The International market is often forgotten for most American e-commerce sellers. The idea of having products shipped to Europe scares most sellers due to shipping costs. Hendrik Laubscher advises against this hesitance and has come on our show to discuss alternative tools and marketplaces for efficient international selling.
In the Tenth episode of Skubana’s E-Commerce Mastery Series where we invite experts of their respected fields to share their best practices for success, our host, Dr. Jeremy Weisz of InspiredInsider.com interviews Hendrik Laubscher of Electric Thoughts in a Digital Era and PriceCheck.
Some essential lessons include:
Identifying who you are selling to and your development strategy for your business
The most important metrics to track for your business
New, up and coming markets to explore and expand your business internationally
Essential software to research into competitors and growing markets and what to look for
Strategies to selling and expanding internationally such as South America and the U.K.
Raw Transcript: Hendrik Laubscher of Electric Thoughts in a Digital Era
Jeremy: Dr. Jeremy Weisz here. I’m founder of InspiredInsider.com where I talk with inspirational entrepreneurs and leaders like founders of P90X, Baby Einstein, Atari and many more and how they overcome big challenges in life and business. This is part of the Skubana e-commerce mastery series where top sellers and experts teach you what really works to boost your e-commerce business. Skubana is a software platform to manage your entire e-commerce operation. Today, I’m excited to have, all the way from South Africa, Hendrik Laubscher. He’s a development strategist for PriceCheck, which is South Africa’s leading online shopping comparison service. Top e-commerce professionals look to his thoughts on e-commerce trends and industry developments, and Hendrik, I was reading through a lot of your posts, you know, people who follow Hendrik include staff from the largest market place in Holland, Bolle[SP], Amazon and many, many more. Hendrik, thanks for joining me.Hendrik: Jeremy, good afternoon. It’s nice to be here.Jeremy: Yeah, and so I want to hear about how you got your start in e-commerce. But first, I want to talk about some topics that are top in mind for you and top in mind for sellers. One I have written down, when I asked “What should e-commerce sellers know and what should we talk about?” And you said “Number one is strategy.” So, what did you mean by that?Hendrik: Jeremy, the reality is that I think with e-commerce, you have to be very clear from day one what you want to achieve. Is it that you want a comfortable retirement package? Is it that you want to basically create a multi-gazillion dollar business? Is it something that you want to basically exit out of and become extremely rich? For me, the reality is, when I dealt with merchants on a daily basis, and even now when I read about big businesses, I sometimes wonder how many people actually know what’s six months down the line, what’s five years down the line. Yes, I know the internet changes really quickly. I’m firmly aware of that – I am sitting in South Africa after all. But the reality for me is, I don’t think people think about it. And then you get into situations where the strategy then dictates that they don’t properly explain for a proper you works or a nice looking website, or they are going into the wrong industry.If you want to compete against an Amazon or a Takealot here in South Africa, there is no point in being horizontal and spending like thousands on stuff. You’re not going to win. Those guys are like…they’ve got a lot of cash and they basically will beat you. However, if you box cleverly and your strategy is that you’re going to go into a niche that you know well, one. Two, that you are really all into it. You eat, sleep and drink it. For me, that is how you win. A very good example of what I’m thinking, while I’m talking, is in Cape town there is a start-up, it’s mostly, I think it’s a one-man operation. And he was one of the first to realize that South Africans have a huge fascination with proper coffee. Yes, I know everybody in the U.S. talks about Starbucks and la la la la la la. Some of us actually enjoy grinding our own beans, putting in to the whole process. And in a space of six months, I saw him basically start with literally nothing, to being in a position where he is the number one seller in his vertical.Number two, he has customers basically not going to large malls, which is the norm just by the way. So, in South Africa, people actually still get in their cars and go to a mall. Unlike in the U.S. where Amazon Prime, basically click, click, and it’s there. So for me, that is one of the things that is symptomatic. He was strategic from day one. He did his market research. His strategy was he was going to be lean and mean, and then ultimately he now has a sustainable business. Yes, I know he can potentially make a bad decision. We all can do that. But I think if you’re any size business and I think the exception to this rule, if you’re in a Fortune 500 because then you’re dealing with, probably playing with public money to a degree.Jeremy: Yeah, let’s assume most people listening are not in that situation.Hendrik: The reality is if you’re anything below the Fortune 500, you have to think very clearly about where you want to be in six months, where do you want to be in two years’ time, and then for the really, really forward thinking, the five years. I’m a big fan of the six months to the two years because that will basically lead you to being really lean in terms of your thinking, but also it will be meaning a sense of you know what your opportunity is.Jeremy: Yeah, I mean to give us an idea, that’s really important. And especially working, you’ve worked with a lot of sellers. You do a lot of research and a lot of work with PriceCheck. What is PriceCheck to you as far as planning for six months and two years?Hendrik: So, I’ll give you the bare essentials. Unfortunately, as you can imagine, by working for a nice corporate, I have like a…Jeremy: You can’t give away all the trade secrets.Hendrik: …no. I have like 12 pages of NDAs that I’m not allowed. So, generally…Jeremy: We’ll start with the six months, when general…Hendrik: Okay, so six months, what we’ll basically do is there will be strategy meeting where all the heads of department will basically provide the CEO with the view of what they believe their part of the business is going to look like in six months. So, that’s step one. Step two, you will then have to negotiate with other stakeholders because you’re dealing with limited resources. It’s not like we are a company of 500. We have 45 people on staff. Thirdly, we will then also need to ensure that whatever thinking you have aligns with business outcomes. There is no point in you wanting to do something that’s not going to make any money.Jeremy: Right.
Hendrik: And then lastly, are there any indirect relationships with any other departments for an outcome? When you are in a start-up, even if you’re owned by a corporate like we are, the reality is you want to ensure that every resource that you have is basically used as well as possibly as you can. So, if it means that three departments have a similar-ish outcome, then obviously that’s going to take precedence over something that has only one department on it. So behind the scenes, there are negotiations, there are people that go into meeting rooms and one would think it’s almost like determining who’s going to have the home finals in the World Series or…so, that is what it is. Then, from there on, there is a whole document drawn up with basically what was decided. It’s normally a half a day so it’s a rather long process, but at the end of it, it leads to everybody being able to know where we’re going.
And in all honesty, I think the reality is most businesses, Mom-and-Pop shops, the one-man operations I mentioned, any merchant, I believe, should be thinking about that. Obviously you’re going to need to ration your funding for certain activities. You’re going to think about “Where am I going to market?” But I think also, Jeremy, the thing is with six months, you have to think about it. What happens in six months? Is it like festive seasons? For example, now we are three months away from festive season. What does that mean? So, because in most cases, every part of a year has a specific activity. So, in e-commerce in South Africa for example, your months of October, November, December are primary months for revenue generations. So, you can’t have any big projects. It’s the same in the U.S. It’s the same in Europe. It’s the same in Latin America. It’s the same in Asia. So, you have to think about it like that. So, that is the six months. I know it’s as vague as anything…
Jeremy: No, let’s talk about this…
Hendrik: …but that is…
Jeremy: …Let’s make it maybe not so vague for a second without you disclosing anything. Because we can see what wins out out from PriceCheck by going to the site, right? So, anything that people negotiated that you decide to go with, we can go on pricechek.co.za and see what’s there, right? So, what on there surprised you that worked so well? That you thought, “Ooh, that person’s negotiating. That’s not going to work so well,” and it really worked. And on the flip side, what has not worked as well that you thought was a slam dunk?
Hendrik: So, if you go onto the home page right now, and we generally get traffic the entire day, for the record. The one thing that’s been really interesting from a strategy point of view but also from a business point of view is you’ll see on the front page, there are catalogs basically of offline retailers. Our business was one of the first to realize that in an emerging market, your opportunity is much more in offline. As I mentioned, South Africans, we do like to get on our cars and make a day of it at the mall. Goodness knows what everybody does, but they do. So, that’s the one that’s surprised me the most because, the reason why it surprised me was suddenly you’ve got CMOs from very large retailers that were over the years not really keen to speak to us, because Price comparison was seen as dealing with the devil. And I’m saying, “But guys,”…
Jeremy: You’re putting all the competitors against each other?
Hendrik: Yes. But also with the catalogues on there, you’re now suddenly are telling people that look, you can see all the specials for the retailer. Number one, now the retailer is seeing that “Whoa. Now people are coming to my shop or to my shop in the mall via something that I cannot control.” So, some of the merchants were really clever. Others didn’t care, which is to be expected. So, that’s the one that fascinated me the most. The one that was really interesting from, not from a disappointment point of view. But I think the one that surprised me the most in terms of lack of performance, down below the middle of the page, you will see this “All Catalogs” structure. We all, our hypothesis was that lots of people actually go to those links and images and actually click on it. Well…
Jeremy: You mean like, for instance, for anyone listening, pricecheck.co.za, there is a category like cellphones and accessories, electronics, computer software, that’s what you’re talking about? Okay.
Hendrik: Yes. So, what I’m saying is…
Jeremy: So you thought that would be good?
Hendrik: Yes, but we were thinking that that’s going to be a major point where people start their journey with us. Well, that was not the case. So, the thing is, in any internet business, Jeremy, you realize that you’ve got to go with the times. So, the page that you see there on the front end, that is like, I think iteration number 25 to 40. I’ll let you guess the number because I’m not allowed to give you the exact number. But the reality is, it’s an iterative approach. And
[inaudible] 12:11
is one of the beautiful things about e-commerce in the sense that if you need to change your game plan, you can do it. You need to speak to a developer. You can change your assortment of products. You are not bound by a location or the amount of storage that you have. Whereas if you’re a retailer, you are stuck. You suddenly have a mall that you need to pay the rent for. You can’t do anything about your suppliers because you signed contracts with them. So, as I say, I’ll be the first to admit, when I started working for PriceCheck, I think I bought one thing in the first year on the internet in South Africa, and I felt like I was moving the world. These days, I generally, basically…the only thing that I don’t buy online is groceries because our groceries are not…it’s not on like the Amazon Fresh kind of vibes yet. But everything else, clothing, toiletries, all those, that I buy online because it’s easy and because I know where it is.
Jeremy: So, Hendrik, tell me this. So, if someone is looking at PriceCheck, obviously there’s a lot to be learned. There’s teams of people who come up with this. So, why should an e-commerce seller reinvent the wheel? They should look at Amazon, look at PriceCheck. What on there should other e-commerce professionals be doing with their site to help them sell more? Like obviously, I see, there’s a box that says “I’m looking for,” there’s a big search box there. What else do you do that e-commerce professionals should be, for lack of a better word, copying?
Hendrik: It’s not really copying. It’s more what you’re saying is, you make a point that I regularly make, and that is you don’t need to reinvent the wheel, in terms of what other e-commerce professionals should be doing, and that is that you should be spending time in your analytics. Be it Google Analytics, be it A-B Tests, be it multi-variant tests, all of those things. Because everything that you see on our home page has gone through multiple rounds of tests. If it’s not providing users with value, it gets taken away. I think sometimes, especially I see this with small operations, small like Mom-and-Pop shops in South Africa as well, and I’ve even recently seen it in the U.S. as well, people get stuck in a habit of saying that “My website looks like X, Y, and Z, and this is just how it needs to look.” That thinking needs to be taken, put into a box, and let’s probably give it to Elon Musk so that he can shoot it to Mars. Because the reality is that you need to change. Because if you don’t change, a competitor from some other part of the world, across the street, from somewhere is going to say, “Look, you know what? I see there’s something that’s inefficient. I’m going to take this, I’m going to use your customers to make a revenue for me.” And I’ve seen that happen, to be quite honest.
Jeremy: When we’re looking at this, there’s a lot of things to be learned, so people should check it out. But on the other hand, we were talking about…and a second thing. So, strategy was one, and then the second thing was, you said, “Jeremy, we need to talk about cash flow positive.”
Hendrik: Yes. A very wise friend of mine, a gentleman in Seattle, I’m not going to mention his name because he must probably do something…
Jeremy: Jeff Bezos. No, no, I’m just kidding.
Hendrik: No, no, no. I wouldn’t mind him being one of my friends, to be God-honest. But a very wise friend of mine in Seattle recently, I met him last year through a mutual introduction, and he made the point, and that is that, I’m not sure that sellers actually know the margins of the products that they’re selling, number one. Number two, I’m not sure that they know how much revenue those products are generating. In the sense of, he used a very simple example, is that you could be selling products with a margin of like 50 cents to 2 dollars, but your expenditure could be 5, 6 dollars per product. So, you’re never, ever going to make money. It comes back to my earlier point, and that is that you need to do your homework on what categories you’re going to sell. If you’re going to sell big-box items like TVs, washing machines, la la la la la, you’re going to deal with large corporates and retailers. But if you’re going sell, like the gentleman who has basically sponsoring the stock like Jared Reuben[SP] does, if you’re selling bags and pipes and things for coffee machines, vacuum machines, etc., those are industries that people use. We all do. We just don’t want to admit it to our friends in conversations. But at the end of the month, when you go into the bathroom, your toothpaste is going to be gone. It’s done. Gone. And then suddenly, it’s “Oh Geez. What do I need to do?” So, those are things that I feel merchants mess up.
On the second point, on the cash flow positive thing, I also believe that many start-ups believe that they can go the U.S. route and basically raise, like jet.com, 200 million dollars, much fanfare. The reality is, the guys that are really successful are in, by default, bootstrapped for a very large part of time. I was surprised when I was reading The Everything Store by Brad Stone on Amazon, where Amazon was run very, very lean financially for a very large part of time. Mr. Bezos only went to the public markets when he knew that he had attraction. I think the whole thing about profitability and sustainable businesses, for me, is a big thing because in South Africa, venture capital is extremely difficult to get, number one. Number two, you don’t want to be putting your own lifestyle – yes, I know your lifestyle is going to take a hit when you do a start-up or you have an e-commerce shop, I’m firmly aware of that – but the reality is that you need to be thinking about how that is going to influence your way of life. And you also need to know the metrics.
So, as I said, my wise friend in Seattle made the point, and that is, he said, and I quote verbatim, “I ask merchants before I even start talking to them, do you know your current year to date cash flow position? Can you answer that for me?” And his words to me was 95% of the merchants are not able to answer that. And that, for me, is an issue, because things cost money, number one. Number two, running a business in today’s day and age is not like you were doing it in the ’80s when I was thought between my parents. The reality is, the thing is business now is competitive. As I mentioned to you – previous show – that the competitors these days are no longer your neighbor next door, or the guy across the street. It’s now somebody in Lagos. It could be me sitting in Cape Town. It could be friends of mine in California. It could be entrepreneurs in São Paulo in Brazil. So you have to think from day one very strategically about funding and how you use that money. The funding I’m referring to is your own cash. Are you willing to max out credit cards in order to have a sustainable business? That is the question that I often come back to, and generally most people, especially in South Africa, are saying, “Mmmh, yeah. I’m not going to do that.” And that’s when you inherently you realize that this specific merchant is not going to be around in 18 months’ time.
Jeremy: Yeah, and I want to get to the globalization part because I know that was a big topic on your mind, but I want to stick with the metrics for a second. So, what are the right metrics? Obviously, the big question is “What’s your cash flow position?” If you don’t know that, there’s a big mistake. What are some of those right metrics people should be looking at on a daily or weekly basis?
Hendrik: So, let me start off with a metrics that, if you’re not a person in e-commerce but you’re basically in the conversation and make me walk out of the room, it’s the vanity matrix. You know how many Twitter followers you have, how many Facebook followers I have, how many Instagram. That, with all due respect, that is irrelevant. That is vanity metrics. That is designed for you to be spending money at those businesses. The metrics that really matter is, number one, is how many visitors come to your website? Number two, how many of those – of those visitors – return? Two. Three, how many of those returning customers of buying on a repeated nature? Those three metrics together will give you an idea of number one, “My site is well designed.” Number two, it will give you an idea as to you are doing the right strategy in terms of getting people to your website. And lastly, it will also ensure that you don’t need to spend an arm, a leg, and half a family on investment money. Because getting people to your site means that you’re going to have to buy Google Ads from AdWords, or from Google which is called AdWords, or you’re going to need to be creative in doing partnerships with other business.
The point that I’m trying to make is that you need to be on top of the data that is in your Google Analytics, number one. But I think also you need to be very clear as to what are your own internal metrics, in terms of “How much money have I sold today?” and “How much money do I need to sell in a month, to number one, break even and number two, to actually be comfortable?” That, to me, is the most important metrics. I’m not going to bore you with the other long ones, boring ones, Jeremy, because I think…
Jeremy: Well, just for a second, bore me with a few of them. I just want to know what’s inside your head. I want to get it out for a second.
Hendrik: So, lifetime value of the customer. How much are you paying to get that customer, to retain him, before he goes? The other one for me that I often get confused with, that I hear confusion over, is simple thing as “What is shopping cart abandonment? Do you have it?” If you don’t have it, good luck, well done. If you have it, how do you fix that?
Jeremy: Who doesn’t have that?
Hendrik: Well, I’m being honest. If you’re in the industry and you don’t have shopping cart abandonment, you have elves shopping on your site.
Jeremy: Right, exactly.
Hendrik: Every site has it, and it’s the guys that have fine technological ways to ensure that you basically force the customer to come back. Amazon’s a great example of this. They’re number one. Ali Express is another one on mobile – in our part of the world. They find ways to get you to open the app or to go back to their website.
Jeremy: Right. You mentioned a few things. I mean, some of fundamentals like traffic. Getting people to your site and then actually tracking buyers, and then lifetime buyers you can actually track to see what your cost acquisition is per customer. And you can actually spend money to get more people, and then some of the shopping cart abandonment. The people who are listening to this, Hendrik, are interested – I think – in those boring…I don’t find that boring. Those details that…an e-commerce seller needs to know those things or think about those things.
Hendrik: They do, but I think the way that I see it, it’s one of the elements. I was recently doing research on a very well-known website in India – not going to tell you the name because I don’t want to be thrown with legal actions and stuff – but the thing is…
Jeremy: I think I know who you’re getting at with this, but go on.
Hendrik: Yes. So, they did a major redesign of their app and they added an element to the app without any kind of thinking as to what the additional functionality is going to have on it. I see this online, most cases. And I was listening to a podcast this afternoon, also I’m not going to mention the name because they don’t pay me for affiliate fees, but the guys were all saying the same thing and that is that simplify, simplify, simplify. I often come back to my colleagues at work, they always claim and they laugh that I should be working in Amazon’s PR department. But the thing is, what I like about Amazon, it’s really simple. You do your search. You find your product. You put it in your cart and it’s done. There’s no millions of things. Yes, sometimes when you put that item in the cart, suddenly a little message pops up and says “Oh, Hendrik, hello. We’ve seen that over the last month, you had two other items that other people bought that were similar.” I’m honest, those generally lead to me spending more money on Amazonj.
Jeremy: Right. It’s like “People also bought this with this” type of thing.
Hendrik: Yes. That for me is how you get people out of the final…happiness. Because at the end of the day, Jeremy, e-commerce boils down to: it’s a transaction that leads to money being moved between two entities, and the one entity has it, and the other one has a box of goods that is delivered by a UPS person or a FedEx person, whoever, to say that “I’ve gotten whatever I wanted.” And I think sometimes we kind of forget about that. I think the fundamentals…in my weekly newsletter I wrote this week that I think for me, the one thing that makes me always just being in awe of Amazon is the fact that they do the fundamentals so extremely well. And I think as an e-commerce owner, you have to ask, even if you’re an executive, and that is “What are the fundamentals of my business? Do I know where there are broken links on my website? Do I know that all the functionality works?” By meaning, can people sign up for emails? Can people contact me? You’re going to laugh at this, but also in South Africa, we have a situation where sometimes you find a merchant on their customer service line, and they don’t pick up the phone. The phone just rings.
Jeremy: It happened with a company I called yesterday.
Hendrik: So, the question for me is, okay so why did I bother, number one, reading that site? Paid for it with my attention, but then why did you not try to help me? So, what is the natural thing we do, Jeremy? You close the tab or you make a mental note not to find that company again, and it’s business lost. That’s what people don’t understand. If you lose the business once, it’s gone.
Jeremy: Yeah. So what are some of the..this is interesting, because it sounds so simplistic but people are not doing these things. So what are other fundamentals you find people make big mistakes with, or don’t do commonly?
Hendrik: So, the things that people…so, fundamental number one, and this is going to sound awful. I promise this is not like a Saturday Night Live skit or something I’m doing. This is reality. Have you checked your front page to ensure that there are no spellings left, typing errors on your page? What is the reason why I bring that up? Is because spelling errors in general leads to people being unconvinced that you are a legitimate business. I know what I do when I see a spelling error. I close the tab and I go to another business because I sometimes, I feel more secure. Second one that makes me really sad, and angry at the same time is you sell products to people yet you cannot see an image of the product in a good dimension. So why am I going to spend $1,000 on a notebook but I cannot see how the notebook looks? Really? Third one that also just makes me really sad is you don’t adequately describe the functionality of the product. As I mentioned earlier, Chad’s Crucial Vacuum. I always, when I look for something, I normally go back to his website because I know he will clearly define which machine the good that you’re going to buy works with. Yes, there are some overlaps for certain products that he sells that I can get in South Africa. So sometimes, if I get tired of debating with the supplier of an item, I’ll just tell him, “Look, the fact is this part, I know works with da-da-da-da machine. Can you give it to me? Yes or no?” General case, by the case the supplier then knows that you know your stuff. Number five, or number four? I’ve lost count. I think number four is…
Jeremy: Four, yeah.
Hendrik: If people phone you or they email you, please, please, please, please, I beg all the owners of e-commerce businesses listening, please make an attempt to answer that email inside 12 hours. I understand that you are busy. I understand that you have a million things going on. But if you are unsure about things, I recently went through this with a purchase in Asia. I couldn’t speak the language. I was phoning and I was emailing and I wasn’t getting a reply to the point where I actually opened a window, I did a Google Translate of it, I put it into an email and then magically suddenly, my issue was resolved. It’s the same with phone calls. If I phone you because I want to know about the special that is running on your front page, please make sure that your staff know about it, number one, and number two, they can actually tell me what is the benefit of having it. The thing is, I know this sounds really elementary and simplistic, but these are the things that the really good companies, they do it by default. It’s routine.
Jeremy: Yeah. This should be a separate blog post on your site, Hendrik, like “Five things that make me angry.”
Hendrik: The other one that I’m just thinking of now, you were talking about the angry one, is when you deal with a website that is able to handle multiple currencies, make sure that your currency selector actually works. I was trying to buy a Bolle last week in British pounds, yet every time I selected the British pounds, it moved over to become Euros. Now, for a South African, that is a big deal because our currency is rather weak against both of them, and I want the best rate. I know that sounds really simplistic, but the thing for me is and my boss at work, basically what I do as a part of my day-to-day is I spend an enormous amount on PriceCheck, where I go look and I basically imagine that I’m a customer and I go and I do certain things because I want to make sure it works. I know it sounds simplistic but I think if you know that your stuff works, suddenly magically, conversions will start to occur. The thing is, you can’t make people buy from you. You’ve got to tell them the story as to why they’re going to buy.
Jeremy: I don’t know if you can disclose this, but I’m going to ask anyways. What’s the biggest thing you found that you realize on PriceCheck or another site…well, we’ll stay with PriceCheck…that you had to change right away because you were acting as the customer and you realized something wasn’t how it should be?
Hendrik: Right. So, the answer for PriceCheck is no, I can’t tell you. It’s unfortunately just like that. I’ll tell you a story that I did just before I went to Asia. I was looking for information on a particular brand of shoes that I wear. Just for the record, listeners, I am six-foot-four, and comfort is like majorly important. So, I was doing a search for a brand of shoes. I found a retailer that runs out of Bangkok in Thailand, but when I found the website, it was literally a product page that was basically showing up the entire email list of the specific merchant to the entire world and his brother. So number one, the privacy bells jumped up at me because there’s huge, huge legal implications. So as a good citizen, I politely emailed them, made them aware of this issue with a screenshot, and just told them that they have to fix it. Because if somebody is aware of this, number one, you’re never, ever going to buy from them again. Number two, yeah, that’s not good operating procedure. That’s bad. And what was nice was I got an email response saying, “Thank you very much for making us aware.” Non-automated. Non-automated. I’ll just reiterate that – it was non-automated, between to a human, which is amazing. He told me that “We are going to fix this immediately.” And within 24 hours, I got another email – I didn’t ask for it – that said, “Mr. Laubscher, thank you very much for contacting. We have now removed all of this data from this page.” He basically gave me the link to go have a look at it again. The data was gone, and from what I concerned that that was case closed. I think for me, stuff like that might seem really small and nit-picking, but the reality is that I always think back to one of my professors at university that said “It’s the small things in life that makes everything worth it. It’s not being loud and proud and shouting it from the rooftops.”
Jeremy: So, on that front, you couldn’t answer the other question because obviously you’re under a strict NDA. What is the most interesting trends you’re seeing now? Because you look at tons and tons of data. What’s trending now that’s hot, that people should know about? Whether it’s a marketplace or a category?
Hendrik: Okay, so in terms of right now, I think from a global point of view, all of the markets – the developed markets – are every second major super long and large retail and now wants to sell groceries online. It’s the U.S., Canada, the U.K., Germany, all the markets that are really important. That to me is really interesting because groceries have super low margins. It’s not a business that you can make a lot of money off it. It’s a lot of investment because you have got to have logistics, and also you have the potential where you can disappoint your customers because certain products are not in stock. So that’s the one thing. Marketplace that I find at the moment, that I find super interesting is Mercado Libre in Latin America. Major reason for that is that these guys have super amount of momentum. They’re also having to deal with a challenge that I don’t think many businesses will ever have to deal with, and that is that their business operation in Venezuela has basically been devalued by the local currency to the point where they actually need to write off a very large part of revenue as being worthless. So they are super. They are growing massively, and they announced earlier this week that they will be supporting BitCoin payments.
For me, any emerging markets where they are un-banked, in which I refer to as people that don’t have bank accounts, I think BitCoin is going to be a very interesting player in commerce. It’s totally, totally decentralized and also it provides a rational means for people to pay for things. So it’s something that I’m very slowly finding fascinating. So, I think the other thing that’s, it’s not really no longer a trend, I think it’s just a state of the play, and that is that you have to think about mobile first. How does your customer basically use your website or business on a mobile device? If you’re not able to browse on mobile, my boss generally likes to say, “Then basically you are dead and you are basically signing your own death certificate and you are committing corporate suicide.” And I’m a firm believer in that.
I think also the fact for me is, that the other interesting thing is on a totally unrelated note is that, South East Asia, where I was recently on vacation, Singapore, Thailand, Vietnam, all of those markets are getting a lot of love from investors because people are seeing opportunities there. And it’s for things like being able to buy a notebook. Things that me and you take for granted. In the U.S., Jeremy, you all most probably order from Newegg or Amazon or eBay. In South Africa, I’ll order from Takealot, and I know it’ll get to me. In those markets, people are still afraid of dealing with the internet because there is no persons to it. And also in Asia, you know your tU.K.tU.K. driver by name, you know your butcher by name. Now, suddenly there is this huge thing called the internet where there’s no people behind it, yet you want me to spend money over it? No, no, no. So, these are all things that I find interesting at the moment. And I think also, the fact is that also globalization is happening in a sense that companies are going global now. Amazon’s speeding up, going to markets, and in the past, ditto for eBay, ditto for Rakuten, ditto for a Rocket Internet, these are all companies, and I’ll even include my own employer, Naspers, also. We have accelerated the markets that we’ve entered because there are people there that are suddenly in the position to have e-commerce.
Jeremy: So, I want to talk about the globalization of e-commerce and what people should think about and do when they keep that in mind. Because like you were saying, the first thing when I asked before we started the recording was “What you want to talk about? What do you think we should talk about?” And the first thing out of your mouth was “Globalization of e-commerce.”
Hendrik: Right. So, when I speak about globalization, I think I need to be very clear. I am referring to, it’s currently called cross-border e-commerce, where people are able to acquire goods from outside their own markets. So, in my case, it would be I am able to buy from a merchant in Thailand, or India, or Russia, or Brazil, or wherever. And I think the reason why I mentioned it is that, it’s going to sound really weird, but I think… I believe the world has become a lot more flat in the sense that the internet has basically led to the large scale domination of the English language. So, language blockers in terms of requirements are less. From a very fundamental point of view, I also think that customers are beginning to realize that if they cannot get what they want, they can buy it on the internet. I’ll give you a very good example. I eat the things by the box. I love Swedish Fish, but I’m so sad because I cannot find it in South Africa. Retailers don’t sell it, so what do I do? I use a logistics partner in New York to basically send me a box to them and then from there on, it gets forwarded to me because I cannot get it locally.
Globalization also means that you have certain companies like Rocket Internet, Alibaba, eBay, Amazon, the usual pretenders, are basically saying, “Guys, we need to have operations in multiple countries because people are requiring us to be there.” To unpack that, the reality is that with the internet, boundaries and borders have gone. People are now expecting that if I switch on Amazon.com, I will be able to buy from it very easily. I hate doing this because I love them, but a site that really frustrates me really much is Bonobos. Bonobos does not ship outside of U.S. borders. And the reality for me is, I’ve been thinking about this, I understand from the business point of view that you don’t want to basically move your operations to a much larger scale inside seven or nine years of birth, but you’re cutting yourself off from business and potential from other markets.
Also, I think the reality is that we have a lot of knowledge workers that are moving between markets. In the seven years that I’ve had my current role, in various different positions, I’ve had the privilege to work with people that worked at Amazon, at Google, at eBay. Those are all people that are basically taking skills that they’ve gained in developed markets and they’re bringing it to developing markets. So, the fact of the matter is the excuse of “I cannot do this or I cannot do that”, that’s gone because these people have seen firsthand how Amazon for example bought multiple distributions centers across the place. Or they’ve basically seen firsthand how eBay has won in Germany by using good customer service. That’s very important, because the reality for me is that because of the skills transference that does occur, you’re on a situation where your customer doesn’t know that he is actually dealing with a local outfit that’s actually running in a city very close to him, because it feels world class.
Jeremy: So, what do you see, Hendrik, with big opportunities in U.S., Canada, Mexico or U.K.? Obviously you see in South Africa the big opportunity is Swedish Fish, right? So, what’s the big opportunity that people should be thinking about? Any that come to mind that you’ve researched, or trends you’ve seen with the U.S., North America, or U.K.?
Hendrik: So, those markets that you’ve mentioned are all developed markets. So what you’re dealing with is you’re dealing with a saturation of players. That’s not bad. It just means that from a big corporate, you cannot go in there. But from a small seller’s point of view, in the U.S. and Canada, you need to be on Amazon’s Marketplace. It’s no longer a negotiation. You need to be there. Secondly, from an eBay point of view, if you are a U.S. merchant, you should be thinking very highly of using the global shopping product, which basically, the long and the short of it, eBay provides the U.S. merchants with the ability to ship to, I think it’s 22 countries that they support. So, that is a great way for you to basically build business where you never had any business. I know of multiple merchants that do this, and all say the same thing.
In terms of Mexico, Mexico for me is, from a market point of view, I did talk nonsense, and that is a developing market. But the fact that Mexico is so close to the U.S. in terms of location basically means for me that I think we’re going to see a lot of U.S merchants go through all the procedures of creating businesses and entities and legal entities in Mexico, but they’re going to be going into Mexico a lot quicker because of the fact that there’s a lot of opportunity there. Rocket Internet for example, they started their operation in Mexico at least 18 months ago, and they basically say that they are saying anything between 50 and 70% year-on-year growth. I know Amazon has basically just also opened up the Marketplace in Mexico for U.S. sellers. I do know eBay has done the same. So the reality is, if you’re in one of those markets, you need to not sitting on the sidelines. You need to be very sure.
In terms of the U.K., the U.K. is an interesting one because it’s a super competitive retailing eco-system. Also, you have eBay and Amazon fighting it out with eBay, losing out because of the fact that they just don’t have the scale. But in England, you’ve got to think about how do you get your product to your customer really quickly? The problem is that because of the fact that traffic congestion is such a problem, I was in England, in the U.K. in June for a conference, and traffic is amazingly bad. Everybody uses the tube. So, what did the thought provokers at Amazon do? They basically started using closed, underground train stations as distribution centers. It’s stuff like that that some of the merchants might not be aware of it, but the impact that it has, Jeremy, is massive.
So, just to summarize, if you’re based in Canada or the U.S, you have to be on Amazon. You also have to consider using, joining eBay’s global shipping product because you are able to then go and do market research on companies without really spending too much money. Mexico, I suspect we will see in the next 18 months to five years basically become one of the most competitive emerging markets because of the fact that it’s close geographically to the U.S. The fact that it has Spanish and Spanish roots kind of gives me the idea that I suspect Mercado Libre most probably won’t be too far behind in fighting their good old friends from Seattle and from California. It’s a fascinating time because you are able to buy stuff from different parts of the world, and with most countries working on ensuring that their borders are very quick in terms of customs, you are able to get products really quickly to the customers’ door.
Jeremy: So, like you were saying, trends to pay attention to, you’ve mentioned before about groceries and that. But what else should people be paying attention to as far as trends go if they’re thinking about expanding their product line?
Hendrik: All right. You’ll enjoy this one because I was completely flabbergasted when I saw it. In the emerging markets, the baby category is completely exploding. It’s huge. Finding good economic baby goods is difficult. Almost impossible. So, that is one. If you’re a business that has operations in Europe, mobile phone batteries, mobile phone cases, that is an industry that’s booming. If you’re a south business base that’s looking in Asia, there you’re looking at just good toiletries. I had a huge issue finding deodorants. I know that sounds really weird, but these are all things that you see because you are on the ground. Also, I cannot, unfortunately, discuss Africa because that’s where I work, but the reality is that if you look, I come back to the point that I made right at the beginning of the discussion, and that is that if you do your homework on a niche or a vertical that you believe that you have a lot of knowledge on, in most cases, they are markets that are similar to yours in which you find yourself, where people are in need of that specific product.
Mobile phone covers in the emerging markets is huge because everybody has a mobile phone. I was in the car this afternoon on the way home and I saw a postman. In South Africa, they still use the bikes unlike the USPS people that they have the nice cars, and he was speaking on the phone while riding his bike. That is just how it goes. So the thing is, I always say look at the way the really large competitors in your market are going. Have a look at what Amazon’s doing. Have a look at what eBay is doing. Don’t look at China. Please, for the love of humanity, leave the Chinese. Just let them be. They are a different kettle of fish. I’m not being nasty, I’m just being factual. But if you are a retailer or an e-commerce business, you have to think about using something like eBay global shipping because then you’re able to enter new markets without having to spend like a gazillion dollars on it.
Jeremy: I know you get a lot of top e-commerce professionals following your blog, and you talk to people on a regular basis. What are the most common questions that you get from sellers and other e-commerce experts?
Hendrik: So, from sellers is “What markets would be great for my business to go into?” Generally, this is from U.S. customers, U.S. sellers. “I’m thinking about where to go next.” From other executives…
Jeremy: What do you tell them?
Hendrik: It’s very dependent on the items that the merchant sells. If that is literally a case-by-case situation. And then you also have to look at the fundamentals of the business, because if you’re moving to a market place that is far logistically and geographically from you, you need almost a new team to run your business in another part of the world. It’s not as easy as people believe. In terms of what e-commerce execs generally ask me, because I am in South Africa, we generally get asked that we need to explain what we see in terms of mobile commerce to them. Mobile commerce has basically exploded in South Africa to the point where it’s amazing.
Also, I get asked “What are market places that are not well known?” and there’s quite a few of them. Stuff like there is a market place in Tokyo that I always like going to look at, it’s called [inaudible 00:53:29]. and they are basically a hybrid of a marketplace and a classifieds business. Then you have Konga in Nigeria, which is absolutely flying. Then you have, in Poland, you have the Allegro Group. In South East Asia, you have Lazada which in my opinion is the most undervalued Rocket Internet asset, which I believe is going to be a big deal. And then also, you get asked “Have you seen the entrance of an Amazon or an eBay or an Alibaba in your region?” And I’ll be honest, the guys come out to Africa, they generally are looking to become investors but by default, we don’t see them because our markets are way too early for them.
Jeremy: So, talking about some of those companies, Hendrik, some insights in competitive strategy, you know Jet, you talk about in your blog post, eBay, Amazon, Tictail. Talk about some of the companies and then some of the insights in competitive strategy. Maybe start with Jet.
Hendrik: Right. So, Jet is a really interesting one for me. I think it’s a very bold bet of one individual called Marc Lore who wants to settle a score against his old boss, Jeff Bezos. Yes, I know he has basically made the press corps that it’s not the case. I think if one is really clearly, he’s going after Amazon Prime and also he is looking to change the eco-system in terms of ways businesses. And I think for me, the question that I have over Jet – it’s a serious concern – is I want to see whether they can actually generate the scale that would require for them to be profitable. I am, at the moment, I am aware of the nay-sayers which believe that from a revenue generating point of view, only charging $50 a year for membership, I don’t think that’s profitable. I think that’s a big problem. If there’s one thing that I’ve learned over the years, Jeremy, and this is going to sound like I work for their PR department, but Amazon by nature enjoys…they know pricing points really well. And if you’re trying to out-gun Amazon on pricing points, you either need to have an inordinate amount of money or you need blind luck.
My thing with Jet, also the other – at the moment – is, I know there have only been around for let’s say a quarter, but I’m also waiting for independent numbers on their business. I get really concerned when I see numbers from the back partners, like ChannelAdvisor and commerce help, the guys that work with him. I have no problem with those businesses – let me just say that. They’re both great businesses but I, as a rule, when you’re dealing with market places, I want a third party that’s not aligned with the business to come and tell me what the numbers are. That is how then I know it’s the real thing. Tictail for me is one that is very interesting. I think it’s really bold. I think it’s an interesting play because number one, they are trying to play in a space that I think is super competitive. It’s the whole platform e-commerce, i.e, Shopify or…what’s the other one…Bigcommerce. But I think what makes Tictail interesting for me is the fact that I get the idea that the founders of the business are looking to basically leverage the fashion / creators industry. And with the exception of Etsy, there isn’t really a great place for people that create things to actually solve. Maybe I don’t know about it, but as far as I can see, you have Etsy in the U.S., and then outside the U.S., it’s like a million potential customers.
Jeremy: Yeah. And Tictail is based in Sweden?
Hendrik: Yes. Them, and the payments business Klarna are basically the two very interesting Swedish e-commerce players. I think for me, the question with Tictail is “Are they are able to generate scale in markets that are at the moment still learning about ‘How do you sell goods that are made?'” That is kind of a different animal. The thing that makes Etsy such a difficult business to compete against is that they’re sitting on reams of data, but also they have a very loyal user base. And a loyal user base is…there must be an incredible value proposition for businesses to leave them. However, in saying that, I want to give Tictail the benefit of a doubt, unlike Jet, because I think just for the scale that Tictail and the opportunity. And also they’ve become, they’ve basically done a lot of stuff below the radar and I think they could be a big deal. Jeremy, what are the other companies you want to talk…
Jeremy: So, Amazon, let’s talk about Amazon for a second, and competitive strategy with Amazon. What should U.S. e-commerce sellers in particular be doing to gain more market share on Amazon? To selling more on Amazon?
Hendrik: I was actually hoping for a difficult question. That’s arguably one of the easiest ever. It’s called the answer to your million dollar question, Jeremy, it’s Fulfillment by Amazon. Amazon has basically ensured that if you want to win the buy-box, then if you use Fulfillment by Amazon, then basically, you have a better chance at winning it. It’s actually quite genius. Amazon is a Rubik’s Cube of businesses, and the fact of the matter is that from a market place point of view, 3p / Marketplace is a huge part of their business. So, my recommendation from a small merchant point of view, even a merchant that does in excess of, let’s say, 10 million dollars worth of sales a year, is you have to use Fulfillment by Amazon. And also, you’ve got to be really sure that the products that you house inside Amazon’s distribution centers are all things that actually sell, because Amazon is basically making it more difficult for sellers to have non-converting products in their warehouses. It’s one of the badly kept secrets, but the thing is, Amazon is an efficiency behemoth. If they want basically anything that is in their warehouses to be sold within seven days – and that’s a guess. But from a merchant, if you want to win the buy-box, that’s gain the attention of the shopper from a market place point of view, you have to think about Fulfillment by Amazon. It’s no longer just a “nice to have” feature. It is the lifeblood of businesses. You have to do that. It’s a no-brainer.
Jeremy: So, anything else that you tell sellers, advance level. Like, “Okay, I’m doing Fulfillment by Amazon, what else should I be doing that maybe most people don’t know about?”
Hendrik: This is going to sound really fundamental and simple, but do you know the rules of all the categories in which you sell? I think I see at least one sad story a week on some blog in the middle of nowhere about a merchant claiming that Amazon’s basically suspended their account because of the fact that they broke a rule. Also, if you are a seller that’s using Fulfillment by Amazon, you have to ensure that whatever you provide Amazon is clearly marked. By clearly marked, I mean you have to ensure that the goods you have are legitimate goods. You would’ve most probably seen on my blog, I have a very stringent belief and it’s a reality check as well that I think all the global marketplaces, all of them, have one huge challenge. And at the moment, I’m not seeing any of them actually, with the exception of Amazon maybe, fixing it. That’s the whole knock-off / fraudulent products. So, if you’re a super-seller that’s selling like millions of dollars, you have to ensure that you basically mark your products. That the lot that you provide Amazon is the products that you claim it is. You cannot have unmarked goods because then you’re basically putting your business up for the situation where you can be basically accused of selling fraudulent products, and that is a messy, messy process. Because a lot of the merchants sometimes take chances with para-importing and all those kinds of things.
Jeremy: You’ll get kicked off and everything.
Hendrik: Yes. So, for me that is the most important thing, and I think the other thing is, also is, I say again, I reiterate the point, and that is that you have to ensure that from an advanced level that you are using Fulfillment by Amazon for your top selling products that are generating revenue. You cannot, cannot, cannot, cannot use it for things that are not making your revenue. It doesn’t make sense because Amazon basically makes money off Fulfillment by Amazon, but that is ridiculous.
Jeremy: So, Jet, Amazon, Tictail, Rakuten, you’d say it’s competitive strategy.
Hendrik: Rakuten is a funny one. I think I’m still nine months, or I’m ten months into the year, and I’m still understanding what their strategy is. Rakuten is a big deal in South East Asia but it’s almost a no-name in the U.S. It’s also the ditto in Latin America. For a U.K. based seller, it’s well worth actually having a look at Rakuten but in general, you want to be making sure that you are selling products in their most probably categories. And from what I gather, it’s generally the consumer electronics that are the thing that sells well on Rakuten. The thing is also, you also have to do your homework in terms of how Rakuten actually bills you, because their whole billing strategy in terms of seller costs. Rakuten does it completely different than anybody and they actually have a quarterly cost instead of a monthly cost or a yearly cost. So from a financial point of view, be very sure that your investment in Rakuten’s actually cash-flow positive. Otherwise, it’s not worth it.
Jeremy: So, what other marketplaces should U.S. sellers be looking at besides the ones we talked about?
Hendrik: Right. At the moment, the one that I know is a huge sticking point, and I know U.S sellers have mixed emotions about it, but I think…I’m very strongly of opinion that Mercado Libre in Latin America, which basically will allow merchants – U.S. sellers – to sell in Brazil and Mexico, is definitely worth a look. The thing that makes Mercado Libre such a monster is that they have their own logistics business. They have their own payments process. So, if you get into the business and you start making a lot of money, you will become a very large part of their business. Where else should U.S. merchants be looking? I’d also say the Middle East. Middle East at the moment is seeing rapid expansion. The business that I’d have a look at first is called Jado Pado, J-A-D-O P-A-D-O. And then the other one is also that’s interesting is Souq, but Souq doesn’t allow international merchants yet.
The other market that I would also consider U.S. sellers to look at is Eastern Europe. The Czech Republic is huge. It’s really competitive, but they basically, as somebody that works with me said recently – and I’m not going to basically mention who he is – but he said that it does feel to the customers that they get the leftovers from Germany. So, if you are able to provide a good service and good products, Eastern Europe. And then, this one is going to surprise you because it’s even surprised me, but I am still of the opinion that if you are in it for the long haul, that Russia is a market that’s really worth it. Russia has a very large retailer that also has a market place. It’s called Ulmart. It’s U-L-M-A-R-T. And these guys have basically in the last 12 months raised like almost 400 million dollars. They’ve said the right things, they’ve done the right things and also they’ve basically come from behind and basically become market leader.
And then obviously, the thing with Russia and South East Asia and Australasia is that you are dealing with logistical and time zone differences. So, I’m of the opinion that basically U.S. sellers basically take a large map of the world and have a look at time zones, and then determine from there on what do you feel comfortable with, in terms of communication differences, staff in different areas? Because Latin America is close by. Europe is close by. But as soon as you move into Eastern Europe, Middle East, South East Asia and Australasia and Russia, you’re now starting to talk major time differences. It’s the same with South Africa as well. As I said, the time now is like quarter to 11 at night, 10:45, and there is a time difference. Do you really want to get email from somebody now where you are like almost at the end of your work day? It’s all these little practical implications that you have to think about.
Jeremy: What about resources, Hendrik, that you recommend? Whether it’s software, or like you mentioned cart abandonment. You mentioned a lot of different things and there is different software solutions. What have you found with your research that people should be looking at?
Hendrik: Software, and for the record, let me just start before I say this, I am not paid one single dollar in affiliate costs for any of these. These are just the products that I have used and I kind of really like and also that they get the job done. In terms of customer behavior on your website, you want to use a product called Hotjar, H-O-T-J-A-R. They have an amazing tool that basically you can look at user behavior on your website, what people do on your website. Secondly, another one that’s also quite popular is Optimizely. They will provide you with the ability to test, do A-B tests on certain words, on certain buttons, and stuff like that. That’s very important.
Jeremy: Yeah, I’ve used visual website optimizer before too which is, I think, their competitors.
Hendrik: Yes. Then from a cart abandonment, I would look at a product called Formisimo. It’s a business based in Europe and what they basically do is they, in my mind, they’re arguably one of the best, if not the best, agency / business that looks after cart abandonment.
Jeremy: What’s it called?
Hendrik: Formisimo, F-O-R-M-I-S-I-N-O. So, that’s them. But I think also with cart abandonment, you’ve got to have a look at something like RichRelevance which is a personalization software. For the record, sellers, this is going to be costly. So, a license will cost you six figures, but if you’re serious and you’re making a lot of money, this is the kind of thing that will basically make you stand out and ensure that you basically have repeat customers buy things that they don’t know of.
Jeremy: Any other tools or software that e-commerce professionals should be looking at?
Hendrik: Yeah. There is another one that I, and this is just a disclaimer, my employer has majority shareholding in this one. I don’t know the owners or the guys that are behind it, but there is a analysis tool called SimilarWeb. It’s amazing. It’s based in Israel. It’s a great way for business owners at a monthly cost to be able to look at where competitors are getting their traffic from, how they’re getting their traffic. It’s basically a nice, subtle hint at one of Amazon’s businesses called Alexa, which is not as accurate. Sorry, Mr. Bezos, but I just… that’s not…
Jeremy: SimilarWeb, you’re saying, is much more accurate?
Hendrik: Yes, and be honest and being…what’s really nice is that the insights are pretty accurate.
Jeremy: What have you seen with your research of SimilarWeb that was interesting? You’re smiling. There’s some good one’s there. That’s what I love about video. I can see that little smirk, like there is something big underneath what you just said.
Hendrik: Yes. I think the one thing that surprised me on that one was just how dominant AliExpress is. AliExpress is truly dominant in Russia, in Brazil and in Europe, and in most markets, even in all the markets. It’s basically flying below their radar. So that’s one. And then the other one that I found really interesting was, there’s this new market place app that everybody is talking about. It’s called wish.com. Wish basically has you can buy stuff from China and wait half a lifetime for it. It’s cheap, but they are super popular and basic