Fruugo invited a few bloggers to the company’s premises this week and demonstrated their service, also handing out beta accounts. (We’ll try to get a few shortly also for our readers – let’s see.)
Fruugo’s Janne Waltonen, VP Marketing & Communication, mentioned that they have not really figured out yet what to call Fruugo; it is not a webstore since they don’t own any products, legally you cannot call the company a webstore aggregator either, and it is not a not a search engine. We could settle for virtual marketplace for now. What Fruugo wants to do is to make it simple and safe to sell and buy things online across the Europe regardless of the country borders. The transaction participants should be able to complete the transaction just if they were in the same country, using their local currency and language.
Fruugo is developing the live beta service constantly (with around 60 own employees and 40 consults), so the UI and layout will likely be totally different after a short while . But the first screenshots give some indication of how the service is turning out (more shots in Fruugo’s Flickr stream). The priority order for UI is 1) products, 2) consumers, 3) merchants. Fruugo is trying to find the most interesting and successful consumer segments first with a broad, steady approach, and then go after the selected ones with bigger international marketing power. The company does not plan to provide mobile offering anytime soon, as the mobile market isn’t yet mature enough, Waltonen commented.
The company depends on the logistics of the merchants, and hence requires all merchants to guarantee certain levels of shipping speed and reliability, with four shipping options at the moment. Non-confirming merchants will be removed from the service. Fruugo’s including only 30k-40k products in the early phase of the beta in order to better evalute the usage patterns. Once they have figured out a working layout, gathered enough data, and fixed biggest bugs they will start adding multiple merchants offering the same products. Having none overlapping merchants is also why currently some of the products in the service are considerably pricier compared to some other stores.
Despite any rumors, Fruugo does not introduce any billing methods of its own, they will rather use existing ones. In the beginning they have just the most common credit cards and Finnish e-bank systems. PayPal will be coming only later, which is understandable, given that using credit cards and e-bank accounts is much more common in the Nordics. Fraud management is going to be a huge task to Fruugo, as Fruugo will take responsibility for all transactions, both merchant-consumer and consumer-merchant. The company has reserved the second floor of their office for most part to operational and fraud management activities. Waltonen commented due to fraud issues they have needed to also rule out some product categories due to the requirements by the credit card companies.
So far Fruugo will not introduce any deeper social shopping features, like group shopping. Rather, there are “social traces”, meaning users can review products, seek assistance from other users, and see actions of others. Interestingly, the recent product views and searches of all users appear on the front page in real time (anonymously). Registration event of new members will be be shown with the users’ real name. Fruugo isn’t planning on introducing any sellable promotion slots, rather they expect merchants to rise in the ranks and get visibility due to reliable service, popular products and good prices, and complete product information, which will generate positive reviews.
One major problem in integrating with merchants is that really few Finnish online merchants are used to providing outbound feeds (e.g. RSS), Waltonen described. In Sweden, UK, and Netherlands the situation is much better, as apparently feeding the different comparison sites is more common there. Considering Fruugo takes care of billing fees, fraud management, first line customer support, and managing the customer returns, the 10 % revenue cut the company is taking does not sound bad at all. If they can get the support for the rest of Europe up and running as per their vision, it seems Fruugo might even be the only sales channel a small webshop could need. In that case there could be clear business opportunities open to 3rd parties for helping small e-tailers setting up Fruugo-compatible shops.
Fruugo’s CEO Juha Usva did an interview with Finnish MTV3 this morning, you can watch it here (in Finnish).
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Update: Check out also Startupbin’s and Ekana Innovation’s posts.
Read also our previous coverage on Fruugo.
Biovakka Suomi Oy 
Bitbar
It’s a really good idea which I suppose a lot of people have had, but which just seems incredibly difficult. I’d love to hear the story of how this went from idea, to funding, to product etc. Any news of who is behind this or must I wait for the book?
Jon,
You don’t have to wait for the book but at the moment we’re such busy with the beta so we just want focus all publicity and interest towards beta phase.
When we see more results and have taken beta-label off I’m sure we’re willing also to tell more about the whole story with our founders help. When exactly, that I can’t promise because main goal is now develop the service further.
Thank you guys for your extensive reporting about start-ups in North.
When reading about Fruugo I can not help thinking about Boo.com (http://en.wikipedia.org/wiki/Boo.com). If not anything else in common – as we all hope, I think – they were both found by Scandinavians.
Maybe Articstartup could find the founders of Boo.com and interview them. They could have some interesting point of views on the Fruugo, too. Or maybe all these people already go to sauna together (I hope). :-)
me still wanna beta, kiitos! :-)
Teemu,
I’m getting amused with these comparisons between Fruugo and Boo.com. I had opportunity to follow Boo.com rise and disaster quite closely but far enough in those days and I can hardly find any other resemblances between these two companies than:
- Yes, both were started by Nordic people (however Boo.com set their HQ to London in quite early phase before launch)
- Yes, both operate in the area of e-commerce
- Yes, both names aren’t meaning anything similar
- Yes, I’m a beta user in both, but even I work in Fruugo, now I need to pay my test orders
I have two quite controversial books about boo.com which I’m happy to borrow for person who will return them which might help with benchmarking.
Life Tester,
You can request for invite now from Fruugo.com.
Having read those two controversial – or at least contradicting – books Janne mentions I gotta agree that it would be extremely hard for Fruugo to reenact the drama and disaster that was Boo.com. There’s just no way somebody could mess it up in as a grandiose way anymore.
@Janne, thanks. invite requested…
OK, but I still cannot see what differentiates Fruugo from Ebay Global (w/ Paypal of coz), http://www.google.com/products, Kelkoo and Amazon int.? Neither why they need to burn so much risked money while doing it.
Thank you guys. it is intresting.
10% commission not bad? Here’s some simple math: You buy stuff for 100 euros and sell it for 200. Fruugo takes 20 euros. You just lost 20% of your markup.
Then again most retailers don’t enjoy 100% markups, and usually have to settle on something between 10% and 50%. So if you buy for 100 and sell for 111, Fruugo takes 11,1 and you just lost money.
Stuff that moves fast and has a short shelf life have lower margins. Electronics, computers and such are in the lower end. So likely you’re not going to see those on Fruugo.
You don’t know what to call Fruugo? Basically it is an online store that is buying its merchandise from other retailers and is stuck with a 10% margin. That doesn’t sound like a good business to me.
To end in a more positive note, Fruugo could be great for unique products with high margins. For example designers could find a wider market through something like Fruugo.
Pasi, the 10% cut seems fine given that they are selling the stuff for you. If you buy stuff for 100 and need to sell it for 111, you need to go back to your business plan anyway. There’s no margin for *anything* there, so you cannot setup your own website and do the sales by yourself either. Credit card transactions, customer support, etc., cost money so no matter what you do by yourself you can never go down to 0%.
To put it another way – you buy stuff for 100 euros and cannot find a buyer for 200 euros. You are stuck with 100 euros worth of merchandise. My understanding is that Fruugo is not exclusive and doesn’t charge you in advance (someone correct me if I’m wrong), so it’s just another channel which can help you reach new customers. They take their cut if they can make the sale, and from that point on you don’t need to worry about the transaction, dealing with the customer, fraud control, etc…
Also, I don’t think they are buying merchandise from anyone. That would be a bad idea indeed. They offer the sales channel, take care of the transaction and instruct you where to send the product.
Jani, that’s my point – 10% isn’t enough, but thats what Fruugo is trying to manage with. I also know Fruugo doesn’t keep any stock itself, just delegates the order to the merchant. But that doesn’t need to make any difference compared to other retailers.
In many product segments retailers don’t keep any stock themselves anyway. There are large logistics companies that take care of everything from importing to stocking and shipping. The retailers just take the order and pass it on to the logistics partner where the order is handled and shipped to the consumer.
If the retailer has no risk of being stuck with merchandise, he can have lower margins. And in a highly competitive market the margins can be close to 10%.
So what makes you think Fruugo can handle transaction costs and all the work involved with a 10% margin? Instead of having a few large logistics partners, they have hundreds or thousands of merchants to deal with.
Jani & Pasi,
10% commission is slightly misleading information and more an average commission. We don’t publish our exact commissions because they vary depending on category and service levels. The commission is always an issue negotiated between a retailer and Fruugo.
Fruugo doesn’t charge in advance and is not exclusive but neither open to every retailer because we need to evaluate risks as well and guarantee retailers for consumers.
Unfortunately we’re not able to participate all discussions related to topics around Fruugo at the moment because we have still a quite lot to do – our public (or at least invitational) journey has just begun. However we’re developing service/ feature/ content for our company site to answer the most common questions related to our concept.
I have followed Fruugo quite closely from the beginning and it is nice to see that they are nearing launch.
However (and this is a big however), it has always seemed to me that they have been trying to solve too many difficult problems at the same time.
I would even go so far as to say that they are trying to solve every single e-commerce related problem in the existence, be it payment systems, logistics, price comparison or marketing.
Luckily for the Finnish start-ups, there is now a situation where we have 140 close-knit people, who have been bonding and thinking about difficult e-commerce related problems for two years and some.
If that does not result in at least 10 brilliant spin-off start-ups, I will be hugely surprised and disappointed.