Online recommerce expert, musicMagpie, has been buying people's second-hand CDs, DVDs, Blu-ray and games for seven years and it now has 3.5 million registered users. Essential eCommerce speaks to co-founder and CEO, Steve Oliver, to understand how the business is still afloat when the word on everyones' lips is 'digital'.

It may be crude to say, but the onset of the recession in the late 2000s definitely helped musicMagpie get off the ground. Launching just prior to the crash, musicMagpie's website provided consumers with a quick and easy way to raise some much-needed cash.

But today, consumers are more likely to come to the website to declutter their homes. Users could probably make more money on eBay, but musicMagpie's efficient mobile app which is used by 70% of consumers allows them to simply scan the barcodes of DVDs, Blu-rays, games and CDs to receive an instant quote, before boxing up the items to be sent off using a free courier. Customers then receive their money on the day the items are received by musicMagpie – a guarantee which has meant the company has had to seriously streamline its systems to ensure it processes every one of the 100,000 units it receives each day.

The company then makes its money by reselling the refurbished products using Amazon Marketplace, eBay, wholesale to Poundland and Morrisons, as well as through its network of 25 stores branded as 'That's Entertainment'.

"We've effectively become the lazy man's eBay," explains co-founder and CEO, Steve Oliver. "Three quarters of the UK's population will never sell on eBay especially with high-quantity low-value items. We're all poor on time and it's just too much hassle."

Scalability

The business has had to scale very quickly, after making £500,000 turnover in its first year to £60 million a mere five years later. In the early days, musicMagpie was featured on Martin Lewis' MoneySavingExpert newsletter, and Oliver says this was a big surprise for the business – especially the associated traffic that came to the website as a result. "We crashed immediately," he says. "There was just so much volume, but you learn things very quickly and scale appropriately."

The business expanded into the US two years ago and its Decluttr brand was recently featured on Good Morning America. "The volume of traffic went up by ten thousand times," he says. "But the website didn't fall over or slow down."

Oliver co-founded the business with Walter Gleeson who is the technology brains behind the operation, where nearly everything is developed in-house, this includes new aspects to the website including the recommerce of consumer electronics which launched nearly 18 months ago, as well as a brand new eCommerce functionality.

eCommerce

The musicMagpie shop launched softly in August and a new iteration of the site is going live next week. Oliver says that while the website primarily supports consumers selling goods to musicMagpie, soon shoppers will be welcomed by a homepage split into two, offering shop and sell functionalities.

A couple of years ago, the business branched out into buying and trading fashion, which was not successful, but Oliver hopes that opening an eCommerce site for media will be closer to the online business' DNA.

eCommerce also allows musicMagpie to complete the customer cycle and learn a lot more about its users. Oliver insists that while consumers use the website to declutter their homes, many return to musicMagpie six months later to sell again, suggesting people are still continuing to buy physical media. "You would think our customers are people exiting physical and going digital – but these people are making room to buy more."

"There's a misconception," he says. "While we do recognise physical media is in a slight decline, two-thirds of all albums sold last year in the UK were still bought on CD."

While the company doesn't currently trade in books, Oliver uses them as an example – like vinyl – of a media which was in decline, but consumers are now seeking out this physical media once more.

"It's a hobby and a passion to collect and enjoy buying, touching and feeling," he says.

Oliver refers to how one of his wholesalers, Poundland, sells its refurbished second-hand DVDs for a pound. "At Blockbuster, people used to pay £2.99 to hire a DVD for a night with fees if it was returned late. Our average selling price isn't much more and at Poundland it's a pound – people put a pound in a jukebox for people to listen to a track on a Friday night."

Data

Being able to connect the sellers and buyers using musicMagpie's new eCommerce functionality will allow the business to gain access to data it has never had before.

"But owning and understanding a consumer's data is incredibly powerful," he says. "If we can work out that you have an Xbox, love Tom Cruise and Kasabian, and own an iPhone 5, that's powerful data to leverage in the future.

"That's where we see the site going, not necessarily a full blown marketplace but we can look into expanding out product categories."

Oliver explains how the musicMagpie website could potentially be used as a portal into other products, using whitegoods as an example.

"While we don't want to become a whitegoods expert, we can have those conversations and use our site as a portal – we don't touch the old fridge, but we introduce the whitegoods specialist and really work on this lazy man's eBay."

The Lego opportunity

Oliver laughs when he says people really think he's "lost the plot" when he talks about the opportunities around Lego.

"Every child has Lego in their toy chest, you pay £20 for a box which is tiny, but it's designed to be a robust product, so we want to go with a recommerce model by weight – put it in a Tesco bag and pop it on the kitchen scales," suggests Oliver.

But at the end of the day, musicMagpie is a volume business, which buys 100,000 items a day, making it difficult for the business to deal in rare items – be that a Star Wars Lego minifigure, or a signed copy of a Beatles album.

"We probably get three items a day with a signature, but we don't know if it's real. We once got a John Lenon signature, we could have got it verified, but you end up spending more in costs," he explains. "There's probably a nice balance in there somewhere, but we have to be careful."