Is there still room in the IT distribution market for a completely new company, with a completely new approach to distribution? With its innovative approach, targeting gaming products and services, eoptimo wants to stand out in this difficult market. I talk to the company’s Executive Director Rafal Zoltanski about the strategy, the company’s approach to sales and the experience eoptimo draws on when building its business.
Przemysław Kucharzewski, BrandsIT: Today I am talking to Rafał Żółtański, Executive Director at eoptimo Sp. z o.o. in the company’s Wrocław office. Rafał, my first question is – where did the idea for another distributor in Poland come from?
Rafał Żółtański: First of all, I would like to point out that it is not another distributor, but a specialised distributor. The idea came from years of work and observation of how distributors in our country operate. Because the market is changing strongly, the area of gaming in particular, which we specialise in, is developing, so we see a lot of potential here. In addition, looking at how distributors, especially broadliners, operate and how they approach manufacturers of gaming products and accessories, we have found that we will operate in a different way. For the big distributors, the priority is the leading global brands that generate multi-million dollar revenues, supported by the right activities at the right intensity to deliver results. Any other smaller manufacturer, whether in the gaming area or elsewhere, is merely an add-on. Manufacturers very often make the assumption that because such a large distributor has such a large reach, it will ensure their sales at a satisfactory level. However, it often turns out that introducing a product to a large distributor is not enough to achieve business objectives. It is not uncommon for the largest distributors to take a passive position, but we at eoptimo rely on an active sales department. We inspire and advise our trade partners – just as a category leader should.
BrandsIT: How do you then want to differentiate yourself from these large distributors?
Rafał Żółtanski: We want to provide added value for smaller manufacturers, who generate a turnover of a few million a year. In the case of a large distributor, such values represent percentages of total revenue. Such business parameters are not satisfactory for large ones due to business indicators that are taken “under the magnifying glass” by investors.
BrandsIT: And where exactly did the idea for gaming come from. Was this choice influenced by the pandemic?
Rafal Zoltanski: Certainly, during the lockdown period and even now we are seeing dynamic growth in the gaming sector, both in terms of hardware solutions and digital distribution, i.e. e.g. game keys, gift cards, recharge cards, various additional services in entertainment services. But at the same time, we based our business decisions on market research and, for example, the gaming business generated $118 billion in 2018, thus surpassing revenues from TV – $108 billion or cinema – $41 billion.
BrandsIT: Indeed, these are impressive figures.
Rafal Zoltanski: Forecasts for the following years are much higher, for 2023 there is talk of a figure of more than $200 billion. We are talking about a figure that combines revenues from the sale of both gaming hardware and digital distribution, whose share of the total market is growing quarter by quarter. Digital distribution has no territorial restrictions – we can buy and sell services electronically globally.
BrandsIT: Do you have an online system ready to distribute digital products?
Rafal Zoltanski: We have started building such a system and it is a very important part of the whole business for us. We want to launch this system early next year. It requires us to invest quite a lot of time and money. Of course, the system will integrate with the sales systems of our business partners in order to reach the widest possible range of end customers. In the other direction, we also want to integrate with our digital service providers so that the whole distribution process is fully automatic.
BrandsIT: Do you think revenues from digital distribution will exceed those from traditional distribution of gaming accessories and peripherals?
Rafal Zoltanski: The market is changing a lot and it will definitely happen soon. Certainly the pandemic has had an impact on this. Comparing March 2020 to March of the previous year, the growth in total sales of gaming solutions was over 60%. Most of the growth was achieved through a sizable share of digital services sales. I estimate that digital services are more than 60% of the total. The pandemic and the need to stay at home has led to consumers choosing to buy keys for services rather than physical products such as games in boxes. We can receive electronic licences practically immediately, while boxed software can be picked up after a few days, whether at a parcel machine or from a courier. The most important thing in purchasing games is the impulse, which makes the fact of immediate purchase and receipt of the ordered service in the form of a key very important and, for example, we can play our favourite game within a few minutes of purchasing a licence key, previously downloading the installation version from the software publisher’s website.
BrandsIT: Let me return perhaps to the topic of distribution: do you think that as eoptimo you have no competition on the Polish market?
Rafał Żółtański: If I thought so, I would be a hypocrite, because any company that sells in the channel, be it game-related hardware or game licence codes, is competition for us. However, we are determined to stand out strongly in the market, based on the work of myself and my team and the experience we have gained with other distribution companies or manufacturers. Above all, we want to avoid the mistakes that the big distributors make. At eoptimo we avoid convoluted procedures and long decision-making chains. We go to great lengths to make working with us both profitable and enjoyable.
BrandsIT: And how do you relate to smaller gaming distributors in Poland?
Rafał Żółtanski: To be honest, I think there are no such distributors. There is one company which is active in digital distribution, but I think that our approach to the distribution of this particular range is comprehensive enough for us to take over quite a large piece of the market.
BrandsIT: I have also heard another opinion that you are a broker, but do you focus on so-called ‘kosher’ distribution, based on direct contracts with manufacturers?
Rafał Żółtanski: We have 10 official exclusive distributors at the moment, and by the end of September we will have signed six new contracts. There are plans to introduce further distribution brands and to take over several manufacturers from other distributors operating in Poland. Obviously, we are reinforcing the purchase of some brands on a good price basis, buying goods from suppliers all over the world. Is this brokerage? In my opinion, no – it is simply normal business behaviour. We have an open market, in the case of such purchases they are usually branded products, so if there is an opportunity, we do it. And in such cases, we are more price-competitive to the prices offered by the official distribution of these manufacturers in our country. But it’s more a problem of the pricing policy of manufacturers and distributors.
BrandsIT: Do you plan to operate only in Poland or do you want to go out to foreign markets as well?
Rafał Żółtanski: We are already active in other countries. In the case of signed distribution contracts, we have exclusive rights to Poland and often also to other countries in the CEE region. Even at the contract negotiation stage, this is a prerequisite for us to obtain exclusivity. For us, this is the key to getting heavily involved and achieving the agreed sales plans without cannibalising the market or engaging in price wars, thereby eroding margins in the sales channel. In the case of countries outside Poland, if the manufacturer gives the opportunity, we also decide to sign a contract covering another country.
BrandsIT: Do you have plans to open branches in other countries outside Poland?
Rafał Żółtański: For the time being, the plan is for the entire sales structure to be located in Wrocław, while our warehouse and service centre is in Łódź. At the moment there are 21 people working for eoptimo. As far as branches in other countries are concerned, for the time being we do not have an expansion plan, we are more focused on companies that can be called sub-distributors. We are constantly looking for people to work for eoptimo, combining commercial competence and a passion for this entertainment sector.
BrandsIT: And where did the idea for the name eoptimo come from? After all, there is a company called Eptimo on the market.
Rafał Żółtański: The name had to have positive associations, so to begin with it was to be “optimo”, and then I added the letter “e”, which is associated with electronics or e-commerce. In my opinion, the name should also be pronounced in the same way as it is written, as this often causes difficulties on the part of co-operators.
BrandsIT: Before the interview, you mentioned the investor you acquired – it seems to me that this is a very important issue for this type of business. Was it easy to get an investor? Is it someone from either the gaming industry or from another part of the IT sector?
Rafał Żółtański: We found an investor who is mentally close to the topic of gaming, because they are relatively young people, operating in quite a different sector, but interested in investing in different areas. The meeting where we presented our business plan took only a few hours, after which a decision was immediately made on the investor’s side. The investor believes in the project and simply ‘feels’ it.
BrandsIT: In that case, congratulations. In my experience, usually investment processes with funds take up to a few months, but it is certainly easier to close investments with private investors, whether institutional or individuals, rather than with typical VCs. Tell me, what are your goals for the coming months and for the whole of 2021?
Rafal Zoltanski: Our main goal is to become a recognisable gaming distributor. If a reseller thinks about this sector, we want them to direct their steps straight to eoptimo. We have an offer of good-quality manufacturers, which we scrupulously verify. These are also products that have differentiators; we often initiate talks with new manufacturers because we see market potential. Our advantage is also the fact that all the people working here come from the IT industry and have seen how the distribution sector has changed, how margins have changed, sales systems, what mistakes the biggest ones have made. The entry of retail chains, which dominated the consumer electronics market, certainly had a big impact on the market. The next stage was the spread of e-commerce.
BrandsIT: Exactly, let me interrupt you – do you sell to retail chains, specialised chains?
Rafał Żółtański: Yes, we have a number of contracts signed with chains and we are in talks with more.
BrandsIT: Aren’ t you worried about the problems associated with this, in particular the impact on business with smaller resellers and online shops?
Rafał Żółtanski: Above all, we focus on a selectively chosen product portfolio available in retail chains, chosen in such a way that it does not compete with products that are sold by smaller resellers. This approach stems from our experience of working with other distributors or manufacturers. It is very important to have a well-configured product policy so as to avoid a price battle.
BrandsIT: You also talked about the development of the GSM offering. Is this already taking place?
Rafal Zoltanski: Yes, at the moment we have two distribution contracts signed, including one with a very high-end manufacturer – it is PanzerGlass – it is a manufacturer of glass for smartphones, you could say it is such a Lamborghini in this area. There are a lot of glass manufacturers, but we try to find high-end solutions, or solutions that stand out with features that the competition does not have. We avoid similarity in our offering to other distributors.
BrandsIT: And finally, perhaps you would like to add something else from yourself?
Rafał Żółtański: It remains for me to invite resellers to cooperate with us, we offer favourable pricing conditions, we provide financing for the credit line – we cooperate with the leading insurer on the market. I believe that the coming year will be a breakthrough year for the gaming industry, which will translate into business for our reseller partners.
