:09:08] Tarek Müller: Yes, I think it’s a combination of things. First of all, they are a big believer in the market overall, as we are. We’re talking about a $450 billion market in Europe alone. This is total fashion. And less than 20% of that was digitized pre-COVID. And we and the market believe that obviously there will be further offline to online shifts. So being an online player, first of all, gives you a bit of tailwind.
Now within the online segment, we can conclude that it’s actually much more fragmented than people usually think. So take the six largest online pure-play platforms being Amazon, Zalando, ASOS, About You, and Boohooo – and Farfetch, sorry. It’s in random directions, not sorted by size now. Now these six players are just accounting for 25% of the online fashion revenue. I.e. 75% is still in the hands of Omni-channel players, catalog players, basically players with a heritage or in other words legacy, and to a very, very slight extent also the DTC of brands.
Now, we believe that the market will further consolidate and that there will be an oligopoly of, I don’t know, three to five online pure players making up for more than 50% of the online share. And the legacy players will have a hard time succeeding and surviving, and then the DTC of the brands will grow. Now, if you take the target picture of the market, I believe we are in the best position to be the leader of this oligopoly within that online pure-play market making more than 50% of the total market.
And we are also making our money with the DTC of the brands because we are supplying them with the infrastructure through our B2B business, we are supplying them with technology, logistics, customer service, and partly also online marketing. So, we are making money with both parts of the market that we believe will be the mass majority of the future market, let’s say in 10 to 15 years. So, this is the first point where they invested in us. They also believe in this market target picture. And that target picture means we will become quite large.
And we are also making our money with the DTC of the brands because we are supplying them with the infrastructure through our B2B business, we are supplying them with technology, logistics, customer service, and partly also online marketing. So, we are making money with both parts of the market that we believe will be the mass majority of the future market, let’s say in 10 to 15 years. So, this is the first point where they invested in us.
Secondly, I think the question is within that online pure-play market. So compared to ASOS, Zalando, and all these online pure players, I think the question is who has the best structural business model? And here, we believe we have several tailwinds behind us.
- First of all, we still see an increase in smartphone usage. We have the best smartphone app. We still see an increase in social media usage. We have by far the most advanced social media strategy.
- And secondly is the target group. We are serving Gen-Y and Gen-Z. And this is the target group that is obviously expanding its fashion spending. And we see that this target group is very loyal and sticky to the About You model and it’s actually increasing their spending every year.
- And the third reason is more of a softer reason, I think, from a DNA perspective of a company, the question is, which DNA of a company is the winning DNA? And here we believe it’s clearly a technology DNA that you have to have to win. And we are probably the most technological company amongst all players worldwide in the online fashion space.
Independence from investors
[00:12:22] Tilman Versch: To summarize it, you’re planning to build a powerhouse here? How is this powerhouse connected with your investors? Is there any overlap? Are your operations fully your own? Or are you also running parts of Otto’s or other investors’ capabilities or networks?
[00:12:40] Tarek Müller: I think, first of all, it’s important to state that we are an independent company. I mean, that’s pretty clear, I guess because we are listed. But I think it’s important to state that. Independent means we have enough capital on the balance sheet to execute everything we want. We have an independent supervisory board, and we have obviously our own operations or buying logistics, and so on, so forth. Nevertheless, we have business relationships with our investors. But everyone in the industry has.
So Otto Group and Bestseller are two major players in this industry. So everyone has business relationships with them. And the business relationship we have is with Bestseller, obviously. They are our supplier, as they are supplying everyone in the industry. And with the Otto Group, we have connections, since they are part of our marketplace, we are part of the marketplace. It’s a very minor part of the revenues of the respective companies. But there is some kind of marketplace connection there.
Furthermore, they’re also a client of our B2B business. So a lot of companies within the Otto Group are using our technology. And nevertheless, this has nothing to do with them being a shareholder.
So the subsidiaries of the Otto Group are also independent, the independent decision to take whomever they want in terms of technology, but a lot of them have actually decided for our technology.
The vision of a global leadership
[00:14:02] Tilman Versch: Coming back to your vision, it’s a bit vague how you formulated it. There’s no clear time goal. Maybe you can explain a bit the goals you have that are concrete out there. And how we should be thinking about this idea of global leadership. Is it something you want to achieve? Is it 5/10/15/20 years?
[00:14:25] Tarek Müller: Yes. So let me start with the milestones that we have communicated to the capital market. I think there are two important milestones looking in our P&L.
- First one is hitting breakeven in our next fiscal year.
- And the second milestone, we have communicated, is reaching 5 billion in net revenue in the fiscal year 2025.
And here, we are still very confident to reach those two milestones.
On the vision of becoming the global number one online fashion platform. This is obviously our north star. I mean there are two ambitions formulated in that sentence. One is the ambition of being a global player. And this is a commitment towards geographical expansion which we have greatly delivered in the past. I mean, we are now operating in 26 countries. In 2021, alone, we have opened five new countries and ramped up the large Southern European countries. So, we have market entries in France, Italy, Spain, Portugal, and Greece. And all of those market entries have been a huge success for us. So the capital efficiency we see is always higher than in the DACH region. We see the model resonates very well, the cohort performances are great, the customer acquisition costs are great, etc.
So, global for us is a commitment to watch geographical expansion. If we see that the countries have a promising prospect in terms of us becoming number one or number two and delivering a great ROI on the marketing expense, we are doing it. But there is no timeline attached. Because also, this is not globalization or geographical expansion. It’s nothing we do out of our ego. It’s something we do very much based on data.
So, what we are doing is we are usually soft-launching a country through a global shipping option. We are serving the country in an unlocalized way, so not translated [websites]. And then afterward, we gather data, and we build up our statistical models around the customer acquisition, the ROI on marketing spend, and the customer lifetime value. And just, if the data indicates clearly that it’s a good investment to launch this country, we are doing it. So, global is a very vague vision. And it’s something that is more the result of data rather than the something that no matter what…
We gather data, and we build up our statistical models around the customer acquisition, the ROI on marketing spend, and the customer lifetime value. And just if the data indicates clearly that it’s a good investment to launch this country, we are doing it.
[00:16:55] Tilman Versch: You don’t want to build an empire?
[00:16:57] Tarek Müller: No, it’s not something driven out of ego. It’s not something… It’s not a briefing “global”. It’s the expected result of what we are doing, basically. But the decisions are always taken on the databases, and purely on the question of positive ROI.
And secondly, the number one is pretty much the same. It is rather a result than a briefing because what we can see in the past is we have grown with a CAGR of more than 90%. So, we have clearly outgrown every fashion e-commerce model in the world by far while improving our margin year by year while having a profitable core market – with the DACH region with EBITDA margins about 5%. So, profitability is proven, yet we’re still outgrowing every competitor.
We believe that the reason for this is that we have the structurally best-positioned business model. Now we obviously believe that this will hold true going forward. And then again, becoming the number one as a result of us having the best business model and continuously outgrowing our competitors. But on both things, there can’t be a timeline attached as this is just the result. It’s the output, not the input.
Consistencies and changes
[00:18:10] Tilman Versch: If you’re growing that fast, you also have to be willing to adapt, change and also give certain things up while keeping it true and increasing the value proposition in your core. Like, what things – looking back the last seven years – and maybe also trying to look into the future, what do you believe will change? Where are things that don’t change? Or things that might be, if we talk again in five years, are more or less the same?
[00:18:42] Tarek Müller: So let me start with the things I think don’t change: First of all, we won’t start running around naked. So people will be continuously buying fashion. Now we’re talking Europe-wide, we’re talking about 450 billion market size. Worldwide, we’re talking about more than a trillion in yearly revenue done with fashion – way, way more than a trillion. So I think people will continue to spend money on fashion.
Now what I also believe will continue is the rise of online. I don’t know what the target or what number needs to be achieved to have a kind of a plateau in online growth. But I guess it will be somewhere around 50%-50% because this is also what you see in the younger generation. It’s roughly 50%-50% distributed. 50% of the spending is online, and 50% is offline.
Now let’s take this as a basis, then we are talking about an online fashion total addressable market of more than 500 billion worldwide. What I also believe will continue to be the case is that the winners will win, the larger players will have a benefit and the multinational player will win over the national players, and the technologically driven players will win over, I would say non technologically driven players. So that I believe will continue to be the case.
What I also believe will continue to be the case is that the winners will win, the larger players will have a benefit and the multinational players will win over the national player, and the technologically driven players will win over, I would say non technologically driven players.
What I think will change though is customer behavior because this constantly changes. So the way how customers want to get inspired, the way how customers are shopping, it might be the device that changes, nobody knows what the next wave after the mobile will be. Live shopping is a new topic, nobody knows what the next topic will be. Social media channels, taking marketing example: We came out of a Facebook world. Now, we are in the Instagram world. Tomorrow, we are probably in a TikTok world. Nobody knows what the next social media channel is. So these things will change.
What also will change is the question of which brands we sell. So we see that brands have a lifecycle. Some brands are hot now and dead tomorrow. Some brands do not yet exist and will be hot tomorrow. So the stuff we sell will change.
Now the good thing is, that this is more or less irrelevant to the success of our model. Since we are a multi-brand platform, we are not dependent on the success of a certain brand. So for us, it’s more or less irrelevant which brand is hot as long as we make sure we have all brands available, which we have. It is not a… I mean, we don’t really care. We also don’t really care what the next trend is, in fashion, because we cover everything.
We believe we need to make sure that we remain a technological leader, and that we remain as flexible as possible when it comes to our supply model by combining stock that we buy and have in our own warehouses combined with the marketplace. So having a hybrid model, basically hedging risks. We need to continue to be multinational to hedge countries. And if we do so, then everything else will follow so we will remain an innovation leader. And we are sure that we can take a large chunk of this future 500 billion global online fashion share that is about to be evolved.
We believe we need to make sure that we remain a technological leader, and that we remain as flexible as possible when it comes to our supply model by combining stock that we buy and having in our own warehouses combined with the marketplace. So having a hybrid model, basically hedging risks. We need to continue to be multinational to hedge countries. And if we do so, then everything else will follow so we will remain an innovation leader.
[00:22:03] Tilman Versch: So how is change managed on the level of About You? What drives change in About You? Is it a gut feeling? Is it data? Is it a combination of both? How would you answer that?
[00:22:15] Tarek Müller: The answer is super clear. It’s data. And it is data where data is available. So we are driven by a broad target picture of the market that I have described. And our decisions — this is really more or less the north star. But our decisions are purely driven by data. So what we are doing is every euro we are spending, be it on stock we buy or be it on marketing. Every Euro we are spending must answer the question of how this euro is generating a positive ROI? And this answer must be backed by data.
Every Euro we are spending must answer the question of how this euro is generating a positive ROI? And this answer must be backed by data.
[00:23:01] Tilman Versch: And how are you managing to do risky bets with this framework? Because sometimes you don’t have the data, especially in marketing, you sometimes need to try new things to see if they work.
[00:23:14] Tarek Müller: Absolutely. I mean, that is part of the game. Calculating risk is also part of the calculation, I would say. And trying out stuff where before you can just come up with a hypothesis on what happens, but you can’t really prove it mathematically is part of the game. I mean, that is basically calculated. And we need to take risks. I mean, we need to try out new channels.
I mean, let’s take the example of TikTok. When we started our initiatives on TikTok and started to spend the first euros there, we obviously had no historic data on the question of whether this performs or not. But I think that must be part of the strategy and part of the calculation, that parts of your marketing budget, that parts of your buying budget need to go on new things. And there you are basically calculating with a high failure risk.
But then it is incorporated. So when we think about ROI in marketing, we take… So the proportion of basically risky new stuff is in there. If we think about how much does the customer cost us? It is a combination of the addition of the things of the money we spent with a very high significance in our data, whether that makes sense or not, plus the stuff that we are trying out. But I think it is important for a company like About You that has the ambition to further outgrow competition and stay in the innovation forefront, to continuously make bets and try out new things. And then and I think that is the important difference to a lot of other companies is after we have done it, we then need to make sure that we really gather the data and find out whether this had a positive ROI or not.
Tarek Müller’s personal development
[00:24:59] Tilman Versch: How did you become the Tarek you are today? Maybe let’s switch this conversation a bit on a personal level. Maybe imagine you meet a friend you’ve never met last three, or four years? What would they tell you how you’ve changed? What have others discovered about you, that has changed in your role as leader of About You?
[00:25:27] Tarek Müller: I mean, I have this situation every now and then. I’m still living in Hamburg. I grew up here and went to school here. So I’m meeting people that I know from school time quite often. I think what they usually say is that they are surprised that they have the feeling that they haven’t changed. Maybe that’s also partly because I started building companies quite early.
I started with my first internet project when I was 13. Now I’m 33. So I’m doing this for more than half of my life. And it’s basically— I mean, I don’t know differently to be honest. I registered my first company when I was 15. So usually you build your personality, I think, around 13 to 17. And in that phase, I was already an entrepreneur, doing stuff on the internet. I started my first online shop when I was 16.
I’m in e-commerce for more than half of my life now. It’s part of my DNA. It’s part of my personality, I believe. And that’s why I think and I believe people that know me quite long won’t see a big difference in me. Obviously, the things that I’m doing have changed massively from the e-commerce or the online shops I ran when 16. That was 17 years ago now. Obviously, the landscape has changed a lot. Back then, there was no Amazon, there was no Facebook, no Instagram, no nothing. It was a Google world. And obviously, what we’re doing now, the way how we sell stuff has massively changed. And that’s what I would expect from the next 10 years as well.
Things change. The customer behavior changes. And the destinations where people spent their time are changing, and we as a company need to be wherever the customers are.
Things change. The customer behavior changes. And the destinations where people spent their time are changing, and we as a company need to be wherever the customers are. But the overall mechanics of e-commerce are not changing. And yes, that’s why I’m actually happy to have the 17 years of experience and seeing several waves of change to really understand what it takes to be prepared for the next wave of change and to come out of the next wave of change stronger than before.
About You’s employees
[00:27:31] Tilman Versch: As you started About You, how many employees did you have at that time?
[00:27:35] Tarek Müller: Yes, basically, just us founders. And then I was brought into the company, one of my former companies called Net Impact. Net Impact was a solution agency. I founded, I don’t know when, 10 years ago, 15 years, I don’t know.
So I had a solution agency with a lot of online marketing people. And my co-founder, Sebastian, we have also co-founded companies together before About You already. We knew each other already for quite a long time. He had a software company. He was building Software as a Service product. And yes, he brought in his company as well. And this kind of Software as a Service incubator, he had a lot of developers. And by this, we had a very kind of, I would say, strong ramp up and quick start because we had my marketing guys, his development guys, and with that we had, I don’t know, maybe 70-80 employees, more or less from day one. We knew them. They were already a team. They knew us. So it allowed us to start quite quickly.
We started the company in January 2014. And we launched About You in May. So it took us four months to go live, which is everyone who knows how complex an online shop is, this is quite a fast start.
[00:28:57] Tilman Versch: How many employees do you have now?
[00:29:00] Tarek Müller: Today, we have a bit more than 1500 in headquarters. And then obviously, people working for About You are much more often in counter logistics, customer service, etc., as well.
Tarek Müller on managing the employees
[00:29:12] Tilman Versch: So with this growth from 100 to 1500, how did your perception of governance change? You had to give up some control because you don’t know every employee anymore. How has governance changed?
[00:29:31] Tarek Müller: Yes, I mean, it’s constantly changing. It’s a linear change. Luckily, it has not changed that much with the IPO because we were quite prepared I believe when it comes to governance, compliance, and all of those things. Maybe also because our two large shareholders are corporate groups, with Otto and Anders. So I think governance for us was never a burden. It was always something that we believe makes sense when growing the company, but you shouldn’t over-engineer it I guess.
I mean, obviously, the company is changing. From the time you know every employee to the time where the majority of employees you don’t know, that is obviously a change. But I see good and bad aspects in, I would say, every stage of a company. I very much enjoy having 1500 employees, and I very much enjoy that we are such a strong employer brand that we really attract the best talent. So whenever I’m in a meeting, I meet a new person, I still think, “Wow, this person is actually working for us? Crazy.” Like, “How intelligent, how integer, how cool this person is.” So I’m still very proud of the people that we hire.
We have more access to talent than we’ve ever had before. We have more power than we’ve ever had before. We have more money in our bank account than we’ve ever had before. We can do great things. It’s a combination of smart people, backing, and supportive shareholders and capital in the company, it’s a very powerful thing. I very much enjoy it, because, in the very beginning, we had none of that. We had no capital. We had very few people, and nobody knew us. So that is something cool.
We have more access to talent than we’ve ever had before. We have more power than we’ve ever had before. We have more money in our bank account than we’ve ever had before. We can do great things.
On the other hand, obviously, there’s beauty in the beginning. When you know everyone, and the startup spirit, this attacker spirit, this disrupter that you are. I mean that’s also pretty cool. I mean, today, I believe we are still disruptive, but also we are being attacked. There are companies that probably I mean, are saying, “This old Tarek, he doesn’t get the things anymore.” Very much like I thought when I was younger.
I mean, when we founded the company, I was 25. I had very much the feeling that we are now really attacking and disrupting the industry because these old people don’t know shit anymore. They didn’t understand social media. I had the feeling nobody understood the opportunities in smartphones. I mean, this is also pretty cool, I would say in the beginning. That’s why I also recommend every young person to join startups. It is such a fun experience to be in a very early-stage startup.
A company from Europe winning the online fashion game?
[00:32:11] Tilman Versch: The word old gives a good pitch to my next question. Why should a company from good old Europe become the global winner in fashion? Like, Europe rarely won the online game. Why should it be different here?
[00:32:23] Tarek Müller: Yes, Europe. Yes, that’s a very good point. Europe very rarely won the online game and I am convinced that online fashion will be one of the very few industries where you will see global leaders coming out of Germany. Because if you look at how advanced Zalando and About You are, then this is so much more advanced than any other player in the world, at least in the world outside of China. I don’t have very good visibility in China. But let’s say in the western world, there is no company being as advanced in the online fashion space as Zalando and About You.
Typically, you have a role model in the US that is much more advanced, and then you try to do stuff kind of like them. In this case, if I speak to the US companies or our US incumbents, I see they are at least five years behind us. They don’t have a marketplace model. They don’t have a hybrid model. They have no personalization. They have no technological skills. They didn’t crack the whole social media game. They didn’t crack the smartphone game. They didn’t crack the inspiration game. If I look at those companies, I have the feeling they are where we were five years ago.
If I speak to the US companies or US incumbents, I see they are at least five years behind us. They don’t have a marketplace model. They don’t have a hybrid model. They have no personalization. They have no technological skills. They didn’t crack the whole social media game. They didn’t crack the smartphone game. They didn’t crack the inspiration game. If I look at those companies, I have the feeling they are where we were five years ago.
And I admire what Zalando does. Nevertheless, I believe we are a bit better in a lot of aspects, but I admire what they do and I’m a big fan of Zalando. Keeping that innovation spirit while being that large. And we are often being compared to Zalando. But my view is, you can compare us to Zalando, that’s a fair compare comparison. We always want to be compared with the best and I believe Zalando is among the best companies in the world when it comes to e-commerce.
I mean, what I always find interesting when especially investors come with the market studies, and then they’re comparing us to Zalando and I always ask, “Where’s the third one?” If you look at the rankings of the several factors, you see About You is always slightly better than Zalando. But then you look at the third one and there’s such a huge gap between Zalando and us, and the third one. I believe that within this market, actually, two German companies are probably in the by far pole position to become a global leader.
And we are talking about one of the largest consumer categories being fashion, one of the most profitable consumer categories being fashion. I mean look on the list, who became rich basically? Fashion is a sector that holds a lot of profit pools. And two German companies are really in the best position to crack that market. And that makes me very proud. And I’m sure in 15-20 years’ time, I don’t know how long it takes, the world will realize that two German companies actually are leading the global online fashion space.
The US Market
[00:35:29] Tilman Versch: How hungry are you for the US market? And are there any role models you’re looking at? *Blink* *blink*, HelloFresh, for instance, that made it in the US?
[00:35:39] Tarek Müller: I’m also proud of HelloFresh. Yes, I really am. I think we are so far behind in Germany and Europe, with our technology companies, and I’m proud of every example that made it outside of Europe. Outside of Germany, at least. So kudos to HelloFresh.
I mean, how bullish are we on the US market? I’m emotionally never bullish about anything. But I’m looking at our data. And what our data shows us, is the US is a consumer-wise very interesting market and a very under-penetrated one.
I’m emotionally never bullish about anything. But I’m looking at our data. And what our data shows us, is the US is a consumer-wise very interesting market and a very under-penetrated one.
I mean, who’s the competition in the US? People always compare us to Revolve. I mean, Revolve is so much smaller than us. Revolve is in the US doing less revenue than we are doing in Germany.
Yet, Revolve is a great company. Don’t get me wrong. I admire what Revolve did in marketing and the way how it works together with influencers. I admire what they did in their own label. I admire the positioning being slightly more premium. But if I look at the structure of the business, it very much reminds me of the businesses that we saw in other smaller European countries.
Whenever we go to countries, we see that there are a couple of mini Zalando’s, I would say. And the way how Revolve is structured reminds me of the companies I see or we saw, in the Czech Republic, for example. There was a company called Zewde, or there are other companies in other countries, and they’re very much structured like what I see in the US. That is very much un-technologically, not a hybrid, not a marketplace, not a smartphone, not personalized, not data-driven. Just having access to suppliers and selling it in very traditional e-commerce 1.0 model. I mean, that is somehow surprising for the size of the US market.
I believe one reason why the market in the US is lagging behind is that in very early times, actually Amazon became very successful and the appetite of investors to invest in early-stage e-commerce companies was very low. So if you look at successful companies in e-commerce, they were usually bootstrapped because there was no capital access. And in Germany, this was different, thanks to Rocket Internet to be honest. Rocket somehow managed to open capital access for early-stage e-commerce models. And if you look at HelloFresh, Zalando, and a couple of other e-commerce models, they somehow all go back to Rocket Internet opening that capital access.
I believe one reason why the market in the US is lagging behind is that in very early times, actually Amazon became very successful and the appetite of investors to invest in early-stage e-commerce companies was very low. So if you look under successful companies in e- com, they were usually bootstrap because there was no capital access. And in Germany, this was different, thanks to Rocket to be honest.
So I think that is the structural reason why Germany has those winning e-commerce models where the US has none because these models were just not founded and funded in the early stages.
I believe the US is a market where we could be very successful. Nevertheless, the question is whether or when we go to the US, and this is driven by our data because equally, there are also a lot of other markets that are heavily underpenetrated when it comes to competitors, and are very interesting in the world. The US is not the only interesting market.
That being said, the most competitive market and competition-wise over penetrated market is the German market. Everyone’s placed in the German market. Often the US guys forget that Amazon is stronger when it comes to penetration in Germany than it is in the US because sometimes an argument is “Yeah, Amazon is leading the online fashion space in the US.” But they are not. I mean, they are but it’s another sign of weak competition. Because they have the same proposition in Germany, and here, they’re not at all leading the fashion segment. We are doing more revenue than them in continental Europe. So Germany is a very, very highly competitive market with Zalando, Otto, Amazon, us, ASOS, everyone playing in a German market basically, while the German demand is actually not very high.
That being said, the most competitive market and competition-wise over penetrated market is the German market. Everyone’s placed in the German market.
So I actually believe that you have to think in a way if you make it in Germany, you can make it anywhere, at least when it comes to e-commerce. Because it’s the most complex market, it’s the structurally worst market with the highest return rates, with the highest competition, combined with a very weak customer behavior because Germans tend to not spend that much and rather save money than spend it on consumption. And that is another reason why I believe the global leaders in e-commerce next to Amazon will come from Germany because it’s the toughest market and every other market is easier than Germany. And we also saw our internationalization. Every other market was more capital efficient than Germany.
If you make it in Germany, you can make it anywhere, at least when it comes to e-commerce.
Tarek Müller on competing with Zalando and Amazon
[00:40:25] Tilman Versch: You already outlined this a bit in your other answers, but why can’t Amazon and Zalando, if they adapt, crush you? What holds them back from taking your position? And what do you solve that they don’t solve?
[00:40:43] Tarek Müller: Yes, I mean, they’ve obviously tried. I mean, Zalando had several initiatives of copying About You. Maybe they wouldn’t phrase it like that. But at least I saw initiatives. For example, Zalando launched two apps. One was called Fleek and another one was called a Maze. I think this was, I don’t know how many years ago. Both are shut down now, we’re not successful.
I think Zalando has a great business model but they can’t incubate new companies. At least they didn’t succeed in that in the past. And they’re sitting on a great model. Their model is fulfilling the demand. People are going to Zalando with a certain demand in mind. Let’s say I need a jacket, and then Zalando guides you to the jacket category as fast as possible and gives you every jacket available in the market. It’s a great model. It’s a profitable model.
Now, the question is, can this model be transformed into the About You model? Yes, it could, but then you are losing the model. Because you can’t be both. Why? Because I mentioned customers coming to your website with the demand of buying a jacket. Now, would it be rational to show this person all kinds of inspirational elements like celebrities, outfits, and so on and so forth? And the answer is no. Because this would actually harm the conversion rate of a customer that comes with the clear demand.
If someone comes with a clear demand, you need to drive them into the conversion funnel as fast as possible. It is the playbook of e-commerce basically. Showing all kinds of inspiration actually drives down the conversion rate. And also, Zalando has not the perceptions and the same holds true for Amazon, everything I’ve just said holds true for Amazon and Zalando. Both do not have the perception of being destinations to stroll around, as we have.
Therefore, I believe they are and should be happy in the segments that they are in. It’s profitable. It’s still growing. It’s a great segment. They are leaders in those segments. And we are happy in the segment that we are in.
Nevertheless, obviously, everyone is also tapping to a certain extent the feet of the other. So on About You, there’s also a search bar. On About You, you also find the category navigation. Especially on the desktop website, because on desktop, we see more people are going to About You with a clear demand when they visit our desktop website. And that’s why our desktop website is similar to Zalando.
Our app is a bit different because people using our app are usually on the discovery destination. So Zalando, on the other hand, also puts a lot of inspiration and elements in their app. So I believe the clustering of the market is not crystal clear. Everyone is doing more or less everything. But I would say there are focuses of the respective markets.
On the other hand, we also see that offline, an H&M sitting next to Zara. Sometimes it’s also about brand perception where people choose one player over the other. All of that being said, I believe the risk of us being attacked by the larger incumbents that we have like Zalando and Amazon has been high in the very beginning, because they immediately realize how interesting our segment is, and had become very, very low now because now we are sitting on the same resources as they. And it will be…
I believe the risk of us being attacked by the larger incumbents that we have like Zalando and Amazon has been high in the very beginning, because they immediately realize how interesting our segment is, and had become very, very low now because now we are sitting on the same resources as they.
I mean, in the very beginning, I think they could have taken us out of the market and they missed the opportunity because in the very beginning we had no resources, no brand, no capital, no nothing. Now we have it. And now I believe we will be able to defend our position and even extend our position and it will be easier for us to go in their segments than for them to go on our segment.
Pricing @ About You
[00:44:22] Tilman Versch: If you do this competitive comparison with Amazon, Zalando, and other online players, what role does price play in your model compared to the others? Are you the leader on prices? Is your pricing aggressive? What do you think about pricing?
[00:44:38] Tarek Müller: So if we compare prices to our incumbents, everyone has more or less the same price because everyone is crawling everyone. Nevertheless, if we look at the actual discount rate from what we hear from suppliers, from what we can derive from publicly listed information, we believe we have a less high discount rate. Now, how does this work? So we have the same offering price, i.e. if on any of our incumbents the product is reduced by 20%, we’ll most likely be also reduced by 20% on our platform more or less.
If we look at the actual discount rate from what we hear from suppliers, from what we can derive from publicly listed information, we believe we have a less high discount rate.
Nevertheless, the sold items have a lower deduction. And that is because of our discovery model. So customers in the discovery model to larger extent see full-priced items. And that’s why even though we have the same offering price, the demanded price reduction in our case, is rather more full price because we can steer the demand a bit better than a model that is actually just fulfilling an existing demand.
Incubating to grow
[00:45:52] Tilman Versch: In our conversation on the new competitors you also mentioned like three words, that I want to do a bit of follow-up. One word that came into my mind is acquisitions. And you also mentioned incubation. Maybe let’s start with incubation. Does incubation play a role for you that for certain topics, you incubate teams and let them work on building something new?
[00:46:17] Tarek Müller: Yes, we do. I mean, the whole own label activities kind of were incubated. A couple of years ago, we started to develop exclusive products together with celebrities, which obviously, had been incubated. And an important pillar of our strategy today, the whole B2B part, licensing our software had been basically incubated.
But all became basically a core. So we’ve never set up a new legal entity or something for that. So this part of the About You SE. We like to incubate new projects and try out new stuff. And I think it also going forward. And also today, stuff that has not been published yet, we are obviously working on extending our business segments.
Acquiring to grow
[00:47:06] Tilman Versch: And how do you think about acquisitions? Is it a thing you do – you like to do? Or do you want to better build it internally and then have this offer as well?
[00:47:17] Tarek Müller: We have already taken a look at other smaller competitors, those mini Zalandos in other countries, and always decided against an acquisition. I think that was a wise decision, because looking back, sometimes we could have gotten the companies more or less for free. But that would still have been a mistake because building up revenue for us and profitable revenues are not very expensive.
We are very capital efficient and expanding, opening up new countries and profit pools. And on the other end, acquiring a company that’s close to our core takes a lot of de-focusation of the company. So we would need to integrate them. And we would need to think about rebranding them because we are a strong believer in global brands, and not fragmented branding and us being named differently in every country. That creates a lot of complexity. So actually, even getting a company for free, getting a mini Zalando for free, in our respective country, for us would have been a bad deal, we believe. And also looking back and continuously having high capital efficiency that holds it true.
That creates a lot of complexity. So actually, even getting a company for free, getting a mini Zalando for free, in our respective country, for us would have been a bad deal, we believe.
On the other hand, what we believe though and what we have already done though, is acquiring technological components. So we have acquired a company called Adference, for example. That was a bidding system for marketing. So it automated and made Google advertising more efficient.
I can imagine us buying technological components also going forward, especially now that we are scaling our SaaS business. They might come to an opportunity across us where it is rational to buy a technological component and integrate it either in About You in our technological core or within Scayle. So I think M&A can be interesting for us. But it will be rather small compared because it’s either an equity hire, or it’s a technological component. So I don’t see us buying big companies in the near future. Nobody knows what happens in the mid to long term.
What we also did in the past was we invested in fashion companies, in small fashion labels. We did an investment in 6PM, for example. That’s kind of the Supreme of continental Europe, I would say. It’s a hot hyped fashion brand which we have invested in, plus we are giving them our or they became a client of Scayle, our B2B unit. So, they’re using our technology. We internationalized them, etc. And we have invested in two other companies with whom we are incubating celebrity brands. So, these are all I would say very small things with, somewhere in between equity higher and a little, I would say, early-stage investment in something that structurally helps our business and is not within our core business or not a multi-brand fashion platform.
The data game
[00:50:32] Tilman Versch: What data has driven this investment into the fashion brands? What data have you looked at?
[00:50:41] Tarek Müller: I mean, it was what they did and what we believe can be unfolded with our Scayle commerce engine. So let’s take the example of 6PM. They are operating in Germany, highly successful. They are this hot brand, like Supreme. They drop new products every one or two months. These products are then being sold out in like, three minutes or something. That’s crazy. And then there is a secondary market where the stuff is being sold for three times the price. So it’s a very hot brand. Very much like a Supreme.
Now, they are doing great marketing. They created great brand heat, also on an international level. But they struggle with the whole technology and operations. And we, as Scayle, can help them with our technology to internationalize and with our operations to internationalize. And what we believe that much in that business that we thought— I mean, it’s great if they become our customer, but we actually want more than just the fees that we are generating. We want to have a part of the value that has been created by using Scayle. And that is the rationale behind that investment actually.
Expanding to new markets
[00:51:52] Tilman Versch: With our interview, we are already in the machine room of About You. So let us switch to the terminal with “New countries” and “Global expansion”. So what is the playbook? If we open this terminal, what data influence your decision to take new markets? What is happening after the idea to go into this market? What are the steps you do to roll out About You?
[00:52:14] Tarek Müller: So the data is basically two questions that we need to get answered.
- First, is, are we able to scale to a number one or number two position within let’s say, three to five years in that respective market?
- And the second question is, are we able to hit breakeven after again, three to five years max?
If both questions are answered with yes, then we follow up on the country. And then we try to calculate the ROI and capital efficiency. And then we prioritize country rollouts, basically by capital efficiency. And by size, achievable size, basically. And achievable profitability. So this is basically the data that we gather. It’s now very much simplified.
The calculations behind that are much, much more complex. And we are rather looking at the drivers and customer acquisition, customer lifetime value churn, behavior, and so on, and so forth. So there’s a lot of data. But ultimately, these are the two questions that we need to get answered: Number one and number two position and breakeven after three to five years, and the required capital efficiency to get there.
And if everything is answered with yes – and this answering usually takes us six to nine months of data gathering in the market. First-party data, so we are in the market, we do marketing, we acquire real customers. So this is not a calculation that we do in the blue, but it’s actually based on real data. And then after the six or nine months when the decision is taken, we are then having a playbook on how to roll out new countries. And that playbook basically functions as follows:
We shut down our website, pretending we were never there. And then there was a count down on the website, but not revealing who we are, and then you can input your email address, and then they will inform you. In parallel in that one week, we are doing a lot of social media buzz and guerilla campaigns, where for example, you see outdoor posters saying “Amsterdam will be About You” with our logo. And then below it always says starting on the 10th of October for example, or in front of a university, it would say “The campus will talk About You”. Always the About You in our logo font, and then starting on the 10th of October.
And in social media, influencers are wearing T-Shirts, where it says “Who the F* is About You?” And, you know, this is the idea. Or you see a television spot sometimes, you see people from the back and then pumping beat, and then it says, “There will be something new About You”. And pumping beats, people from behind being excited. And then at the very end, you see a countdown, three, two, one, or you see a situation where there’s a party and then you see the countdown, three, two, one. And then boom, boom, boom. And then it says “Starting on the 10th of October.”
Still, when I talk about it, it creates goosebumps for you because it’s so great. I can tell you, it works everywhere. Everyone goes crazy and excited. And the funniest thing is…
Let me maybe continue with and then I tell a small anecdote. So we are starting, we’re saying it starts on the 10th of October, for example. And then the day before the 10th of October, there’s a launch event in the night where influencers and celebrities are invited. And then we do all kinds of sceneries where people can experience who we are, i.e. the most inspiring and personal fashion online shop in Europe. So for example, people get a little NFT chip in their wristband, and whenever they pass a television, the logo changes from About You to about their name. Yes, pretty cool. It’s very surprising. Very discovery. People really enjoy it. It is a great party.
And then, at midnight, we actually stage the scene that you already know from television. So there’s a big party, there’s confetti, and then there’s a countdown and there’s a booming beat, like boom, boom two minutes before. And then it goes faster. And then you see the countdown. And then at midnight, there’s a huge celebration, confetti everywhere, and people going crazy. There’s sometimes a little show, someone’s singing, doing some crazy stuff.
And then we show a clip. It’s a 30 seconds clip, basically explaining who we are. And that 30 seconds clip is then also being streamed on television. And then on social media, the influencers in the days following the launch, the influencers are showing their favorite pics from About You. So they are on About You, and they explain who we are, why we are so cool. And then they are shown the products that they have shopped by About You. And they are offering a welcome voucher for the country to test us.
And this is also what we communicate, the most inspiring fashion online shop in Europe and his welcome voucher tests us – for four weeks valid. And this is an amazing, amazing framework on how to ramp up About You in those countries. And I’m surprised that nobody has actually copied that. Because it is unbeatable if you ask me. Because after those four weeks, the country knows us for sure.
And this is an amazing, amazing framework on how to ramp up About You in those countries. And I’m surprised that nobody has actually copied that. Because it is unbeatable if you ask me.
And it creates so much buzz and that’s the anecdote I wanted to tell. I’m usually also attending the launch event. So obviously, we are booking a hotel. So obviously we booked our company a hotel saying here want to book or reserve 10 rooms because people from About You are going to stay there. And then I had to sit… Usually, I’m the first one there, and then I check-in for us. So I’m there saying, “Hello, I would like to check-in,” and the receptionist asks, “Oh cool, which name?” And then I say, “For About You.” And then there’s always the same reaction. They’re like, “Oh, About You? Ah! I saw you. Who are you? I was talking to my friend.” Then the receptionist bumps the person next to her. “Hey, these guys are from About You.” Then, “Oh, no way. Who are you? Like, I was talking. Is it a new Netflix series? Or is it a new magazine? Or something with fashion right? Or something with lifestyle?”
They can detect it’s something cool, something lifestyle. They usually understand it must be something with fashion or lifestyle. At least they’re cool people dressing up cool. But it always works. It brings the people, it really makes the people talk about it. We are talk of the for about four weeks. But after that four weeks, everyone in our target group knows us. And then from that point on, our automated online marketing campaigns start to kick in, to then really monetize the brand awareness and the brand heat that we have built up here.
In these five weeks, we are spending a lot of money, tons of money on marketing. It is the amount that we would usually spend in one year, we concentrate on five weeks. But we have detected that this is a super-efficient model because nobody will ever forget about us because it’s such an emotional and crazy campaign that everyone actually keeps in mind forever.
In these five weeks, we are spending a lot of money, tons of money on marketing. It is the amount that we would usually spend in one year, we concentrate on five weeks.
Now, being a publicly listed company, sometimes this needs a bit of explanation, because if we do big bangs and they’re usually at the beginning of a season, so they’re either in March, April, or in September, October. So that means in those phases in March, April and September, October, obviously our bottom-line is to massively kind of disturbed by this huge investment that we have done. I mean, imagine, we’re launching in a country like Italy, we’re talking about 70 million citizens. So this is a huge investment that we’re doing there. But in the midterm, it is the smartest, most capital-efficient way to enter a new country. And it’s a mechanism that has worked in every country so far.
I also believe that this will also be a mechanism that will work going forward from the pure mechanism. Obviously, the channels that we are using are changing. Three years ago, we were heavily doing stuff on Facebook. Now, it’s obviously on Instagram and TikTok. Tomorrow, it will be whatever. So the channels that we’re using for communication will change. But this whole playbook of creating curiosity, making a huge, crazy event inviting the country, and then creating four weeks of crazy buzz basically explaining and introducing ourselves to the country, I believe is a major factor for our large and fast ramp-ups in new countries.
Launching in Italy
[01:00:21] Tilman Versch: Behind the show, you also have to make sure that you’re able to execute greatly on logistics and deliver products if you have launched. What is your playbook there? Maybe you name Italy as an example because at least quite a big country and the geography is challenging.
[01:00:40] Tarek Müller: Yes. So this is a huge challenge for us. First of all, we are obviously doing a lot of market research to find out who’s the favorite carrier in the country, and what are the most relevant payment methods. But then it’s also a lot of optimization. So we need to make sure that the line hauls in the countries are well said, the cross-boarder functions very well. But these are things that…
This is exactly what we are doing in those nine months of the soft launch phase. We’re not just gathering data, but after let’s say, three months, you usually have a very good feeling about whether that might have potential or not. And then we invest the six months in really optimizing the customer experience. So we luckily ask every customer after the order on the NPS. So we ask for happiness, we ask for feedback, etc. So, six months of iteration, with NPS feedback. We see the delivery time we had. We see what they have answered. So we can really detect what is driving happiness in the country, and what is driving customer satisfaction.
In those six months in the soft launch phase, we really calibrate basically, our whole operation’s chain, and make sure that the customers in this country are as happy as they can be. And this is another prerequisite, basically, for us doing the big bang. This whole crazy thing that I just described, as you know, answering those questions I’ve mentioned but also making sure that our customers are happier. So if all of that is answered with yes, then we big bang a country. Yes, it takes some time to make sure operations are running smoothly.
In those six months in the soft launch phase, we really calibrate basically, our whole operation chain, and make sure that the customers in this country are as happy as they can be.
Tarek Müller on managing logistics
[01:02:10] Tilman Versch: Maybe also walk us through how what your logistics look like. Where do you have logistic centers? How automized are they? How are you thinking about density in this network – to increase density if you’ve grown in the market and to offer this quick delivery?
[01:02:28] Tarek Müller: Yes, today we are operating two warehouses, one in Germany, one in Slovakia, and one return center in the Czech Republic. And we are about to launch further DCs in the future. And out of those two DCs and one return network, we actually serve continental Europe plus the worldwide shipping basically. So everything’s done out of those DCs. Works very well for us. So, the delivery time is always on par with our competitors and gives us great efficiency.
[01:03:00] Tilman Versch: Is there any plan to increase density? With two centers – I’m a bit surprised that it’s just like, only two.
[01:03:06] Tarek Müller: Yes, there will be more DCs in the future for sure. I mean, we are actively already working on future DC or next DCs. I think we have not disclosed where they are. But obviously, we will extend our DC network going forward.
Why is About You’s management qualified to win?
[01:03:26] Tilman Versch: Coming back to the idea of the global number one and maybe also using the chance to talk a bit about your strength as a team, as a management team: How are Hannes, Sebastian, and you qualified to build the number one online player in the fashion?
[01:03:44] Tarek Müller: I think I couldn’t have wished for better partners than Hannes and Sebastian. First of all, we are all equal, we are all co-CEOs. I know, US people sometimes are a bit surprised by that model. Three equal co-CEOs. But we love the model. And it’s by the way, also the model’s – kind of by accident I believe – the model at Zalando has also three co-CEOs.
Now what I love about our team, though, and that is kind of specialist, we are really different from each other. Sebastian is really a technology person. He learned software development at the age of 13. And Sebastian founded his first Software as a Service company at the age of 15. He has done several Software as a Service products, and he has worked on several enterprise shop software projects prior to About You. And by the way, Sebastian is two years younger than me, so he is now 31. So at the time of the foundation of About You, he was 23 which is a good thing because he had all these modern technological architectural things already in mind that are now cool and everybody talks about.
Sebastian is really a technology person. He learned software development at the age of 13. And Sebastian founded his first Software as a Service company at the age of 15.
This is in headless architecture. This is mobile born. This is a hybrid born. This is mobile-first. These are the modern programming languages. So this is such a huge advantage to have Sebastian as a co-CEO because he is a real software developer. He is really a technical person, but he’s also a business person. He founded his own companies. 100% of the company were always profitable.
He’s not just the smartest person I know, he’s also the smartest technological person I know. And I’m sure he’s actually the smartest technological person in Europe. Plus, he has a business sense. And he understands the industry, understands enterprise, he understands e-commerce very well. So we couldn’t be luckier about having Sebastian. I believe that is very special. Because think about it: How many European digital companies have real CTOs within the founding team? I mean, this is a US model. I mean, in US companies, you find that Mark Zuckerberg probably similar profile to Sebastian. But in Europe, this is very rare. And this is such a, such a huge advantage. I think you can’t overestimate this advantage of things having Sebastian on board.
Now, Hannes on the other hand was in management consultancy for a long time. He was then the Head Of Strategy of Otto. And Hannes is a person— When I met Hannes, for me it was a crazy experience. Because I was talking to Hannes explaining all kinds of weird stuff I had in mind. And nobody understood what I was talking about. Sometimes even I didn’t understand what I was talking about. And Hannes is capable of understanding complex stuff in no time, and then coming back and structuring the thoughts, and most importantly, he knows how to make a plan to execute all that stuff. Because having ideas is a waste if you can’t execute them.
And Hannes is capable of understanding complex stuff in no time, and then coming back and structuring the thoughts, and most importantly, he knows how to make a plan to execute all that stuff.
Hannes is a person, he holds together the organization, he structures the execution, he structures the operations, buying, logistics, all that really complex asset-heavy stuff. It’s always well managed by Hannes. And he knows everything about that stuff. He understands stuff very well. Always if I talk to people that studied with Hannes, I always hear the same stories. Hannes was never in the university. Never. And then the day before the test, he read the book, and then he did the best result. He had the best university degree, even though he was never there. I mean, that’s Hannes. You can tell him something, he will remember it and he understands it in no time. It’s crazy how structured he is and how intelligent he is.
And me, I think I’m kind of the marketing guy. I grew up with marketing. It’s my DNA. I mean, I did online marketing before anything else? I did it since I was 13. I saw every wave of the internet. I founded a couple of companies already before About You. They were always profitable. I know how to do profits on the internet. I know e-commerce by heart. I know online marketing by heart. And I love online marketing. I love marketing. I love social media. I love crazy stuff. I love telling stories.
[01:08:09] Tilman Versch: Guerrilla campaigning.
[01:08:10] Tarek Müller: Sorry?
[01:08:11] Tilman Versch: You like Guerrilla campaigning.
[01:08:12] Tarek Müller: I love Guerrilla campaigning. I love events. I love creating experiences. I love all that kind of stuff. And I love thinking big. I love big visions. I love winning against others. And I think that’s the perfect combination. Because of me alone, I am 100% sure I don’t know where About You would exist or whether About You would still exist, I’m not sure really. I think I alone, couldn’t have built that company. The same true with Hannes alone. He would not have built this company. And Sebastian alone had no chance to built this company.
So the three of us alone would have no chance. But the three of us together are so strong and we are so aligned. We are sitting in one room, we are fighting on a lot of topics. But in the end, we always find a very good solution. Everyone has their responsibilities. We trust each other blindly. And it’s just a very good combination. Even though sometimes I hate them both and sometimes they hate me. But I think it’s normal. It’s kind of like in a marriage, I guess. With people that are totally different from each other. But that is the strength of our team.
Everyone has their responsibilities. We trust each other blindly. And it’s just a very good combination.
I think we have what it takes and that was your question. We have what it takes to become a global leader. Because we have everything I believe that a company needs. It needs structure. It needs the ability to grow an organization. It needs financial compliance. It needs governance. It needs an operation that runs smoothly and makes the customer happy. And it needs to make smart bets when it comes to buying stock. All of this is covered by Hannes.
What it also takes or needs is strong technology because technology is an enabler for great things. Technology is the driver of innovation. And it needs someone that can attract technological talent. There is a huge challenge and all of this is covered by Sebastian. And you need someone that tells the world the story. And that is my part, basically, making sure everyone knows us and coming up with those crazy things like the internationalization playbook. These are the things that you need to become a global leader.
And if I look at our incumbents, they usually have one part of that very well, and the other two parts very weak. And you can also see this when looking at the management team. It’s usually either just business guys or just marketing guys. Europe never just tech guys, unfortunately. But it’s usually either marketing guys or business guys. They never have a tech person. And they usually don’t have this complementary team as we have. And I believe I don’t think that this is the reason for our success. But I think that is one factor for our success that we as a founding team are very complementary to each other and cover everything that needs to be successful equals.
I think that is one factor for our success that we as a founding team are very complementary to each other and cover everything that needs to be successful equals.
What does Tarek Müller personally get out of this all?
[01:11:05] Tilman Versch: So what are you three getting from this journey? The idea of becoming the global leader?
[01:11:11] Tarek Müller: What are we getting?
[01:11:12] Tilman Versch: You’re already rich men. You can sit in the sun with your dog, enjoy drinks and look on the outside, or look at the ships in Hamburg and just chill. What drives you there?
[01:11:25]Tilman Versch: Hey, Tilman here! I’m sure you’re curious about the answer to this question. But this answer is exclusive to the members of my community, Good Investing Plus.
Good Investing Plus is a place where we help each other day by day to get better as investors. If you are an ambitious, long-term-oriented investor that likes to share, please apply for Good Investing Plus. I’m waiting for your application.
Without further ado, let’s go back to the conversation.
What does Tarek Müller want to do after growing About You?
[01:12:05] Tilman Versch: What is your imagination for the life after About You? Imagine you became successful. You made a lot of money with this business in retail. Look at Aldi or Otto, it’s one of the businesses, or IKEA, that makes you rich. So what is your goal over the long term Tarek’s impact, Hannes’s impact, Sebastian’s impact on the world, imagined you’ve made it?
[01:12:33]Tarek Müller: First of all, I’m also happy, I think we already made it. But I think we can make it even…
[01:12:39] Tilman Versch: Not the vision, not the vision.
[01:12:42] Tarek Müller: No, you’re right. No, we didn’t make it to the vision. But we make it to be successful and we have multiplied the money of our investors. And that’s also important for me. Whoever puts money in our company should come out with a return and then I can sleep happily. That’s why we need to push the share price a bit as well.
So, Hannes and Sebastian have different plans for the afterlife. I think I don’t want to speak for them now. Even though I know the plans from them, obviously. But my personal plan is that About You is the last company that I founded because probably it will be impossible to copy that success. But also because for my afterlife, and the second half of my life, I would say I envision working on social and non-profit activities to optimize not on P&L but on the impact on the society level.
Furthermore, I am of the belief that actually passing money to your children is something that makes sense, to make sure that they never get into essential problems, I would say. Nevertheless, the wealth I have created for myself exceeds what I believe is necessary to make sure that they will never get to see problems. And then I have the belief that passing more money than actually needed does not make sense for society. And I’m actually a big fan of capitalism, but capitalism actually says money and value should be in the hands of those that are creating value. And passing money to the next generation might mean that you are passing money to unproductive hands. And I’m not saying my children will be unproductive, but if they are productive, they can build their own wealth. But if they want to do different things, they should do different things.
I have the belief that passing more money than actually needed does not make sense for society. And I’m actually a big fan of capitalism, but capitalism actually says money and value should be in the hands of those that are creating value. And passing money to the next generation might mean that you are passing money to unproductive hands.
I don’t think that becoming rich is at any point a goal one should have. I’ve never had that goal of I want to become rich. And to make a long story short, I want to work on society, non-profitable things, and be impact-oriented, and I also want to use my private wealth and reinvest it actually.
I do not just want to fund my social activities by the returns of the wealth I have, but I also want to actually decrease my wealth over my lifetime and invest it in things that I believe are right for society and make it in the About You style. It wouldn’t be my style to donate to someone, and then whatever they do with it. But I mean, somehow I think I’ve built a network, I’ve built some capabilities, I want to execute that stuff as well. So I really want to build an NGO that is capable of executing on problems that society has. Backed by my own money, which is a combination of returns of the wealth I have by investing in public markets or whatever, plus basically decreasing my own wealth. So this is my plan.
But I don’t need to rush in that. Because I have the feeling hopefully I have decades executing this, after About You. But I’m also very much looking forward to that, I have to say, not optimizing on profits and revenues anymore, not following a vision of becoming the global number one in fashion, which I love, I embrace that vision. But equally, I would embrace, I think, a vision of how can we maximize positive impact on society. I also love the idea of doing such things and reinvesting the money I’ve done based on the society we live in, based on the infrastructure that Germany gave me.
I’m also a happy taxpayer because I believe, I made my money and my wealth based on the free education in Germany. I drive on the roads that this country has built and that society has funded before I came alive here. I use parks, I use all kinds of public assets, like health care, and everything in Germany is basically publicly organized, I use all of that. So I’m happy to give that back to the society that allowed me to have an above-average lifestyle.
On the other hand, I believe the public hand in a lot of aspects is not very efficient in managing public assets. And I believe I somehow have the skill to manage stuff. Why shouldn’t I help the society and public hand to manage staff more efficiently to even better cater to society? And there is no very vague, but my plan for my after About You life.
[01:17:44] Tilman Versch: Maybe that’s a good point to follow off the record. Because we’re running out of time at this moment. And I want to thank you for these great insights. I hope I can welcome you back for another podcast episode because I still have so many questions.
[01:17:59] Tarek Müller: My answers were also too long.
[01:18:01] Tilman Versch: No, it was good.
[01:18:03] Tarek Müller: If you have Hannes, he can give you sharp and dense answers to complex questions. That is something I still learn from him.
[01:18:12] Tilman Versch: Yes, but maybe we have the chance to chat again. And to the audience, thank you very much for listening. Til here and bye-bye to you for now.
[01:18:22] Tarek Müller: Many thanks for inviting me.
[01:18:24] Tilman Versch: I hope to have you back.
[01:18:27] Tilman Versch: As in every video also, here is the disclaimer. You can find the link to the disclaimer below in the show notes. The disclaimer says, “Always do your own work. What we’re doing here are no recommendations and no advice. So please always do your own work.” Thank you very much.