Gaston Frydlewski is the founder of Hickies, a company that's revolutionizing the way you tie your shoes.
Find out how he set up his business so that it could quickly scale to over 50 countries around the world.
In this episode, we discuss:
How to plan out a massive project when you don’t have the time.
How they were able to secure 70 patents for their business.
What logistics to set up when you’re entering a new geography or market.
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Show notes:
Store: Hickies
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Transcription
Felix: Today I’m joined by Gaston Frydlewski from hickies.com, that’s H-I-C-K-I-E-S.com. Hickies is the evolution of shoelaces, making your shoes look, fit and feel better. It was started in 2011 and based out of of Brooklyn, New York. Welcome Gaston.
Gaston: Thank you very much, Felix. Happy to be here.
Felix: Excited to have you on. Tell us a little bit more about your story, and these shoelaces.
Gaston: Yes, absolutely. I was one of those kids that would never tie his shoes. That got me thinking and made me realize, that there was a global opportunity in the shoelaces space. I started paying attention and noticed that most of my friends would never tie their shoes, and would leave the tips hanging. Then I started paying attention to moms and dads of small kids, who usually had to tie and untie their kids’ shoes multiple times a day. Then I saw athletes having to interrupt their runs and their trainings because the laces come undone. I saw my grandmother, that she couldn’t bend. Basically, I realized that everyone has a negative relationship with shoelaces, depending on their stage of their lives.
On top of that, I noticed that there’s not a- there was not a shoelaces brand. It was a commodity. The technology around shoelaces had evolved- sorry, around shoes had evolved tremendously, and we were still using strings. That’s how I came up with the idea of Hickies. That it’s a technology that replaces shoelaces in any shoe. It’s a one-size-only product. It turns any shoe into a slip-on. You can connect them in different ways. Once you have found the perfect fit, you will always have it.
Felix: You knew this was a pervasive problem because you saw it everywhere? You’re saying all stages of life, everybody in different backgrounds and ages all had this negative experience with shoelaces. What was the first step towards creating a business, creating a product around it?
Gaston: Yeah, for many years, this was like my passion project. My background was as an investment banker, so a completely removed from design. During all those years, I kept working all the time. The first step was- the biggest revolution about Hickies was that it changed the concept of shoelaces. Instead of having one single device that goes across the whole shoe, it’s multiple devices that connect each [inaudible 00:03:27] independently. That’s the biggest revolution.
Once I had that idea, I hired a very small design firm in Argentina. That’s where I’m from. The first step was to design the real product. Once that was done, which took me like a year, then I spend almost a year writing the patent. I was very young and patent in the U.S. was very, very expensive, so I had no money but I had a lot of time. I spend like a year drafting and writing the patent, which I filed online. Once that was done, I spend a lot of time researching materials. If you fast forward to today, we have developed our own material to produce Hickies, because they have to be very resistant, but very stretchy and comfortable. Those features usually fight each other off. We ended up developing our own material.
There would have been a lot of different stages of trial and error, and a lot of patience to get to a point where we were ready to launch a company.
Felix: Mm-hmm (affirmative). You were an investment banker at the time, and this was something you were doing on the side. Did you have any issues balancing that time? From what I know, investment banking, anybody in finance- financial industry, it’s very time intensive. It takes a lot of time and energy out of you. How were you able to balance that out with trying to start a- basically, invent a new product on the side?
Gaston: Yeah. To be honest, it was taking baby steps but constantly. I had this goal of having at least one major progress every week. That major progress could be finding a vendor, or talking with someone. For me, the consistency was the key. That was the- sorry- the force driving out of this was the passion and the vision that I had for the business. For me, it was very important to keep making small progress every week. I would devote an hour during the weekend, or some time on a lunch break. That’s how I kept going. Layers, and layers, and layers of those efforts ended up with the right product.
Felix: Something that is this large- inventing, creating a new product, not even just creating a business, but creating a new product for that business- obviously, it’s a large scope, right? There’s a lot of steps involved. I think when you do not have that much time, you kind of have to spread it out over so many years and try to find holes and opportunities to get the work done, like during your lunch break, or on weekends, or after work, trying to find all these times to squeeze it in. There is that potential where you do lose steam. I think that’s what you’re alluding to, that you always wanted to make some progress. How were you able to, I guess, plan it all out? How were able to- did you ever take time to kind of zoom out, and say, “Okay, this what I want to do over the entire year. This is how I’m going to do it.” Did you ever do it that way, or were you more just see what comes as you go?
Gaston: Well, it was a mix of both things. For me, the biggest- there were 2 drivers. One, that I thought that this was an idea that had to exist, whether I would do it or not. A big fear that was driving me was that someone would come up with this before me.
Felix: Mm-hmm (affirmative).
Gaston: That was part of the pressure even though it took me many years. The patent was a big part of that. The other side is that I do believe that you need to be in love with the idea, that kind of obsessiveness that you cannot remove from your mind. I think that that’s part of also of the trick. It’s not- it’s very simple that the idea will fade away, or the enthusiasm will fade. I think you need that passion that I can not explain where it’s coming from. Plus, also the fear.
Felix: That makes sense. The … with the- other than Hickies, did you have a background in business or entrepreneurship? Have you tried launching other products or other businesses in the past?
Gaston: Not me, but my wife, who’s also my co-founder. By the time that we got married, she already had a successful hotel in Argentina, which she started when she was 24. It was the number 1 hotel on Trip Advisor for 4 years. She brought to the table the start-up vibe and experience, and I brought more the global business mindset from investment banking. It was a- we were very lucky, and it was a very nice combination. The real world start-up experience was brought to the table by my wife.
Felix: Okay. Once you had- once you were able to start designing the product, when you had a good idea for it, or when it was pretty flushed out, you then decided to go get a patent. Tell us about that process. What was involved? How long did it take?
Gaston: Yeah. It took me a year. Basically, this was before even becoming an investment banker. I was very young, and jobless, but with a lot of time on my hands. I found out that customer service at the United States Trademark and Patent Office is extremely good. I drove them crazy. Basically, I read a ton of patents, and even some legal books to learn how to do it. At that point, filing for a patent, we had a full law firm involved. It was like 20,000 dollars. There was no way that I could afford that, so I ended up doing it for 600 dollars, which was the fee that I had to pay to file the patent.
It was- it was a learning process, which I think that today was extremely helpful. When you look at Hickies today, we have more than 70 patents worldwide. We have a full time IP lawyer in our company. I can talk with him and with of our law firms around the world on the same terms that they talk among themselves, and I can discuss strategy with them. All the hard work that I put in on the early years, now it’s paying off. I can talk with material vendors, as if I would be a plastic engineer and so on, so forth. All that work really paid off, now that we have a real business.
Felix: For, I guess, a product in general, and then all these other patents that you came up- or that you decided to file, how did you decide what needs to be patented and what maybe doesn’t need to be patented?
Gaston: Yeah. It’s all- the whole patent game is extremely expensive, but there are many, many ways to spread it in time. There are different international stages, and there are ways of diluting the investment. You can start filing in the U.S. Then, a year later, you can expand to Europe, and to some other countries. Then, through the PCT which is the international agreement, you have a couple additional years to file in the local countries. You have a- in total like 4 years to do the whole investment. You can see what’s working and what’s not, so then you can decide what to invest, and what not to invest. On top of that, Hickies has patents not only on our product, but also around all the potential variations of it. We have protected the whole space. We believe that we are the owners of this space.
Felix: Mm-hmm (affirmative). These 70 patents are for, obviously, different technologies around the product that you have, but you also need to have the same patent in multiple countries, is that what you’re getting at?
Gaston: Yeah. Correct.
Felix: I see. How do you decide which countries that you should go after? Let’s say that there’s a listener out there that wants to patent their technology, wants to patent their product, and maybe they’ve done the U.S. one. They’re based in the U.S. How do you know what countries to look at next?
Gaston: Yeah. It’s a combination. The good thing is you have in total like 4 years to do it, for the investment. On one side, you see the market opportunity or potentials, so the size of the market is a big driver. The other one is if you’re already making revenue from a specific country, then you definitely need to protect it. Also, countries where vendors or potential counterfeiters are based. Those are the 3 things that we consider. There are some markets where we are not present yet, but they are huge. We protected them. There are some markets where we are active, and we never thought that we were going to be active, so we ended up filing the patents there. Then, of course, the traditional infringing countries. Those ones we protected.
Felix: Mm-hmm (affirmative). How do you- when you are beginning this patent process, how do you make sure- because you’ve gone through it so many times- what do you make sure you have ready in order to make sure this process is smooth? You said you took 6 months for the first one, which is, I don’t think that long, I guess, for especially for your first time around. I’m sure you’ve learned things along the way that have made the process smoother. Can you share some of those with us?
Gaston: Yeah. It’s very important. It’s very easy to search for prior art- it’s called in the space. Basically, there’s a lot of people that have a lot of great ideas that they patent it, and maybe you have never seen the products come to market. Do a thorough search of what you think it is a new idea, because if it’s not novel, you will not get the patent. Make sure that no one else has produced the same thing that you want to produce. If there’s something similar, you have to make sure that you are addressing the differences and that’s what you’re going to get the patent on. I would say that, make sure you have a novelty involved in your patent.
Felix: Mm-hmm (affirmative). You said that there- you have 4 years to complete the entire process. Does that mean if you have a patent in one country, you have up to 4 years to patent it in another? What does it mean to have 4 years?
Gaston: Yeah. If you go through all the stages that the international patent process allows you, it can take up to 4 years. You first do an investment in the U.S., which is part of this international network called PCT. Then you file, you have up to a year to file the PCT and then the whole PCT process takes like between 2 and 3 years. At the end of that process, you have to say in which specific countries you are going to go. That’s when you have to do the big investment. At that time, you have 4 years to develop the market and see if there is something there.
Felix: Mm-hmm (affirmative). A patent is only useful, obviously, if you are going to be using it. How do you, I guess- you don’t have to go into exact details, but how do most people, or maybe if you want to share your experience, how have you used your patent? How has it helped your business?
Gaston: Yeah. On our case, we are very strong in enforcing our patents. Each time that we see someone that it’s trying to knock us off, we immediately address it, and we do that at multiple layers. We, for example, we file and we have relationships with other market places. For example, Amazon, eBay. As soon as we see someone knocking us off, we get in contact with them so that their listings are removed and the user is banned immediately. Then, we also send cease and desists to retailers which also immediately react. Then, later, we also file against the infringer, and we usually collect damages from them.
Felix: Mm-hmm (affirmative). Okay. Makes sense. Once you’ve had this product pretty flushed out, you have the patent for it and everything. Was that when you first went to market, or were you already in the market place before you got these patents?
Gaston: No, I was sure- it was a 2-prong strategy. On one side, it was getting the patents and the right to expand it internationally. On top of that, the idea was to move very, very fast into the core market. As soon as we launched, we were in the U.S. and our first international markets, and the first few months was to expand to Japan. Today, Hickies is selling in 50 countries, but the first one was Japan, the exact opposite of the world. For us, it was very important also to be the first mover, because you have a lot of- all the patents, and all the rights, then it can also be very expensive to enforce it. I would rather be making money in a specific market rather than spending it.
Felix: Mm-hmm (affirmative). Makes sense. How were you able to expand so quickly? What was the strategy once you had- again, once you had the product ready to go already, did you build up inventory first? How did you prepare for this launch at just so many different markets?
Gaston: Yeah. We- from the beginning, we used all of the available technologies to get the word out, and we launched our company through a Kickstarter campaign in 2012. This was the early days of Kickstarter. That campaign was very successful. Basically, we got a lot attention globally. Immediately, we got a lot of distributors reaching out to us. Specially, we started seeing a lot of interest from Japan. We’re trying to figure out why Japan was so engaged with Hickies. What we realized, is that they have to slip in and out of their shoes all the time, because of their cultural requirements. It was a no-brainer that Hickies had to exist in Asia, especially in Japan. That’s how we engaged.
Basically, we had a lot of positive feedback and interesting reaching out to us from the get-go from the visibility that we got in Kickstarter.
Felix: Mm-hmm (affirmative). Okay. These are reaching out to you- and I think this is a- not exactly an issue, but a good problem to have, one you do have. All this success, either from PR, or from a successful Kickstarter campaign, is that a lot of vendors, a lot of retailers, a lot of people in general just want to start working with you. How did you, I guess, manage all of that? How do you, I guess, analyze opportunities in front of you and make the right decisions, without getting too overwhelmed?
Gaston: Yeah. We had a good advisors that came from the footwear industry when we launched the company. They help us to understand which were the right leads, and also they made some great introductions. We made sure that we were surrounded by people that would help us to build our supply chain, our marketing, and our distribution network. That was key in our initial set up.
Felix: Mm-hmm (affirmative). Makes sense. Can you talk to us a little bit about those decisions then? How were you- what were some things that you learned? Some ways to filter for let’s say, a good retailer to sell to?
Gaston: Yeah. I don’t think I have the perfect answer because I’m still learning. The one thing that I’ve seen is that the geographic diversification has given us a good understanding on what’s going on in brick and mortar and retail in particular. For example, the U.S. brick and mortar ecosystem, especially at the large retailers, is much, much tougher than in the rest of the world. Usually, you have only one gatekeeper which is a buyer that is in front of thousands of doors. Those guys usually don’t have a lot of incentives to take risks, right? They’re just monitoring their margin, at least in the U.S.
While in other geographies, you see a more automized environment, and more automized ecosystem, where you have much more independence that you need to compete with these big chains, and those guys need to have the fresh product to compete and gain the foot traffic. It’s sometimes- sometimes it’s much, much easier to penetrate the brick and mortar internationally than in the U.S. I think that’s highly dependent on the industry, and the product.
Also, what we are seeing, especially in the U.S., is that brick and mortar is suffering a lot. All of the big retailers, you see them every single day that they are fighting from bankruptcy. They’re closing doors. Instead of taking risks, they are just trying to protect the every day smaller footprint that they have. That’s why for us, e-commerce is key. We really started investing in e-commerce a year and a half ago, after understanding this dynamics that are very strong in the U.S. and that will happen also in the rest of the world in the next few years. Investing in e-commerce became a strategic pillar in our company. In a year and a half, it became more than half of our revenue, so we really took it seriously and started investing and of course we started using Shopify after a few bad experiences.
Felix: Mm-hmm (affirmative). After the Kickstarter campaign, in 2012, were you just in production mode, or did you already have some inventory previously? How- what stage was the business in after the Kickstarter campaign?
Gaston: Yeah. The thing= the first thing that happened is that we were approached by a large retailer in the U.S. called Brookstone. Basically, they made a huge offer for the first holiday season, which was at the same time that we were shipping to our Kickstarter backers. We shipped to our backers, we shipped to Brookstone, and it suddenly became one of the best-selling items at Brookstone that holiday season. They run out of inventory in the first 3 weeks. They started reordering, and basically they bought all of our capacity I would say, for 2013. Then of course in 2014, they went out of business. That’s when we started seeing this trend-
Felix: Of retailers- of brick and mortar places having issues. Okay. You had all this inventory- or not inventory, but you had all these orders that were coming in prior to you having a lot of inventory at the time. Was that an issue, especially during the holiday season, where there’s so many sales, so quickly, so concentrated? What was that experience like?
Gaston: Yeah. The good- the interesting thing is that we always set up the company for success. For us, the worst thing that can happen is to have the sales and not be able to supply.
Felix: Mm-hmm (affirmative).
Gaston: We always had a very strong supply chain. As I mentioned, we moved from Argentina to New York to launch the company, so we put all the bets also to do it in the right way. Then we would have started the company from Argentina, and everything would have been probably right, but much, much slower. Everything we did was betting that this was going to be big. The supply chain was ready to react to that type of demand.
Felix: Mm-hmm (affirmative). Tell us a little bit more about the supply chains. I think this is an area that a lot of listeners are interested in, because they might have- they’re thinking about getting their products manufactured, and they’re trying to set it up in a way that’s scalable that you guys have been able to do. What are some- what is the supply chain like, and what are some keys that you think you guys got right to be successful at a large scale so quickly?
Gaston: Yeah. We originally wanted to produce in the U.S., but in the U.S. it was very very hard to get started because of all the credit requirements, and the new company, and foreigners, was- there were, of course, impossible. We had to end up producing in China, even though our product does not require a lot of labor. It’s highly automatic. We could have produced in North America, basically, the same cost that in Asia, but we couldn’t find the right partners. In Asia, everyone is more open to take risks and new clients. That’s how we found our first supplier, which was in Taiwan. We worked with them for 2 years.
Then, we were able to scale and move the factory to China. Finally, we were able to switch to a U.S. vendor, and we switched and moved our product into Mexico. Our original vision of producing in North America had to wait like 3 years until we could make it happen and the bodies were there and the company had a history that could be vetted by traditional suppliers in North America. Now, we’re producing in Mexico, which makes everything easier in the sense that we can get a good in 4 days, instead of 60 days from China. Basically, we can ship the products out before we have to pay the factory. Before, even though we had terms, we were still paying for the goods when they were in the water, you know?
Supply chain, for me it’s key. The way that we look at it, the location, it’s also key because it really helps on the working capital of a small company, which is key. If you are growing very fast and you probably won’t get great terms, so the location of the production facility is key.
Felix: Yeah. I think it’s an important topic, because basically what you’re saying is that previously, when you were- you had suppliers on the other side of the world, it took 60 days to get the products, but maybe a net 30 deal where you had to pay them before that.
Gaston: Yeah.
Felix: Now, you’re in the situation where you get the products first, and you don’t have to pay for many weeks, maybe even months until after you receive the products. Talk to us a little bit more about it. Why is this such an important fact?
Gaston: Yeah. This even becomes more relevant when you’re talking about an incomer’s business, where you can collect your- the sales in 24 hours, and you have several weeks to pay for the goods. In general, I think that in a consumer goods company, working capital, it’s what makes or breaks most of the companies. If you are growing a lot, working capital is an issue, and if you’re not growing a lot, the supply chain will shut you down. It’s always hard to find that balance, you know? You need to show the dream to your supplier, and have your volumes for them to be engaged and give you the terms that you need. As soon as you’re able to have that growing business, working capital is the biggest discussion that you can have in a consumer goods company. The most treatment that is your supply chain, you can basically leverage the financing, and as I was saying, if you’re sitting on e-commerce, and you’re getting your goods 4 days after they have been produced, and you’re selling them the next day, it’s a great business model.
Felix: Mm-hmm (affirmative). Yeah. One thing that you mentioned in the pre-interview questions was- or one thing that you said as advice, was that you want to stay alive as an entrepreneur. Don’t run out of money. As long as you have fuel, you have the chance to try new things, and ultimately figure things out. Tell us a little bit more about this. What- have you been in situations before where it’s come close, or come down to the wire?
Gaston: Absolutely. A friend and investor, he said, “Gaston, nothing would happen if it weren’t for the last minute.” I think that he’s absolutely right. Yeah. Yeah. We were close for many, many times. You can get close to bankruptcy or running out of cash, not as a sign of failure, but as a sign of success. If you’re growing extremely fast, you can also drain your resources. You need to manage when things are not doing great, but you also need to manage when things are going great. It’s a very fine balance. Of course, it’s easier to find a balance when things are growing. The real world doesn’t move as fast as your business when things are working out, so that’s the most important thing that you need to monitor. Always make sure that you have enough margin and enough cash to afford mistakes, because they will happen.
Felix: Mm-hmm (affirmative). What red flags do you look at today, to make sure you don’t run into the situation, a future where you are running out of cash?
Gaston: Of course, you need to track the bank account level almost on a daily basis, or on a weekly basis, and then run different scenarios and have your team used to thinking in that way. It’s very important that the whole company understands the mindset, and what everyone is trying to achieve. If you have someone in your company negotiating something on the marketing side, it’s important that they can also ask for terms, right? The whole company needs to be in that mindset. In terms of red flags, it’s always running. When we were- in the early days of the company, when we had the risk of running out of cash, of course, we were running scenarios and casting our projections on a weekly basis, and adjusting based on that.
Felix: Mm-hmm (affirmative). What do you think on newer entrepreneurs are doing that might be dangerous to their cash flow? Do you see a lot of newer entrepreneurs investing in a certain way that might be dangerous? Setting up kind of deal terms that might be dangerous to the health of their cash flow?
Gaston: Absolutely. I see a lot of this happening, especially in e-commerce companies. I see a lot of business raising money, and then just spending that money on acquiring customers at the higher cost of their average transaction. When you told me them, they say, “Well, my lifetime value of a customer makes the investment profitable.” I’ve seen so many companies just raising money and then trading that money for revenue at a loss, and I think that that’s a very difficult game, because you’re just betting that the lifetime value that you have calculated will remain being what it is, and then that you will be able to keep raising money.
I come from another industry. I come from the finance world, and I’m obsessed in making each transaction profitable. If a transaction’s not profitable, I’d rather not do it, and leave the revenue, which is fake revenue at the end of the day on top of the table. What had struck me about- I don’t know, the last few years, I’ve dealt with, I don’t know, close to 100 companies in the e-commerce business, is that I would say that 90% of them are investing on a lifetime value, but they are losing money with transaction. That’s why you’ve seen so many companies going out of business in the last few years.
Felix: That’s very interesting, because that is the calculation that a lot- that you’ll hear a lot, which is to make sure that your cost of acquisition is lower than the lifetime value. You’re saying that that’s too dangerous, and you like to be even more conservative and make sure that the cost of acquisition for a customer should be less than the average order size. Basically, the first time that you get them to purchase, you should be profitable. It shouldn’t require multiple purchases.
Gaston: Absolutely. That’s how we grow our business. Each transaction has to be profitable. That’s what my grandfather would told me. If I would tell my grandfather that I’m losing money to [inaudible 00:30:07] sell something, he would say, “You’re crazy.” That’s common sense.
Felix: Yeah. It’s this idea that you will be successful just by volume alone. If it’s- you’re losing money on every transaction, then you’ll just get more and more in the red. That makes sense. You mentioned earlier that when you were looking for suppliers, like you say, it’s not a labor-intensive product to make, it’s very automated, but you weren’t able to get any suppliers in North America to commit initially. What were the issues? What were they- what were their objections when you were approaching them?
Gaston: Yeah. Basically, the whole thing that makes the system work here, which is great, is the same thing that makes it very difficult to be inserted into that system, right? In the beginning, you imagine, I was fresh off the boat, with a crazy idea, running a company with my wife out of a co-working space in Greenpoint. I would talk to a huge factory, telling them that I was going to reinvent shoelaces. Of course, it was hard- it was a hard pitch. They said, “okay,” when I cam out with the orders, they say, “Okay, that’s interesting. Give me your credit history, and your company history.” I say, “Well, the company is 6 months old, and I have no credit history because I just arrived here.” Those things make it very hard to start a business in the U.S. so I had to find suppliers somewhere else, until I was able to build all that which was required to start a company here.
Felix: Mm-hmm (affirmative). Makes sense. They wanted to see a history first, so you went elsewhere where they might not have required as much as a background, that was more willing to invest in a smaller company. Get that relationship going, and then when you came back, they were- you had a history, a resume essentially, that made them want to work with you. That makes sense.
Gaston: Yeah. The one thing that was [inaudible 00:31:51] for me that I was willing to pay cash for the whole investment, and the inventory, and the whole thing. There was no risk from the suppliers, but they still needed to run all this requirements, and that’s what got me out of the picture. Of course, I understand, and that’s why I chose the U.S. to build the company because the market and ecosystem, it’s very federal, but it takes time to be part of that ecosystem, and that’s just how the game is.
Felix: You felt like you had to move to the United States to- not necessarily earn the respect, but to earn the credibility from other vendors in the U.S.
Gaston: Not really. We moved to the U.S. because Argentina is not an easy country. A couple of years ago, it was closer to being Venezuela than any other country in the world. Now it’s on a good track, but when we decided to build a company, we were posing it if we would have started in Argentina. We had this global opportunity, which we own through the patents and through the whole business plan that we build. We saw a global opportunity, and the only other language that we spoke, with my wife was English beyond Spanish. We didn’t have that many- too many options. Given that I had already lived in New York as a banker for a few months, I already knew how it was. New York has- now it’s this center of the world, so if you gain some visibility here, you gain global visibility. It made sense to take as an adventure and relocate here. It was more about the exposure, the ecosystem of the city, and the visibility that you gain by being here, than on the vendor side.
Felix: Okay. Makes sense. Other than- because you’ve worked with so many different vendors and suppliers- other than the payment terms, are there other deal terms that are important to really focus on when you’re working with vendors or particularly suppliers?
Gaston: I would say in any deal you have to be very, very careful with the exclusivities. I think that that’s important. If you are agreeing to some type of exclusivity, you need to have some way out of those contracts. Those are the key things that I would consider before engaging.
Felix: When you say exclusivity, if you’re working with suppliers, how does that work?
Gaston: Well, yeah, a given supplier can tell- can say in a contract, “Well, I’m your exclusive packaging vendor for the next 5 years.” Right? Then, any packaging that you do, you have to do with them. Then, each purchase order, it’s a minimum of X amount per year. That’s another thing that you have to look out for when you’re dealing with vendors, are the minimums that they require, and what happens if you don’t reach those minimums. Anything that can put you in the hook, and even be prisoner of a specific vendor that then can do whatever they want to in terms of pricing. Those are the things that you have to consider. I don’t think I’m saying something very smart here, but those are the basics, you know? It’s not giving exclusivity, if you give exclusivity, you should have a way out. If- you also have to be very careful with the minimums. Payment terms are key. Those are the usual suspects.
Felix: Yeah. Even though these are, when you say, you might think that they’re obvious things, I think it’s important for listeners to hear anyway. Especially if it’s your first time working with suppliers, they’re going to try to convince you that these are the normal deals, or that these are- it might not be- it might be a disadvantage for you, but because they have so much experience negotiating and working with retailers. Especially if you’re a smaller company, they might kind of bully you around and put you in positions that aren’t great for you.
Gaston: Yeah. The biggest thing is don’t do anything that makes you uncomfortable, right? Then on top of that, when you’re dealing with retailers, they usually want to take everything on consignment and if they cannot sell it, they sell it back. I usually don’t accept that. Those are the things to consider.
Felix: Mm-hmm (affirmative). Makes sense. Definitely go with your gut instinct a little bit more. You said that Hickies is now sold in 50 countries, which is a great distribution, lots of, all over the place. How did you- once you decided you said North America, then Japan, and Asia was really big. How do you decide which markets to enter next?
Gaston: Yeah. In our space, there were some markets that are the ones that create new taste, and opinion. We went after those key markets. After Japan, and the U.S. being active, we expanded to Europe, into Germany, the U.K., France, and Austria. Then, very, very quickly we expanded to Italy and Spain. Those are the biggest markets, the ones that generate in trends. It was really important to have a presence in those markets. That was how we decided which markets to move next. It was a mix between the size of the market, and the impact they have on the world.
Felix: I like that. I never thought about that way before, but it makes sense that you’d want to enter a market that does set the trends because people are going to be looking towards those markets. If all of a sudden everyone’s wearing Hickies in the U.S. or Japan, it’s going to become very popular in other countries, surrounding countries that look towards the U.S. or Japan for these trends.
Let’s talk about the- how to manage all of this. The logistics, and the shipping around this. I’m sure this like, could take a whole podcast itself just to explain all this. Let’s start with the basics though- how did you set this up in a way that it was successful from the beginning to expand to so many countries?
Gaston: Yeah. I think that there are a lot of advantages when starting a company right now. There are a bunch of things that were not around a decade ago. Today, you have all these amazing softwares. I think the trick to scaling is to have processes and technology. That’s the only way that you can scale. We a small team, right? You have to make sure that you have the right team, that you have the right processes in place, and then the technology. The technology, many times, it’s involved in the processes, because the processes are designed around the technology.
Also, if the processes are designed around the quality of the people that you hire. I think that those 3 things are key. Going back to the original point, today you can have the best CRM system and you pay 50 dollars per month with 1 position, and you have a better CRM system probably than Microsoft. That, if they want to change their CRM system, it would take them millions of dollars and maybe 3 years to implement. Small companies have the advantage that they can all have the latest technology very, very cheaply. I think that that’s what we use to scale. I think that Shopify is an example of that. We are now operating Hickies.com in the U.S., in the U.K., in Mexico, in Argentina, in Germany. We are opening in Australia, Japan. That was easier because we were able to scale it on the back of Shopify’s platform. Like that, we did it with every single thing you can think about the company. Paying by position, getting the best software, if it doesn’t work, change it, but that’s the only way that you can scale.
Felix: Mm-hmm (affirmative). When you are entering a new market, and you decide that this new country is someplace you want to see Hickies in next, what do you have to do to prepare for it? What do you have to do logistics-wise, to make sure that it rolls out successfully?
Gaston: Yeah. Now what we do, there’s a mix of markets that we operate ourselves. Then, we have a big part of our footprint handled by local partners. Those local partners are seasoned distributors that already have rooted relationships with local retailers, for example. Now, our job is, when we identify that there’s a priority to open a market, is to engage with potential distributors in those markets, and then do a very good training and onboarding process, so that then they can be successful in their local space.
Felix: Mm-hmm (affirmative). I want to change topics a little, change gears little, and talk about the marketing behind all this, to be able to become a global brand, you obviously have to be able to reach out to a lot of different people. I think you had mentioned that Facebook advertising had been one of the most successful strategies for you. Tell us a little bit more about this. What is the strategy behind advertising on Facebook that’s been able to help you grow so quickly?
Gaston: Yeah. I would say that my secret weapon is my wife. She’s a genius marketer, and she’s in charge of the whole communication of Hickies. I’m the numbers and the operations guy. I think that the trick is basically getting a great partners that can help you on the distribution of the content. First, you need to create amazing content, which I think that our team is great at. Once you have that content, the most important and the most difficult is getting that content distributed.
For Hickies, Facebook has been an amazing platform to target this content to relevant audiences. We were able to scale very, very quickly thanks to our partners that manage our budget for Facebook. Their name is [Ment-al 00:41:25]. It’s an Israeli/U.S. company. They have done an amazing job. I think that it’s all the engines need to be firing. Basically, you need the content, you need the right audiences, and you need someone that understands the dynamics of acquiring and redirecting to potential customers how to manage your budget. I think that finding the right partner is the key of everything.
Felix: Yeah. In terms of the content, what do you mean by the content? What are you- what kind of content are you guys creating?
Gaston: Yeah. For example, we have a lot of traction in different verticals. We are very popular among golf players. We are very popular among some specific communities, like for example, yoga, people that go to the gym. We are also very popular amongst disabilities communities where we solve a big problem for them. We create specific content for specific audiences, and then we target that content to those specific audiences through Facebook. I think that being able to deliver the right content to the right audience- which sounds simple, but it’s not- that’s the real trick.
Felix: You identify these communities, identify people who have particular problems, or particular hobbies and create content around- that they would be interested in, and is this content just like posted on Facebook? Where does it actually live?
Gaston: Yeah. It’s like Facebook advertising. Videos. Instagram. Yeah. It’s basically that.
Felix: Makes sense. Okay. Cool. Let’s talk about the team. I know that you obviously have a lot of experience outsourcing a lot of things, hiring and partnering with a lot of different companies, help grow the business. Is it- do you have a team of your own too? People that actually just work directly for your business?
Gaston: Yes. Yes. We are around 20 now, in 2 offices, one in New York, and the other one in Switzerland.
Felix: Mm-hmm (affirmative). How do you- I guess, any tips on growing a team? How did you know what positions to hire for first?
Gaston: I would say that the biggest recommendation is that first you need to have revenue, before you start hiring. Then, the business organically demands for certain positions. I think that you have to be very aware of not what would make your life easier, but what the business is demanding from the company. They are usually not the same thing, so that’s very important. To understand where the growth is coming from, and support that growth through hiring.
Felix: Mm-hmm (affirmative). Yeah. 20 people is definitely one of the more larger that I’ve spoke to on this podcast. How do you manage a team of that size? What do you do to make sure on a day-to-day basis make sure that everyone is on the same page?
Gaston: I think the most important is the quality of the team that you bring on board. You don’t need to manage a team if they are great. I think that it’s very important to bring high-quality people to join you for the ride.
Felix: That makes a lot of sense. When you do sit down and are evaluating candidates to join the team, how do you know if someone’s going to be an amazing employee, rather than just someone who’s great at interviews? How do you actually identify that they’ll be a great addition to the team?
Gaston: I usually am terrible at that. The good one is my wife. She has a radar for that. It’s- I don’t know. I think that it’s a combination of seeing the passion. It’s very important that they see the vision and they understand the opportunity, and that they like the product. I think that’s the most important thing. Then, on top of that, that something in their experience must stand out. They are not just a cookie-cutter, because we are not doing a cookie-cutter company here. You need to find people that like thinking differently. That’s what we look for when we are hiring.
Felix: Mm-hmm (affirmative). Makes sense. Cool. In terms of the tools and applications you use- because you mentioned before that processes and technology are the 2 key ways that you’ve been able to scale a business to the size with a relatively small team for again, a global business. What tools and apps do you guys rely on to help run the business?
Gaston: Yeah. I’ll tell you the ones that come to my mind, but I’m going to forget most of them, because we use a lot. For example, I was mentioning CRM. We use [Same Desk 00:46:14] for that. Again, something that we always look for is that it’s highly interconnected with all the other apps and tools that we use. We have [inaudible 00:46:29] that nowadays, you might find amazing tools, but it’s very hard to make them speak to each other. That’s- for us, that’s the key when we are bringing a new system onboard. I would say that we use [Same Desk 00:46:37]. Then we use also [Opta 00:46:39] to manage all of the accesses and passwords in the company. Then we use … what else. Quickbooks, the Cloud version. I don’t know. It’s all Cloud-based, well, as I mentioned, [inaudible 00:46:58] Shopify. Yeah. Those are the key ones. In any specific area of the company that you look, you see a Cloud-based app that we pay by position, basically.
Felix: Awesome. Yeah. What are the- what are the plans and what kind of goals do you have for the next year for Hickies?
Gaston: Yeah. Our idea is that now that the company’s growing, is to be more out there. Is more people learning about us, more people wearing it. I love when I see people on the streets wearing our product. Now, some companies will start launching food [inaudible 00:47:43] directly from the factory with our technology for installs. That’s going to be a big step for our company, and that’s going to happen in 2017.
Felix: Amazing. Thanks so much Gaston. Hickies.com, again, is the website. H-I-C-K-I-E-S.com. Anyone else you’d recommend that listeners check out if they want to follow along with what you guys are up to?
Gaston: No. I think that that’s the best place. That, combined with all of our social media, that’s the best way to keep track of what we are doing.
Felix: Awesome. We’ll link all that in the show notes for anyone who wants to check that out. Once again, thank you so much for your time Gaston.
Gaston: Thank you Felix. It was great.
Felix: Thanks for listening to Shopify Masters, the e-commerce marketing podcast for ambitious entrepreneurs. To start your store today, visit Shopify.com/Masters to claim your extended 30-day free trial.
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