When self-regulation in platform entrepreneurship is an asset

HIIG researcher Tina Krell had the opportunity to speak with Magdalena Piech from Allegro, Poland’s leading digital marketplace. The following interview focuses on Allegro’s position in the Polish market, the company’s community-driven efforts and its views on regulation and self-regulation in platform entrepreneurship. In addition, it gives an insight into the future of the digital single market and how the players in the broader European tech community try to shape it.

Platform companies have become an integral part of our daily life. Especially in e-commerce, we see large American and Chinese “everything” providers dominating the European market. This, however, does not apply to all European countries. That’s why the Platform Alternatives research project spoke to Allegro, the leading Polish online marketplace where sellers and buyers find each other.

Over the past 20 years, Allegro has managed to establish a tech business with constant ongoing innovation and a growing community across all its market sides. The company also heads the European Tech Alliance (ETA), comprising European tech companies focusing on scaling issues in the EU.

We talked with Magdalena Piech (PhD), who represents Allegro as its Director of Regulatory Affairs. Piech has a legal and partially academic background. She joined Allegro as an employee four years ago, previously working for them as a client. She is also the chair of the ETA.

Together we discussed Allegro’s position in the Polish market and its community-driven efforts, but also regulation and self-regulation in platform entrepreneurship, the future of the digital single market and how players in the broader European tech community try to shape it.

An interview with the Polish e-commerce platform Allegro

Tina Krell: Allegro is celebrated as one of Europe’s platform success stories. How would you define Allegro’s success yourself, and how did the company achieve its current market position?

Magdalena Piech: Allegro was born over 20 years ago in Poland. We started as a second hand, very basic online platform. I remember the fun fact that you could put the entire Allegro code on a floppy disc. We scaled from a very simple auction-based business model to a very advanced platform marketplace with new products and the most popular online shopping platform in Poland. A major point is also that a year ago, we went public. Allegro was the biggest debut on the Warsaw bourse and one of the largest in Europe. I would say throughout our history, our success was built on the spirit of constant innovation, so our continuous use of tech is an enabler for our business.

You know, this understanding of tech was very different throughout the development of Allegro. At some point, the fact that allowing payment methods on the platform was a huge development. So, to move from our classifieds business right to the one where you can actually conclude the transaction was a big step. And there were many, many steps on this journey. You know, we are constantly innovating.

TK: I read about the One Fulfilment initiative. Do you continue to mostly operate as a marketplace between merchants and customers, but they do the packing and delivery themselves? Or are you aiming for more integration through your own fulfilment centres?

MP: We remain a marketplace. The development of our logistic solutions aims at providing merchants with the opportunity to grow in a very sustainable manner. So we, as such, don’t interfere with the delivery process. What we are trying to do from a technical point of view is to get data on delivery simply to be able to tell our consumers when they can expect a product to be delivered. Now we’ve launched the first fulfilment centre. This is to some extent because we want to be able to offer same-day delivery, which is something that consumers expect to get in certain cases now. Also, an important element is eco-packaging, but with fulfilment. The project is now in its pilot phase and will become more widely available to merchants as early as Q1 2022.

“It does not matter how many fulfilment centres we have,
as we will always mainly rely on merchants to deliver their products.”

TK: Is it a goal to integrate the fulfilment process fully at some point?

I think what’s essential is that we now have over 250 million offers available. By contrast, a big shoe company in Poland sells around half a million shoes a year. So you can imagine the scale of products we have. My point is that it does not matter how many fulfilment centres we have, as we will always mainly rely on merchants to deliver their products. The very basic principle of how an online platform operates is that we will never be able to deliver all the products because then we would have to be a retailer to some extent. So our fulfilment centres, or advertising, are extra features we want to offer merchants and buyers to make the process as fast and seamless as possible.

“We are the most widely used online platform in Poland, but we are also a horizontal platform. So if you look category by category, the competition is very high.”

TK: How would you describe the competitive landscape? Is it rather larger marketplaces like AliExpress or Amazon, which recently entered the Polish market, or also small niche e-commerce shops with highly focussed marketing?

MP: We are the most widely used online platform in Poland, but we are also a horizontal platform. So if you look category by category, the competition is very high on almost every single level. On clothing, for example, there are many brands in Poland, and many of them are really strong. If you look at electronics, there are many electronic online shops, and there are also big offline retailers that go online. So we do feel that competition is tight, including Amazon, AliExpress, and now Shopee – another Chinese player that is entering European markets. My point is that the competition is very dynamic and strong, and our approach to all competition, whether it’s a huge player like Amazon or a smaller one, is that we make sure that the offer we have for our consumers and for our sellers is the best out there and that makes us competitive. Our focus is to always be better at what we do, rather than focus too much on competitors. Our responsibility to the European scale-up community is also what differentiates us from our competition.

Tina: On the technology side, do you develop and build all the technology in-house, or do you also use third party providers?

MP: Allegro is a technology-driven company. Over half of our employees are IT people, and we build most of the solutions in-house. Our code, our product and our platform are developed internally. Building on this foundation, we, of course, also use very tailored solutions provided by third parties. The strength of our company is that we are technology-driven and seek continuous innovation, which is what has made Allegro a success story. Even if we do use other technologies, we are independent and self-driven.

“There are many ways through which a company can improve in cooperation
with external partners or by integrating them.” 

TK: How does that usually work when you cooperate with third parties?

MP: We cooperate with external players, be it regarding the infrastructure or some very specific products like email automation, fraud detection, payment solutions etc. There are many ways I would say through which we can mutually improve and benefit in cooperations with external partners or by integrating them. In some cases, such cooperation may end up in acquisition, like with FinAi – a fintech company, which has become the basis for Allegro Pay. Our cooperation with a courier company offering same-day delivery – X-press Couriers, also proved the first step to a tie-up, but the company remained independent and keeps providing its solutions to external players. All in all, I would say that even if you are a completely independent company, it is natural that you look for improvements in many areas through external partners.

“The future of technology and regulation play an important part in how we operate
and how we can compete with other players.”

TK: You recently published the Allegro EU Tech Credo, which to my knowledge, was part of the consultations for the Declaration of Digital Principles of the European Commission. Can you say something about the background, how it fits into that consultation, and what the reasoning was behind that?

MP: We believe that European companies should be actively contributing to the debate on the future of Europe. So, as a representative of the European tech community, we felt it was our duty to lay out our contribution to the debate on the EU’s digital future and share our vision for a European digital framework that empowers EU tech scale-ups. 

The future of technology and regulation play an important part in how we operate and how we can compete with other players. This is why we felt it was the right time to have a more high-level declaration on what we believe in and what we advocate for, alongside our more issue-specific discussions. The Declaration of Digital Principles has the potential to set the guiding pathways towards a robust European digital framework, and we want to be a key contributor to this process. 

Moreover, because of the fact that the Commission was having a number of consultations about the future of Europe, we felt it would be of use to help inform the debate. This is also partly why this was published early this September, after the summer break. We thought that before the numerous discussions start, it would make sense to have something more high-level because eventually these very detailed discussions about AI, platforms, DMA, Data Act, taxation, and sustainability – if you put them together – will create a very detailed framework for European companies to operate in. 

“We are really drafting rules for an average small or medium or even big,
but a comparatively small company.”

TK: Why do you think this is happening now and not earlier?

MP: I believe that we are in a very pivotal moment for the digital single market. Even when I started at Allegro four years ago, the digital market as such was regulated only in some areas like consumer issues or GDPR. Now we are really setting the rules for the digital single market for the next 10 years. And it’s happening all at once. So what I am seeing is that in 2024-25, the digital market will be, to some extent, a more regulated market. In five years’ time, everyone will be online. So we’re not actually making these rules for big global platforms or even platforms like Allegro. We are really drafting rules for small or medium, or even big, but relatively comparatively smaller companies. And it will have an impact on all the areas, be it education, medicine, essential areas of our life. This is why I think that this framework needs to be done right. If there are some risks, be it with AI or even the platform economy, they should be addressed. At the same time, we should have an approach of supporting responsible European players, not of over-regulating, because the market we will see in three to five years will be completely different.

TK: Speaking of over-regulation. That seems to be really tricky to solve.

MP: I think there are some areas or sectors where most agree that are overly regulated in a way, right? So I wouldn’t like this to happen for the entire digital single market because then we come back to this discussion about where Europe stands towards other jurisdictions, other continents. So this is why we think that it is a good time to have the Credo, to make a statement about how important it is to, on the one hand, allow for innovation, and on the other hand to create fair competition conditions, also with players from outside of the European Union.

“We want to compete outside of our countries and hopefully globally.”

Tina: How do you witness the openness from the European Commission and their institutions to engage with European platform providers on this?

MP: I would say European institutions are open to the dialogue with the European players, but the resources of the European companies to engage in the dialogue are still limited. With the European Tech Alliance (EUTA), we join forces between 39 companies and their resources, creating the alliance of European companies, which is becoming an important player. But on the other hand, these are only 39 European companies. Not that many companies have the resources to engage in a dialogue. It is also the responsibility of the decision-makers and MEPs in the Parliament and member states to think through the lens of European scaleups, average European companies. 

Is the requirement we are imposing proportionate? Could that be done by allowing a bit more flexibility in how the goal will be achieved? Do we have to make this prescriptive? This is also why, as EUTA, we want to emphasise that Europe has very diverse and very dynamic companies and that we want to compete outside of our countries and hopefully globally. But for this to happen, the rules need to be set right in terms of how we can innovate and how we compete with others.

“I feel that we may not be going in the right direction with the very many detailed regulations.”

TK: We are working on a strategic guide to responsible European platform business. Instead of writing very normatively about what should be done, we rather decided to showcase what European providers already do beyond their legal obligations.

MP: That’s a great approach. The question I’m asking myself as a lawyer, but also through my academic background, is: what should be the right approach to regulate technology? I feel that we may not be going in the right direction with the very many detailed regulations. If you give us the basic rules, we’re happy to come up with a code of conduct ourselves. I think it could then be more efficient, time-wise and details-wise. On the other hand, shouldn’t regulation be focussed on really checking if the standards are met? There are so many rules, but there’s so little enforcement. The global market is completely unbalanced. Good players are trying to keep up with all the rules, and bad players just ignore them and remain completely untouchable and can carry on, and nothing changes.

TK: Unfortunately, we are at the end of our time. Is there something from your side that I haven’t addressed yet?

MP: I just wanted to add that Allegro and many other companies are open to discussing how we can address societal issues and challenges. We want to be part of this conversation. Our approach is that we want to be good business citizens. To come back to your project title, “Platform Alternatives”, I think that platforms can be great community builders and can operate in a manner that is ethical, good to the community and good to employees. And this is what we’re trying to prove by our actions.

There is a phrase in our Credo which I really like that reads: “We fully recognise our responsibilities towards the community we have helped build and belong to for our customers, merchants and employees.” I hope that the perception of European tech will be that we are responsible and want to contribute to the community.

This post is part of the European Platform Alternatives issue in focus

Key Takeaways (tl;dr)

Technological innovation helps tostay ahead in the competition. When the foundational technology is built in-house, independece is easier to maintaint.

A successful European scale-up needs to be aware of its responsibilities. One way to achieve this is to viewall its market sides as communities (customers, merchants, and employees), and consistently innovate around their needs.

A lot of rules already exist but are not enforced. Instead of demanding more regulation, platform self-regulation might be a more promising solution, as platforms themselves have a more detailed understanding, and also want to contribute to the discussion.