For sale: Canadian online classifieds customers, lightly used, still in good condition, free to a good home o.b.o.
The online classifieds business in Canada, a sleepy if lucrative sector dominated by eBay-owned Kijiji's desktop-friendly web site, sees its only real competition from startups such as VarageSale or Facebook buy and sell groups or barter groups like Bunz. Enter Letgo, a new and well-funded smartphone app-based service with deep roots in the global online classifieds business and a very strong launch story in the U.S. market.
Letgo is extending a bet that it can win users from the dominant North American players like Craigslist and Kijiji who it says haven't done enough to leverage mobile features like geolocation and image-recognition technology to pull more buyers and sellers into the secondhand market.
"We think we can disrupt the existing scene," said Letgo CEO Alec Oxenford about coming to Canada. "That doesn't mean everyone will disappear … we think we will significantly grow the market. I think there's a situation where we all grow. Hopefully, we grow a little more than all the rest." He won't say how much Letgo is spending to launch in Canada, but did allow that 75 per cent of the spending will be on marketing.
Letgo launched in the United States in October, 2015, and, according to the company, will hit 40 million downloads in the next month. The brainchild of Mr. Oxenford, an Argentine businessman almost two decades in the online selling game, most recently as CEO of OLX, which he grew into the Craigslist of the developing world, with 240 million users in more than 90 markets, including India, Brazil and Poland.
Letgo is a separate company from OLX, though it is partially owned by Naspers and Mr. Oxenford, who remains chairman of OLX.
"Seventy per cent of Canadians have bought or sold secondhand goods, that's massive," said Mr. Oxenford, who is used to building his businesses in markets with no tradition of secondhand selling. "I don't know any other country where this is the case."
Canadians really like buying secondhand goods for a pretty simple reason, according to Warren Shiau, consulting director of IDC Canada's buyer-behaviour practice: "We are relatively cheap."
"There is an economical buyer or consumer," Mr. Shiau says, framing it more politely. "There's not as much stigma attached to buying stuff secondhand, Canadians are not as status conscious as Americans when it comes to things like cars or luxury goods."
Mobile-oriented startups are the hot category in classifieds. In Japan, a similar app, Mercari, has attracted $111-million in investments, and Canada's VarageSale raised $34-million in 2015 to pursue the mobile market. OLX never managed to break into North America, but Letgo's traction has been different.
"It's crushing expectations," said Martin Scheepbouwer, CEO of Classifieds at Naspers. "Letgo is a format that we use to bring mobile-only solutions to more mature markets. The pattern we've seen is as these platforms mature they lose a little bit of their innovation."
In Canada, the mature platform is Kijiji with 16 million unique visitors, two new ads posted every second and 1 billion page views per month. But on mobile its stats are less impressive.
According to Apptopia, a market research firm focused on the mobile-app market, the two most popular Kijiji apps on Google Play and iOS collectively have 58,000 daily average users, and 49,000 downloads in the past 30 days. VarageSale has 65,000 daily active users and 61,000 downloads in the past 30 days (more than half of them in Canada). Letgo had 1.8 million downloads in that period and 21 million monthly users.
Kijiji was not able to make a spokesperson available in time for publication.
Another interesting piece of Letgo data was that men spend far more on classifieds sites, an average of $636 annually, than women, who spend an average of $213 annually.
Andrew Sider, who replaced co-founder Carl Mercier in March as CEO of VarageSale, runs a secondhand site the flips the overall market trend.
"Eighty-five per cent of our users are females, and they open the app six times per day," Mr. Sider said. "In month three of a users life, the average seller is posting 10 items per sale per month. We're selling 900,000 items per month, and the bulk of our items are between $5 and 20-to-30 dollars."
Mr. Sider says a key reason is that it eschews more open models in favour of one where users know each other's real name. VarageSale's app features closed neighbourhood markets that new users have to join, with administrators who curate everything from listings to comments on products, and each new user has to use a real name.
"It doesn't focus on convenience, it focuses on accountability," said Mr. Sider. He believes Letgo's geolocation features could add unacceptable risk, particularly for women sellers. "One of the drawbacks is around user safety. How and where is this information being shared?
Letgo, which lets users log in via Facebook and almost instantly post pictures of goods for sale, says it commissioned market surveys that found 28 per cent of Canadians who buy secondhand couldn't find items nearby, which the company addresses by putting a seller's location on a map (not their exact address, but by postal code).
VarageSale had a rocky 2016, it laid off 26 people in January, but Mr. Sider says they never stopped growing their user base and have since hired 10 people back. "We're doing 3 billion item views per month … and we are in a better position in terms of the cash the company is burning." Though VarageSale, like Letgo, has no monetization plans yet, he sees an ad-supported model as one possibility.
Mr. Oxenford acknowledges he's not an expert on Canada, but he's confident that the global market for secondhand goods is poised for serious growth in the near future. "This will be a very hot category for a very long time," he said. "We want a world where nothing gets unused."