A great business is like a great money manager. They take money in, invest it, and turn it into more money. In the case of a company, it can invest its money into manufacturing plants, marketing, hiring employees, or a variety of other things. If those investments return more money than they cost, the company’s value increases. If investments return less money than they cost, the value of the company decreases. Thus, building a successful business can be boiled down to investing money at high rates of return.
But there are only so many high return investments that a business can make. Just as finding undervalued investments became more difficult for Warren Buffett as Berkshire Hathaway grew, traditional businesses can only invest their capital at high rates for so long.
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Zooplus is the largest e-commerce pet supply company in Europe. If you happen to be familiar with Chewy.com in the US, Zooplus is the European equivalent.
Like Chewy, Zooplus has built up significant market share compared to both Amazon and the traditional bricks and mortar pet supply stores. The total pet supply market in Europe is still very fragmented with over 50% of pet supplies being purchased in grocery stores. Including bricks and mortar, Fressnapf is the largest pet supply company, but Zooplus is #2 and should surpass them within a couple years.
If we zero in on e-commerce, the pet supply market is much more concentrated. In 2018, Zooplus had 52% of online market share, followed by Amazon at an estimated 17%, and then the traditional pet supply companies behind them—Fressnapf and Pets at Home. Not surprisingly, e-commerce as a percent of total pet supply sales has increased every year, and I expect this to continue for many years. I don’t see any reason that online can’t make up 40%+ of pet supply sales in the future. E-commerce going from 10% industry penetration to over 40% is a major tailwind for Zooplus.
Continue reading “Zooplus vs Amazon in Battle for the European Pet Supply Market”
Reading through all of Jeff Bezos’ annual letters inspired me to read through other letters from very smart people—and Larry Page and Sergey Brin from Google were the first choice. Besides using a bunch of Google services on a daily basis, I’ve never followed them as a public company so I learned a lot reading the letters. The main thing I came away with is an appreciation of how Google has evolved from just a search engine to a smorgasbord of many products and services that all ultimately feed into the search funnel.
If you invested in Google in 1998 (as a private company), you almost certainly would have been betting on their ability to build a search engine. In fact, you can read Larry and Sergey’s original paper from 1998 describing their Google prototype and, not surprisingly, there is no mention of Gmail, Analytics, Chrome, YouTube, Maps, or Android. It’s interesting that, in my opinion, Google’s expansion into so many products would have been impossible to predict, but looking back from today it all seems rather obvious.
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I recently read through all of Jeff Bezos’ annual shareholder letters and wanted to summarize some of my takeaways. I’ve loosely followed Amazon for years just because of how interesting of a company it is (and how much of an effect it has on our economy), but I never went back and read the older shareholder letters until now. I wouldn’t say there was anything too surprising in the letters (everyone knows how obsessed with customer satisfaction Bezos is), but I came away even more impressed with Bezos than I already was. Many people refer to him as one of the best CEOs in the world and I can’t disagree—he has a combination of traits that are very rare.
Business manager + financial expertise
It’s not often you find a CEO who is both a visionary for the business and also understands the financial drivers behind it. This makes sense when you think about it. Most CEOs got to their position by being great marketers, salespeople, or inventors, but none of those roles prepare someone for being the chief capital allocator. A hired CEO may work his way through a company’s corporate ladder, never once needing to really allocate capital on a large scale, and then all of a sudden he’s promoted to CEO and that’s one of his main job roles. Likewise, a founder spends many years just growing their company any way they can—and suddenly one day the company is large and more in-depth capital allocation decisions must be made.
Continue reading “Lessons from Jeff Bezos”