20. 06. 2024
In an exclusive interview with CzechCrunch, David Chmelař speaks for the first time since taking the helm of Heureka about the recent layoffs, changes in the company's vision, and future plans.
The news surprised almost the entire Czech e-commerce scene. Last September, after ten years, Tomáš Braverman ended his tenure as the director of Heureka, and the company's owners, the investment groups PPF and EC Investments of Daniel Křetínský, appointed David Chmelař to the position. Chmelař had spent the last eight years in Malaysia, where he co-founded iPrice, which grew to become the largest price comparison site in Southeast Asia. It earned the nickname "Asian Heureka." Over the years, iPrice raised over half a billion crowns from investors, and a year ago, the startup was sold. Chmelař then returned to the Czech Republic.
Thanks to the collaboration between iPrice and Home Credit, Chmelař had connections in the local business scene. "I met Jiří Šmejc (director of PPF, which owns Home Credit – ed.) and he offered me to join them. A month after joining, I was 'sent' on a mission to Heureka," he describes in his first interview since taking up his current role. And what is that mission? "In short, it's about building a long-term healthy and valuable company," responds the 42-year-old entrepreneur and manager, who started his career at BCG and served on the board of Wüstenrot as a thirty-something.
Heureka itself has undergone several major changes in the past year. In addition to the change at the top, there were also changes among the owners when Jakub Havrlant's Rockaway sold its stake to PPF and ECI. The company is also influenced by market events, as it continues to grow in economic results despite the downturn in the e-commerce market, but it is also aware of the turbulence associated with the arrival of new players like Allegro and Temu. "The market is changing significantly, and in a dynamic environment, it's necessary to react quickly," says Chmelař. Recently, Heureka also laid off a significant number of employees.
In a large interview that followed CzechCrunch's ranking of the 100 largest e-shops in the Czech Republic, Chmelař describes the current state of Heureka, how the company's vision changed a year ago, and what defines the director's mission. He compares doing business in Asia and the Czech Republic and outlines what cooperation with Šmejc and PPF looks like. The discussion also touched on the state of the e-commerce market, new players, and the hot topic of recent months – Temu.
Even though Heureka operates in e-commerce, which is globally a very tough market, it has always had a very good economy. Once it grew out of its startup phase, it was profitable, which is not common in e-commerce. From this perspective, it is doing well, it is profitable and generates positive cash flow.
But when we look at your financial statements, you have a negative economic result, increasing the losses of recent years, and your long-term liabilities exceed five billion.
Heureka Group has consolidated revenues of around two billion crowns, with EBITDA (earnings before interest, taxes, depreciation, and amortization – ed.) in the hundreds of millions. We meet all obligations, pay interest, and within the bonds, it is standard to define indicators that we must report continuously, which we also do. There is no reason to believe that this will change in the future.
At the revenue level, we will report growth, but logically it will not be in double digits because the market itself has been declining in the last two post-COVID years.
We operate in a dynamic environment where things are uncertain, a new technology can come and shuffle or re-deal the cards. I lived abroad for the last eight years, but from a distance, I felt that the Czech market was stable in this regard. Everything was growing, but then inflation and war came, major transactions with Mall Group, and now new foreign competitors. The market is changing significantly, and in a dynamic environment, it's necessary to react quickly. We decided that if we want to continue building and improving Heureka, we need to react on the cost side and manage new challenges with a smaller team.
Most people to whom we communicated the bad news were not thrilled, but not everyone was sad, some were already thinking about it. The Eastern European market is in relatively good shape, and the outlook for people to find new jobs is good. With the remaining team, we immediately started addressing what this step means for them, their teams, and goals, but also generally for our strategy and vision.
This vision was very company-oriented. We rephrased it, and it is now much more focused on what we bring to customers – "choose wonderfully" and "don’t regret the choice." Under this lies a set of things we want to fulfill, including price comparison. According to surveys, the safety of purchases, payments, and data sharing is also important to shoppers – and this relates to our verified e-shops and verified reviews that cannot be faked. This is also tied to convenience. In each of these areas, we see potential to move three levels further.
A seemingly small thing, but it goes to the core. We track the lowest price of products to which we add the cost of shipping. If a customer gives us their postal code, we can show them a map indicating that home delivery will cost X crowns, delivery to a box 200 meters away will be 40 crowns cheaper, and they can pick up the goods from a nearby store for free. And we have thousands of such ideas.
It's a process that Tomáš started, I continued it, and we are working on it with the team. I believe it is a well-set direction. No matter how the market turns, customers will perceive us as those who help them save money and advise them in the shopping process.
We still have it, and it brings convenience to customers because, for example, some e-shops do not have such well-handled mobile purchases. We believe that the volume of sold goods will grow, we have a newly built platform, and we are ready for further scaling. However, we say that it is more important to provide customers with a great service, so even if an e-shop does not want to join our marketplace, we want them to stay with us.
Yes, in Asia, we built our own company where we commercially collaborated with Home Credit and knew each other. When I was returning to the Czech Republic, I met Jiří Šmejc, and he offered me to join PPF. A month after joining, I was "sent" on a mission to Heureka.
It is very open, I did not receive detailed instructions. In short, it is about building a long-term healthy and valuable company. Health is, of course, related to finances but also to other areas such as proper organization. Long-term means doing work so that the company functions for many years. Jiří Šmejc, for example, has already declared that he plans to involve Heureka in the Unity program (a business platform where PPF wants to strengthen the combined sale of services of individual companies such as Air Bank, O2, or Voyo – ed.).
I did not receive such a goal. I had the task of developing a business plan that was then approved, and according to which we operate. It was up to me to say what we believe with management is right and what to aim for in the future.
Even that is open, I will be here for several years. Whether it will be five or ten, like my predecessor Tomáš, is not necessary to address now.
To my knowledge, that is not the case, and I am not tasked with preparing Heureka for sale. Jiří Šmejc also mentioned in interviews in the media that the great advantage of PPF and ECI is that it is long-term capital and not a classic private equity fund that must sell assets after several years. This gives them the ability to think about individual investments differently and more long-term.
I enjoy it, and I can say that it suits me. In Asia, we built a startup that at its peak employed 300 people, so Heureka is not fundamentally different in size. We thought similarly about organization, building the product, and implemented similar agile methodologies. For me, it was a relatively familiar environment. And Heureka still has a youthful spark, a bit of a startup environment, and the company has excellent DNA.
One of the themes was that the company had grown a lot in the last few years and now needed to catch up on core processes. In the first six months, I did a lot of work on that to help set up goal definition, prioritization or people evaluation.
I wasn't used to how long people work in one company. I came to Asia in 2015, the digital market exploded there and to this day there is an absolute lack of capable developers or digital marketers. There's a huge turbulence in the market all the time, with new players emerging and others disappearing. That's why we have 30 to 40 percent of the company turnover every year.
Even though Heureka is a young, dynamic and modern company, there are people who have been here for over a decade. I have not met anyone in Asia who has been in one company for more than three years. When you have people around you like that, you get used to it and lose the fear that you can't handle the speed of change.
My co-founder was German and had previously worked in America, where the notice period is 14 days. That's just the way it works. The problem would be if the notice period was 14 days, but it would take three months to bring in a new person. If you can find someone in 14 days, it's not a problem.
What brought you to Asia, where you started the equivalent of Heureka years ago?
The first decision was to start a startup. I was 33 at the time and sitting on the board of a bank where my colleagues were in their 60s. It was obvious that at some point digitalisation was going to invade banks and they were going to be affected by new technologies - we already had Revolut, Air Bank... It was fine for my colleagues, they were going to experience some turbulence in their last ten years at work, but if I didn't understand digital technology, I would be screwed because I still had another thirty to forty years of my career ahead of me at that point. So I had to jump out of my comfort zone.
The second step was related to the advice I got from my mentor: experience the growth phase of the company. It's a big chore, but an extremely beautiful and powerful phase of an organization. So I looked for opportunities where there was potential for such growth, there were more regions around the world. Southeast Asia came up. When I traveled there, I made an emotional connection and found it great to live there for a few years. My then-girlfriend, now wife, and I went there for a year. We came back after eight years with three children. (laughs)
While building a business is a great thing, in the end you do it for the sake of your environment, in the strictest sense for the sake of your family. With our third child, we felt we were stretching the string too far and it might snap. Living partly on two continents is easy to manage without children. My favourite story is when I flew from Kuala Lumpur to the Czech Republic on Friday night to cross-country ski run the Jizerska 50 and was back at work in Malaysia on Tuesday. With one child, such a life is harder, with two even harder and with the third we really needed to "calm down". The Czech Republic has always been home for us, we have returned often and never mentally left it as some people do.
There are very few people who don't have a boss, it's a unique concept. I guess you could say that about Peter Kellner or Daniel Křetínský. But in iPrice we had twenty-six investors who entrusted us with a relatively large amount, about $25 million. Even if they don't come to you every day, you want to have good news for them, you feel a responsibility to them.
I have thought about it, maybe it will happen in the future, I don't rule it out. Maybe being an entrepreneur is already in my DNA and I look at Heureka from an entrepreneurial point of view. I found the opportunity to work with Jiří Šmejc and the people who surround him incredibly attractive. In the Czech Republic, I see him as a total leader among investors and managers. That was the main reason for me to be here today.
I am used to maintaining a close relationship with investors. I believe it's better if they know the context. I learned the hard way, but investors don't like surprises. When something goes wrong and you believe you can turn it around in two months, one way is to not tell investors and then two months later admit everything to them, saying it's already solved. But the problem is that it doesn't always work. (laughs)
Because problems can last four or six months. And when an investor asks how it's going after a quarter of a year, you have to surprise them negatively. So I've learned to have continuous discussions with investors. It's hard for me to assess how PPF does it elsewhere; we have a fairly close relationship. We don't have a week without interaction, which allows me to give them information and also allows us to use the infrastructure of the investment group.
As shareholders, they have split the company in half, but otherwise, yes, from what I understand, they have an agreement between them that PPF "looks after" Heureka more. To me, that's a workable model.
No, when you look at PPF's portfolio and the size of Heureka, it's obvious that we are not a "fundamental" investment. We are an interesting investment, Jiří Šmejc thinks about it in a strategic context, but interaction with him personally is not that frequent. They have a team of people who look after parts of the portfolio, and I communicate with them.
I'd like to talk some more about how you perceive what's happening in e-commerce. According to Heureka data, in the fourth quarter of last year and the first quarter of this year, the market is already returning to growth after two years...
We jumped to high numbers during the covid and everyone was hoping that this would be the new normal and we would bounce even higher from there, which didn't happen and the market declined for two years. And that hurts. The e-stores had warehouses full, they needed to empty them, it was a very challenging period. Now we are seeing a trend that the market is turning around, demand has partially recovered, but there is a new big turbulence on the supply side.
Yes, it is Allegro, for example. We're seeing an incredible rate of improvement there. Last summer it had everything on the website half in Polish, plus poor service... But this quickly disappeared and today it is a relevant player on the market. Even the customer experience is already good at Allegro, it has a very good rating at Verified by Customers.
The customer experience is poor on it, currently they have less than 80 percent with Verified Customers. Even the 90 percent threshold tends to be problematic and a signal to customers not to buy from that merchant. We are in contact with Kaufland, we give them feedback from customers and it is up to them at what speed they incorporate it.
This is a very interesting topic. Regardless of whether Temu is going to be able to operate in each market over the long term, it has shuffled the cards for all of us with the way it spends. Overall demand is about the same, although perhaps Temu has partially created a new market for extremely cheap goods that people could previously buy offline at stores like Pepco. But the amount of money going into marketing is huge, and it has driven auctions (online advertising on search engines and social media works on the principle of auctions: whoever pays more is the one the customer sees - ed.).
This is why everyone on the market, whether Heureka, e-shops or other players, is seeing their advertising prices rise. It worries me that this is the hardest thing for small e-shops. The big ones already have the financial strength, they can grit their teeth and hang on for a while, but for the small ones it can be very difficult to survive this period. Meanwhile, reports from China about Temu show that they too have enough resources to last a year or two. It is
It's an open question and we are in contact with Temu. And it's related to our proposition - if we have to give customers a clear message about where to buy things cheaply and if it's safe, then it should be with us just like the other players. If the customer experience is bad, our Customer Verified will expose that. Heureka's job is to bring transparency. In reviews, people will learn specific things and maybe say that those are the issues that don't bother them - for example, they need a disposable item like a gold tie for a party, so they're not looking for quality.
You're right. There is a customer perspective and questions: do I want to shop there? Does it bring me value? Do I perceive good prices? Do I like the speed of delivery? That's where we see our job as to bring transparency and alert customers to potential problems. Then there is the issue of fair play. We are in a market where we all play within certain rules. It doesn't matter if someone comes in with a big budget - it might hurt us and cost us money, but that's competition.
But then there are a lot of question marks with Temu. We, as Heureka, together with other players, should be a voice for regulators, whether at Czech or European level, to address these issues and require the same rules for Temu as for others. At the moment when a local player pays, for example, a recycling fee, but manufacturers from China selling on Temu do not pay it, it is unfair. In the long run, it certainly shouldn't be.
There are a number of them. We are in active discussions with foreign players and regulators, where we bring issues to their attention and ask them how they are addressing them, how they will move forward. Some of them are open and can show concrete things and progress. Then even within the local market there are initiatives that we co-organise or join, but I don't want to talk about them until they are public.
In some Eastern European countries we see that Temu already has a market share of ten to fifteen percent after six months. In the Czech Republic it looks like a strong single-digit percentage, but even that is really big, there are not many players like that here.
Exactly. So even in that way we see that the emergence of Temu is huge. The question is how much of that is new market that nobody has been operating in before and how much is taking away from the existing players, which is hard to estimate. But if it means that this is what customers want and its offerings, why not - provided of course that the playing field is straightened out.
There has been a lot of discussion here about when Amazon's services will be fully up and running. They have warehouses here, it's just a step to launch the Czech version. But it still hasn't happened. That's the beauty of the dynamics of e-commerce - everybody expected one player to enter, but now somebody that nobody even knew a year ago has a big market share.
Next, Trendyol from Turkey is coming to the Czech Republic, which is also an interesting player that brings a new customer proposition. By the way, although it is Turkish, it is 90 percent owned by Alibaba, so it has Chinese influence, thinking and capital power. Shein is also gaining traction, Allegro's regional expansion is interesting... There are going to be interesting things happening and I'm happy to be a part of it because that kind of momentum is energizing.
Original version: https://cc.cz/jiri-smejc-z-ppf-ho-vyslal-na-misi-do-heureky-mym-ukolem-neni-pripravit-ji-na-prodej-rika-chmelar/
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