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MusicMagpie
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== musicMagpie’s business model == MMAG’s core consumer circular business model can be broken down into four constituent parts: buy, receive, refurbish and sell/rent. '''Exhibit 5: musicMagpie’s circular business model<ref>Source: musicMagpie.</ref>''' [[File:Image5-2a26213dc893059206714d5e57034217.png|600x600px]] === Buy === Potential customers input the details of the products they would like to sell on the company’s website, app or at the self-service SMARTDrop (see below) kiosks (in the case of technology). The process is more straightforward for media and books than for technology. For books and disc media, MMAG provides an instantaneous quote, which is valid for 28 days, after the customer provides the book’s International Standard Book Number (ISBN) or details of the CD and without questioning the item’s condition. For technology, the process is slightly more involved as the customer is required to provide a view on the condition of the products (good, poor or faulty, with MMAG providing a simple guide to what qualifies as good, poor etc), which is later verified by the company. This is important given the likely more variable product conditions that can affect performance, larger ticket size and potential greater margin risk, and the quote is valid for 21 days. If the customer accepts the quoted price, there are a range of delivery options to the company’s warehouse, depending on the value of the products: technology products are mainly handled via Royal Mail given the higher values of products involved; and a courier service is mostly used for media and books with collection from either the customer’s house or the courier’s drop point. The courier and postal fees are borne by MMAG. When customers use MMAG’s SMARTDrop kiosks, the kiosks have the technology to inspect the item and check its provenance and functionality so that customers can be paid within minutes. MMAG’s purchasing strategy is to only buy products it is confident of selling at an acceptable margin while minimising stock obsolescence. The success of this strategy can be seen in the improved gross margin (from c 23% in FY18 to c 29% in FY20 and c 30% in FY21), while inventory days have remained broadly stable. The offer price to the customer is generated by MMAG’s proprietary purchasing algorithm, ALIVE, in conjunction with the proprietary sales algorithm, WARP. See ‘Proprietary technology drives the buy and sell processes’ section for how MMAG’s technology platform and warehouse management system help maintain dynamic and competitive pricing. === Receive === On receipt of the products at the company’s warehouse (typically within two days in the UK and seven days in the United States), they are quality checked and graded by the team. When an item has been checked and graded, the customer is paid via bank transfer or PayPal. Disc media are checked and, if MMAG decides it cannot sell the product, it is recycled responsibly. The condition and functionality of each technology product is checked, as well as its provenance, that is whether the customer is the genuine owner and whether the product is lost or stolen etc. Any data stored on the device are wiped to an Asset Disposal and Information Security Alliance standard. The company protects itself from receiving stolen goods by only paying customers via bank transfer etc and having their full contact details. If the product’s condition is worse than expected a revised offer will be made, which the customer has 14 days to accept or decline; if declined the item is returned to the customer free of charge. === Refurbish === Refurbishment of technology products including in the case of smartphones repairs to screens and boards, and component replacement including batteries if below a set standard. For disc media, refurbishment is restricted to replacement of damaged protective cases and buffing of the discs. Books are not refurbished. === Sell/Rent === Sales are made through MMAG’s own websites and smartphone apps, marketplaces such as Amazon and eBay (it is the world’s largest seller on those platforms by volume and feedback) and a recently announced agreement to sell technology products on Back Market (see Sell more section), and a small minority by wholesale partnerships in the UK. MMAG has a 14-day return policy on all sales, as long as the product is returned in the same condition and consumer technology products have a 12-month warranty, which is an important differentiating part of MMAG’s offer versus some competitors, for example peer-to-peer sales websites. MMAG’s recent move in to offering rentals of technology is discussed later. === Trusted brand === Management believes its trusted brand (average Trustpilot rating of 4.6 for the UK business with c 220k reviews, and 4.5 for the US business with 21k reviews at 4 March 2022), given the high level of quality control and speed/ease of dealing with and receiving money, are key determinants of its appeal to customers relative to its peers. MMAG has the highest number of seller reviews on both Amazon and eBay with over 10m on each of the platforms, with highly positive feedback scores. === Proprietary technology drives the buy and sell processes === The company’s technology platform and warehouse management system platform have been developed in house. They ultimately drive the buying and selling price decisions for each product so the trading margin is optimised and stock obsolescence is minimised. The company’s core ‘buying’ technology, ALIVE, has data including over 10 years of MMAG’s transactions and information on 2.5m products that drives the instantaneous decision on whether to buy a product and the price that should be offered. The ‘selling’ technology, WARP, optimises the selling price and handles the product listing across the different sales channels, with interfaces to Amazon and eBay, which enables management to see competitor availability prices and decide where the best price can be achieved. === Group infrastructure === In the UK, MMAG operates from two processing and distribution centres and the head office in Stockport. In FY20, the UK sites, which cover 170k square feet, processed approximately 16m items. The larger site (Hazel Grove, 110k square feet) focuses on processing technology and disc media and the smaller site (Macclesfield, 60k square feet) focuses on books. MMAG’s US operation is much smaller in scale, operating from a processing and distribution facility covering 60k square feet. In FY20, it processed four million items, one quarter of the amount handled by the UK. Management estimates the infrastructure (UK and US) can support a doubling of the growing technology revenue base, assuming some space re-allocation from media (expected to contract over the long term), so there is no pressing need to consider infrastructure changes.
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