Strategic management - case study - eMag

I. Introduction: history & facts

The name of the company: S.C. EMAG INTERNATIONAL S.A.

Code Unique of Registration (CUI): 15967043

Number at Registry of Commerce: J40/16457/2003

Social Status: Registered from 02 March 2009 as a company by shares

Type of Activity: Commerce by retail in specialized stores of other products (Code CAEN 5248)

The name of the company: S.C. DANTE INTERNATIONAL S.A.

Social Status: Registered from 29 August 2006 as a company by shares

Type of Activity: Commerce by retail of electrical household articles and devices, of radio devices and television (Code CAEN 5245)

The name of the company: S.C. ASESOFT DISTRIBUTION SRL

Social Status: Registered from 02 December 2002 as a limited liability company

Type of Activity: Commerce with raise of other products (Code CAEN 5190)

eMag is a digital shop that activates on the Romanian electronic market. Its main field of activity is e-commerce, being the largest online retailer on the market.

The virtual shop was launched on 17 December 2001, which was its first day when the e-business got its first order of 65 dollars. The company was founded by Radu Apostolescu together with Bogdan Vlad and Dan Teodorescu and started at first with selling a small variety of office automation and calculating systems.

The companies behind this online shop success in Romania are SC Dante International S.A. and SC eMag International S.A. The first was created in 2002 as a limited liability company (SRL) and only in 2006 became a company by shares (SA), the three cofounders having each 33% from the total shares of the company and its basic operation is to make sales to clients, individual customers. The second was created in 2003 as a limited liability company (SRL), only to became a company by shares (SA) in this year on the 02 of March 2009 having 41019 nominal shares with a nominal value of 10 lei. The shares status being slightly different from the other company in the sense at it exists a fourth owner, Gabriel Dumitrescu that has 10% of the shares, the rest of the founders having equal parts of shares of 30% from the total shares. eMag International focuses on online sales to clients, meaning companies. The gross revenues of the site come from clients, individual customers and equals 60% of the total revenues.

The continuous development led to the enlargement of products offered, doubled by the accumulation of the consultancy competence and the implementation of complex solutions. The company tripled year by year that called for an accelerated enlargement of the team and the changing of the headquarters four times in five years. On the day when it celebrated 6 six years from the day of its founding, on 17 December 2007 it reached the absolute value and record of orders received throughout a day that reached up to a total sale of 1,1 million euro formed of 2682 orders.

eMag sells over 15000 products from over 500 producers and in 2007 held 70% of the market share of trade in IT&C products with a derived turnover worth of 76.7 million euro doubled compared to 2006 when it had a turnover of 35 million euro and a total net profit of 0,6 million euro. The estimated sales for 2008 were almost double reaching 140-150 million euros but because of the financial crises they announced at the end of 2008 that they reduced their target with 40 million euro at approximately 100 million euro. eMag hasn’t made any official communication on the official financial result on 2008. The evolution of the growth of the retail store from 2004 to 2007 can be put like this triple, triple, triple, double in part for every year.

August 2006 was marked as the debut of the collaboration between Emag and GECAD ePayment for the segment of online payments and joins in the efforts of both companies to promote e-commerce in Romania and payments throughout cards. This platform of electronic commerce developed by GECAD ePayment offers the security and comfort that are necessary when doing online transactions that a client expects when entering a virtual shop. In addition the marketing instruments made available for the merchant make possible diversification and adaptation of services to the need of the client. ePayment integrates all the necessary instruments needed in online commercial activities and they adress to everyone that want to begin or expand a e-business.

In 2008 eMag relocated his operations in new headquarters, specialized for each of its activities, the total value of the investment rising at 2, 5 million euro until the end of the year. The first step was the opening of the Logistic Center eMag in the commercial area of the west side of Bucharest near the highway A1, over a space of 3000 mp organized as a deposit and center of expeditions. In the phase two of this process the showroom situated in Sema Park was moved in the Grant Shopping Center Crangasi because of the need of a bigger space having five times the size of the old one, approximately 1500 mp. The principal objective of this step was to create a much more tightened relation between the eMag showroom and the online community. Fallows after this the opening of a new central headquarters in a office building structured of seven floors, situated in Virtutii area.

The continual growth at an accelerated rate of the business made it obvious even from the beginning of 2008 that eMag needed to find and investor in order to capitalize the company, which needed a contribution of capital, like it needed fresh air in order to maintain its growth. They negotiated with companies like Tiger Global Management, the American investment fund that entered recently on the Romanian online market buying Neogen and eJobs. Sources say that they also negotiated the Romanian American Enterprise Fund and Balkan Accession Fund, funds administered by Axxess Capital.