Wednesday, September 11, 2013

Day 2 Munich - Meeting With Mercateo

Good morning, picturesque city of Munich!

We started off the day with a sumptuous breakfast buffet offered in the hotel. They have really good selections here!

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Everyone met in the hotel lobby around 11:30 a.m. and headed out to the train station by foot...

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...and snapped pictures of the gorgeous city center along the way!

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Any city will not be complete without a friendly, moving statue!

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We stopped at this food court in the city center for lunch. Variety of German cuisine favorites!

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The food court had an underground chocolate store. Some of the team checked it out!

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After lunch, we then headed off to Mercateo, our first official company visit!

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The founder/CTO, Sebastian Weiser, welcomed and ushered us into a room full of goodies!

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Some highlights of the meeting:

He started off with a brief history of Germany, the 2nd country with largest export record next to China, and how the split happened between East and West. Mercateo moved to East Germany due to its high unemployment but lower labor cost, making it a more ideal environment to do business in than in the West. There are approximately 4 million companies in Germany with few hundred companies signing up everyday with Mercateo; 10,000 companies signing up every month making that 120,000 companies a year and 1.2M companies in 10 years! Mercateo is the largest B2B (business to business) in Germany. Mercateo has 300 employees with 150M turnover yearly. Mercateo reorganized its IT to build its effective platform. He understood how powerful "clicks" are and how key word advertising made Google's business model successful the way it is today, making Google a powerful ally/partner. Mercateo's platform is designed for suppliers to find other suppliers of products that they need. Suppliers can upload their catalogue of ten million or so products in Mercateo's console and Mercateo connects these suppliers with other suppliers. There is no exclusivity; Mercateo is open to all suppliers. Seventy-five percent were previously owned by e.on before eventually giving all control over to Mercateo. Even though Mercateo has a relationship with suppliers more than the customers, it bridged that gap by building its sales team to follow up with the customers after a recent purchase. This also allowed Mercateo to offer better prices for other products the customer may be interested in based on that recent purchase. After initial marketing ended up to be a miserable failure, Mercateo completely stopped marketing and had to depend on its core competitive advantage (semantic search and service translation functionality) to drive traffic to the business.

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Sebastian also disbursed some advice on how to sustain longevity: To be successful, figure out your company's added value. Bigger is not always better but your scalability and unique processes are. Be cool in negotiations, take risks, listen to your guts. This was especially helpful when he spearheaded the decision to convince e.on to step out of Mercateo's business. Have passion for what you do. Don't just do it for the money. This makes you strong and more committed to putting in long hours into your work. Play the price game - reduce marginal cost to its lowest.

Right now, Mercateo is under stress because Google made an update that lost some of the traffic going towards the business. He refuses to sell because "the value of money is decreasing rapidly. I would lose my interesting job, my interesting position. I can't work under a circumstance where I don't have the freedom to do what I need to do."

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When compared to Alibaba (the most successful B2B business in China), he distinguished Mercateo by saying that it links to suppliers' systems which is superior to Alibaba's lack of integration. It takes some interfaces to connect orders/invoices and to build the semantic search that Mercateo has, allowing it to have somewhat of a monopoly in the B2B business in Germany.

What about their future plan? Sebastian would really like the "last call option" vision to succeed which is the possibility of providing just one link to all suppliers that contains a list of other suppliers. This allows suppliers to get buying behavior of their customers (which are also suppliers). This is not working at the moment. Suppliers need to go through Google to get the list of suppliers that may have the products they need to run their businesses instead of going to just one site. More mechanism is in the works such as getting suppliers to log in directly into the website to have full access to other suppliers' (signed up with Mercateo's platform) competitive prices.

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After our meeting, Sebastian was presented with an appreciation gift by the UC Davis MBA Program:

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Thank you so much, Dr. Sebastian Wieser, for accommodating the IST team!

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The evening ended with a calm and relaxing dinner at Augustiner-Bräu München in the inner city. Strongly recommended! Über delicious food! We enjoyed a nice traditional Bavarian dinner, local beverages and some enjoyable conversations amongst ourselves and the staff.

From Adam - "Some of us were lucky enough to have a very generous, not necessarily wanted, glass of sauvignon shared with us. Though the recipients may not have explicitly shared in the wonderful taste of said wine, they definitely are very familiar with the aroma and stain removal properties of German white wines." If you didn't understand what he meant with this, you'll need to ask him ;)

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That caps off the day, lovely readers! We are off to our after-dinner drinks :D Tomorrow, we will tell you about the SAP Academic Conference we are attending and our meeting with IHK so, stay tuned!

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