- Joonas Gebhard
- Founder of the Kawaii Group
- Started in 2014
- Moved 2008
- Early in the influencer space
- No taxes
- No profit taxes
- Super cheap shipping
- Close to China
- Subscription box
- Higher LTV
- Drip – Get a free demo of Drip using this coupon code!
- Spark Shipping – Dropshipping Automation Software
Joonas started his first business when he was 15 years old and his first e-commerce store around 2004. Now Joonas runs 2 online stores and 2 subscription boxes from Hong Kong. He sells cute Japanese stuff to kawaii fans worldwide.
In this episode of the Business of eCommerce. I talk with Jonas. Gebhart about running an eCommerce business in Hong Kong. This is the business of eCommerce episode 136.
Welcome to the business e-commerce to show the helps eCommerce retailers start launch and grow their eCommerce business. I’m your host, Chelsea [inaudible] and I’m here today with Jonas hired. Jonas is a founder of the quiet group, the company that he launched in 2004 in Finland. He since moved to Hong Kong and has been running it their sentence, I assume in the show today to chat about what are some of the benefits and difficulties running an eCommerce business in Hong Kong. So, Hey Jonas, how are you doing today? Fine. Thanks. How are you? Good. Great to have you on the show. It’s a, where are you? So you’re still currently the founder of the quiet group rice. All right. And you’re not currently in Hong Kong about right.
Corona, evacuees, and currently in Finland flew here in late, late January.
Okay. So are, but your home still is Japan, but you’re just kind of Finland.
Yeah, we live in Hong Kong, but we have a apartment here in a house.
Okay. Gotcha. And you’re originally from Finland, Finland. Okay. So I’m curious, can I talk about the background of how you got started? And so first actually the quiet group I was looking through your products, but what exactly, how do you describe what you guys sell?
We sell everything cute and Japanese cute, like a hello kitty. And character’s like, hello, kitty and everything. Pink. Fluffy.
Okay. And what markets do you sell into?
Mostly North America and Europe.
Okay. So you and you sell them and where is it? I mean, just a few questions here. Cause this is a very different, most folks are either in North America or Canada and they’re selling to their local market, but you are in, did you start the business when you were in Finland or in Japan?
Yeah, we started about 15 years ago in Finland. So we had a few physical stores and then we sold, sorry, Hong Kong. I should have said Hong Kong. Sorry. Yeah. So we sold from Finland, Finland. We imported the stuff to Europe and it’s just impossible to sell from Finland to any other countries. It’s too expensive. Everything from shipping and labor and storage and all the fees. So then we moved the business to Hong Kong about 10 years ago. So now we are able to sell everywhere in the world and beyond the same, same basic like cost structure as all our Chinese competitors and other Asian companies.
So you’re you moved the business to Hong Kong, but I wanna make sure I understand. So you move the business to Hong Kong, but the products now are being distributed from both Finland and Hong Kong and North America. Where do they actually, where, where is it? The distribution come from?
We S we ship everything from Hong Kong. We have a warehouse in Hong Kong and everything is shipped
So direct, like basically Hong Kong to North America and Hong Kong to Europe now. Yeah. Yeah. Okay. How long ago did you start this business?
This one we started about 15 years ago. Okay. So 2004, if I remember correctly.
So you basically started like the opposite, like the anti dropshipping business, instead of doing drop shipping, you kind of went with the drop shipping. You kind of went there and you’re shipping the other way now.
Yeah. I don’t know if there was, there was dropshipping even when we started, but we have always had our own warehouse and on shipping because we have so many products, like maybe 5,000 skews. The, we are not able to have a three PL or, or another company to handle that.
Okay. So are you sourcing, so I’m trying to understand, so you source them all locally in Hong Kong and Hong Kong and China,
You buy from many countries, most of the pan, but of course, some of the, like the custom products we make for ourselves are coming from China. And then we buy from Korea, Thailand.
Okay. And then shipped them all to the warehouse in Hong Kong and then distributed. But you’re taking orders from all over the world and just distributing to wherever, basically North America.
Yeah. It’s bad because the shipping from Southern China and Hong Kong is so cheap, we offer free shipping for every country everywhere. So it’s basically, basically everything we ship, we offer free shipping and we don’t even carry any products. That would be more than two kilos because then we would not be able to ship them for free.
How do you do that? That seems that’s amazing. Actually,
We have, we just have to calculate the shipping prices into the product prices. It’s a, basically it’s easy but easier for customers to see that the shipping is free. And then if they compare the product prices, our prices might be a little bit more expensive than some competitors, but still we offer fresh
Today’s episode is sponsored by drip, drip. It’s a world’s first e-commerce CRM and a tool that I personally use for email marketing and automation. Now, if you are running an eCommerce store, you need to have drip to try. And here’s why drip offers one-click integrations for both Shopify and Magento. There’s robust segmentation, personalization, and revenue dashboards. To give you an overview of how your automation emails are performing. One of my favorite features of drip is the visual workflow builder. It gives you a super easy way to build out your automation world visually and see the entire process. It lets you get started quickly, but also build very complex automation roles. It’s powerful, but also easy to learn. Unlike a lot of email tools that offer the same type of automation to get a demo of drip today, you can go head over to drip.com/boe. That’s drip.com/b O E now onto the show. So how did you first get into this? Like, were you in Finland at the time and you traveled to Hong Kong? The same site?
Well, a lot in Asia, like late nineties, early 2000 and everywhere we see the product, the product is what we sell. Now. We see them everywhere, but they were not available in Europe. At least, maybe some cute stuff for younger girls, but nothing like Japanese style cue, where it’s very different from what we are very used to. So that’s why we started that business first and then slowly, slowly moved to online also because we started with a physical store. So it’s, it was completely the other way around.
Oh, so you started out with a brick. So you had a brick and mortar in Finland and you are just importing products. Wow. Okay. Yeah. And I’m not that good idea. Yeah. Well, I mean, this was also in 2004, you said so slightly different. I guess the tide was already changing at that point, but
Yeah. And it’s so, so expensive to run an actual store with like inside a shopping mall with all the mandatory opening times. And,
Yep. So when did you decide, so started in 2004, but when you decide, okay, it’s time to actually get rid of the brick and mortar. And then when did you decide to actually move to Hong Kong
Around the same time with the, the, the economic downturn 2008, we decided like we are going to close the physical stores and just focus on e-commerce because then we could already see that eCommerce. And if we could sell worldwide, it’s going to be much different than selling to a small market of 5 million.
Okay. So I moved in 2008. All right. So what, how did you decide to move there? Cause I mean, most people, I mean, I think one thing, right. It’s close to the physical location. I get that part, but all of a sudden, like moving where you moving there for distribution reasons or just to be close I dunno, like to be in Asia itself, like what was it, what was the kind of the thought process? Like?
I always liked Hong Kong a lot. It’s like a super nice city with like, and it’s easy. Everything works in English and then it’s a logistics hub. So basically you can import everything from any country in the world. Are there are almost no restrictions, no taxes, no import fees, no duties, nothing. So we could use Hong Kong as a hub and be basically cheaper shipping from Hong Kong tan. If we were to sell our Japanese products directly from Japan.
Okay. Interesting. So you kind of picked up then you had a family at the time, everyone kind of just moved with you and back then, I only had girlfriend
Okay. So less of a, less of a self, I guess. Yeah.
When, when, if, if you know the finished winter it’s Hong Kong is a much more sun and sun and warmth.
Yup. And how big is, how big was the company then and how big is the company now? Kind of account?
Oh, back then. We only had one employee now we have 15,
So 15 all in Hong Kong or Philippines? Hong Kong. Japan. Okay. And is it customer service? Is it warehouse? What kind of, what’s it look like
In Hong Kong? We have like a photograph her office manager, warehouse people in the Philippines, all the customer service, social media copywriters in Japan, sourcing and buying.
Yep. Interesting. Okay. Wow. So what have been some of the biggest challenges to doing this? Cause I feel like, I feel like this is a very atypical eCommerce business, so it’s going to have totally unique challenges.
Yeah. Like maybe the biggest challenges were like starting to gain traction in the U S because it’s, once we, once we got the first customers and like started like that, the word started spreading in our niche, then it became more easier. And we were able to benefit a lot from the early days of influencers. Maybe that was the biggest challenge because we are in the beginning of our customer base bus only in Northern Europe, basically.
So it took a while to break into the U S the North American market, basically. Yeah.
It was almost before Facebook marketing before Instagram. So it wasn’t that easy to have the word word out.
Yeah. So how did you actually get into the U S market at that point? Was it all kind of just PVC or, but I’m guessing no, one’s searching for it’s tough. Right? Cause back in the day it was all kind of, I’m trying to Google product ads. I think it was called at the time when you go that far back, but like people had to be kind of searching for your product, like cute Japanese products and unless they were searching for that, you couldn’t just find them like you can today. You can just show them on Facebook and use an influencer. So how will you doing it originally?
I think the biggest boast we got was from the influencers. At one point we sent hundreds of basically sample products every month for like two or 300 every month back then all the bloggers and YouTube, YouTube stars were small and did not expect any payment. They were happy to receive our products and do the reviews. So that was, that was one of the biggest, like early boosts we had. And now it’s more Facebook and Google and email everything combined.
Okay. So you were very early in kind of the influencer you were in the influencer world before it was, they were called influencers. Yeah. There has
Always been like these people who are fans of the Japanese pop culture, like anime, manga and Japanese games. So we just, we just have a small niche in that, which is the cowboy cute stuff that we sell. And that has, that’s also a niche that will work with any young girls or young women, everything cute and pink, every girl at some point. Yeah. Usually like usually lifestyles. So it’s a, it’s not as limited as it sounds, but yeah.
Well I guess so on the flip side, what would you say is the biggest strength from setting up the business this way
In Hong Kong? It’s it’s everything is every day is an advantage because no taxes and no import duties, no fees like that. And then labor force is very very competitive. No, almost no personal taxes, almost no profit or a profit or dividend taxes.
Oh, wow. I didn’t understand.
The shipping is maybe my biggest benefit. Like we can offer free shipping in any country in the world. And it’s, it’s cheaper to ship from Hong Kong to Finland or from Hong Kong to us than it’s from us to us or Finland to Finland.
It’s wait. I want to make sure I actually got what you’re saying. It’s cheaper to ship from Hong Kong to the U S than U S T U S. Yeah.
And mostly in most situations it takes longer, but maybe two weeks, but it’s still cheaper. How,
How, I mean, I could, I know getting stuff from China, you know, you can do it, but just one off shipments is always tough, but how is Hong Kong so much cheaper?
We have all the same benefits as a China, so much volume. Well now in, during the coronavirus, it’s a bit different because the passenger flights have been reduced, but before Corona, it was mostly passenger flights, so much volume. So the the shipping companies as competing each other.
Yeah. I think most folks don’t actually know this, I guess not a couple weeks ago we were talking about this. It’s probably worth mentioning where a lot of the air phrase from China from Hong Kong, isn’t when you think of it, right. You’re thinking it’s on like a plane freight plane. It’s just a big plane. They got DNA pallets on us, but it’s really just in the bottom of a passenger flight, like 90% of the phrase, right?
Yeah. Yeah. That’s like, that’s the majority of the international air mail is it’s not cargo flights. It’s just passenger flights going to each of these countries yep. Scheduled every day. And now when there are no such flights is that there have been delays. But once again, Chinese and Hong Kong companies are very resourceful. Now there are cargo flights going almost daily to most major countries.
Okay. Yeah. So, cause I know at first it hit real hard where there were no passenger flights, the cargo flights weren’t ramped up and just, it was a, there was just stuff sitting on the you know, pals, just sitting, waiting to go. And there was just no flights put them on, but they did get that cargo flights kind of going again. Yeah.
Yeah. Now, now things the U S and Europe are pretty much back to normal, even actually a better than before, because now it’s faster than before.
Okay. But because there’s still no passenger flights really coming from actually almost anywhere into the U S at this point. Very few. Okay. So shipping is cheaper from Hong Kong to the U S than U S T U S. That’s a good, that’s a interesting one. Wow. And then I didn’t know about the taxes either, so you’re not, so there’s no profit, there’s no corporate taxes, profit taxes. It seems pretty pretty business friendly to say the least.
Yeah. Hong Kong is super business, planetary business friendly city. I think that’s the corporate taxes maximum 15%. But if, if I remember correctly, if you make a profit of like a 250,000 us, it’s about 8%.
Oh, wow. Okay. So super cheap shipping. And then you’re, I’m guessing also just being close to source, right? Like,
And the time zone is a really big plus, like we can go to China just hop on a train and we’ll be in Rancho or shanshan in one or two hours. And then when we are on the same time, John, it it’s so much easier to have everything work out efficiently. And from China to Hong Kong, there are now, now no duties and now no customs face. So it’s, it’s like, it’s like, it would be in the same country. Everything works very quickly.
Okay. Very cool. Okay. So you are able, so if you want to go, source products is so you have the factories in, so you’re going to factories in China, but then you’re distributing from Hong Kong. So you’re just, okay. Do they move it over on? Just kind of curious truck train. How do they get it there for us? It’s trucks. So trucks come over, drop it in to DC, and then you’re just shipping out from Hong Kong via air freight, basically to everywhere in the world. Yeah. Very cool. Okay. Why do you think most people don’t do this? Cause it sounds like, it sounds like there’s a lot more frozen cottons.
Then again, you need to go to a new environment to start a business. It’s not always so easy. And then now people are doing mostly Amazon, maybe. So having your own warehouse in a city inside China basically is not an easy thing to start, but it’s actually very easy.
Why is it not easy to stash?
Well, there is a big culture difference. If you come from Europe or us, when you want to start a business in Asia, maybe, maybe people are more scared that it’s going to be difficult, but actually it’s much more easier than starting up a business in the U S
Really. Okay. This is, you might talk some people into moving over to Hong Kong or China at this point. Did you guys recently, I was just looking through your bio start a subscription box business as well. Is that something I read correctly
And do subscription boxes? So we have one store for all the cute stuff we’ve been talking about and one store for candy and snacks, Japanese candy and snacks. And then we have a subscription box for both, which are their work really well together. They support each other. So for the subscript subscribers, we can upsell the store and the other way around and both like we can also share the products. So basically if we have leftovers from the monthly subscriptions, we always can sell them in the store, makes it easier. And now not less risk with overstocks
That’s when did you start that business?
Oh, just a subscription box. Only six years ago. So we’ve had that about six years.
I think some people don’t don’t know about that little trick as well, how they kind of support one another. So you’re basically, so you can almost you, so what you don’t sell and won you then are able to basically have a deeper discount and the other, because you’re buying so much of it each month
For the subscription, we always have to, at least we want to do it so that every box is identical every month. So we have to buy a little bit extra every month, an estimate so that we don’t run out of products, but then we can always sell that product overstock products from the in the store. So it’s basically no risk for having leftovers. If you have only a subscription box from how do you get rid of the extra stuff? That’s, that’s a problem for some companies, but we can still sell it in the store and then have campaigns and deals for those one or 200 extra items.
And it all sounds like the ultimate upsell and the other direction, right? So you purchase a product and you’re like, Hey, if you like this product, maybe you’ll want something like this. Every single month,
Every customer that buys from the store is being hammered with the subscription box at UN emails.
And what kind of, how relative to each other, how what’s a larger business,
The store is much more profitable because we can make and maintain a higher margin. But the subscription box has higher lifetime value. So when customer comes and buys subscribes, they stay with us like four, five, six on average, depending on when they start and then the store, they might have two or three orders, but the lifetime value with the subsequent book, subscription boxes a better. So we can always like spend a little bit more on the ads for the subscribers.
Okay. So, and then just start taking some notes here. This is interesting. So then having a higher LTV on the scription box, and if you’re upselling them, then it makes us still more profitable to them guessing, right? Cause now you’re saying, Hey let’s say average, cock size is a hundred, right? Let’s just round number check checkout. So normally you can only spend so much on acquiring that customer, but if you know, you’re going to upsell them after the fact to this product, they’re going to have six months. Now you can spend double, triple on your ads. At that point, it sounds like,
Yeah. And the people who buy from the store are maybe they want to sell certain products that they want to select the certain items they like, but the people who subscribe, subscribe, they mostly mostly subscribe for the experience. So it’s not about individual products for us. It’s about the experience of unboxing and getting us both like getting this cute box every month and sharing with your friends and maybe some people buy it for Gibson. It’s a little bit different, like target audience, also more general target audience when the store people actually need to want the productivity.
Yeah. You kind of see someone that’s really into a ghost, goes to the store, buys a product gets, you know, is wearing a shirt or kind of has a product. Their friend sees it and they’re kind of into us. And then next birthday or holidays, they buy them the subscription. Then as a gift, it’s something you could easily see that exact relationship. So it’s almost buying the same user. The same customer could be buying it for a friend at that point. Right.
Yeah. And then at the subscription business is also like I heard you talking about dollar shave club at one point. Like it’s a bit different for us because our products are not consumables. So what we have to keep it entertaining. We have to keep it at a really cool experience with all the leaflets and everything that comes in the box. So the customer actually has an like information about the products and backstories and B, if we have characters, we always tell the backstories of those characters. And so it’s a, it’s a bit different, like a selling point because when we sell the products in the store, we have to actually sell the how to use this product or how this product is solving all the problems in your life. But the subscription it’s like a monthly, monthly Jose indulgence or,
Yeah, I’m thinking it’s more like I’ve seen before. I’m like a whiskey club. Like you had a different sort of whiskey every month or like a cigar club, different Scott’s come over. It’s like that kind of indulgence. I’m not quite whiskey and cigars, but that’s exactly mine goes right where it’s just this thing that you don’t need, but you’re excited to get it every month. Like, you obviously don’t need a cigar and you don’t need, you know, like candy from Japan. But when you do get it, that is your indulgence.
And then we saw a huge spike. Now this April may when all the, all our customers in the U S were locked in their apartments. So the parents wanted to just keep their, maybe, maybe keep their kids happy and subscribe to our box. So there was like a, like a Christmas black Friday type of a spike for two months, right?
Yeah. I’ve had you talked to a number of retailers that we work with. And a few of them basically said, you know, that’s everyone kind of how it’s going. And I’ve heard back from a few folks. They’re like, yeah, we’re doing like black Friday type numbers. Like, Oh, really this week. They’re like, no, every day, just like every single day, it’s like black Friday. Like that is amazing. So yeah. So you’re in that. What was that?
No, I’m just asking. Do they think it’s going to last, or how does, how does like the North American sellers, are they expecting this this sales spike to last until Christmas or
I, so my opinion is there’s two different things happening here. And just from talking to from people, this is kind of where I’ve come to, at least this opinion, this two waves were hitting the wave of people locked in their house and they’re you know, buying it for the kid to keep them happy, that sort of thing. So that’s like the big wave, but there’s one under us. That’s actually the, the larger thing happening where a lot more users have been exposed to online, exposed to shopping. It’s both, it just exposes world of eCommerce. That might as it might’ve been a little foreign to them last year at this time, the older generation, or even just some folks buying this strips box over a time. And I think that wave is actually the more important one that w that might never stop. Like, I think it’s the new normal, all of a sudden, so we’re filling the big pop, but I think the underlying current is really then it’s gonna move the needle, you know, forever at this point,
I feel like when you once teach people how to do something new, they’re going to say,
Yeah, it’s pulling getting over that fair. Right. That description box said, you know, like, Oh, this is actually kind of nice. And then they’ll start exploring other scription services. That sort of thing verus you know, the first time you dollar shave club, for example, just get out of that mode of, Oh, I go to the store and I buy raises, you know, every, every first week of the month. And you’ve been doing that for 20 years. And all of a sudden you realize, Oh, they can just mail them to me. Then you start, it changes something in your brain of going, what else can they just mail to me? And then you just realize like, Oh, it’s just a world of things here that I can just get. I don’t have to do anything.
Is that kinda what you’re finding?
I think it’s going to be like that blood test, exactly what you described. Like, some people have been still hesitant, especially some parents have been hesitant to buy from online for their kids, but now when they do it a few times, if they say it’s okay, like they get used to zoom meetings and they get used to all the other stuff, they have been forced to get used to it. So this is going to be one of those things, I think.
Yup. Yeah. I totally agree. I think 2020 is a very crazy year in some ways, but I think that e-commerce can be overall a good thing. So we’ve we’ve had a few retailers that were negatively affected big cohort in the middle that were not affected, but some that were super positive. So it’s, it’s been interesting. One of the questions too actually is, so you’ve done this now for, was it 20 plus years?
I wouldn’t, I wouldn’t call this when, when we started in e-commerce it was so different. So basically what we have been doing for the past eight years, it’s completely different, but we did a 2006 or something. We had OSTP commerce and we like, we feel our shipping labels by hand. And it was from different, from a different world
Then the dark ages.
Yeah, it was. And no Facebook, no, no like social media. And I don’t know if we even had Google ads back then,
If you were starting this business today, actually, what, what would you, what would you do different? What would you not do? How would you kind of position us? Would you have moved to Hong Kong? Like what would you do fast forward to 2020? If you’re a starting this,
Maybe if I would want to start now an eCommerce business just from scratch, I would maybe start from content, like maybe shut up a blog for for the niche Burien and then maybe start Amazon products first with our own product line, because our strength has always been like the visual quality of photos and the graphic design we have in the products. So that’s maybe better suited to selling our own products than selling other people’s products.
Okay. So you would start first, you would start any commerce, not in eCommerce, basically just starting kind of content, getting a following almost before.
Yeah. I w I would build the platform first and that’s actually what we’re doing next week. We are starting a blog and we are, we are starting to test out some Amazon products, but if I would start now, I would not set up a warehouse and invest hundreds of thousands in stock. I would invest that money into creating a platform and our own product line in Amazon and other other marketplaces.
And why is that? Because is it to be, is the goal at that point to become your own influencer? And you, you are the influencer at that point?
I w I think it would be important because now we have the audience, we have the email subscribers and like Def fans on social media. But if we would start from scratch, we would first need to build that before actually launching any brand.
Okay. So you would basically start kind of the content business, or even, it sounds like selling other people’s products, but just get something, get an audience first. Yeah. Build that up and then leverage that audience to then sell what, basically, whatever, whatever you’re selling, you have other folks sell it now to other folks that way.
Yeah. And maybe, maybe also like am, if you want to launch something in Amazon, 2020, you need to have some kind of audience yourself to make the initial launch big enough to stick out. I’m not an expert on that field, but like, that’s what I’ve been hearing
To, basically, if you want to get a product to Amazon, to base and be able to hit your email list and say, Hey, come buy our list, going to kind of do something to the sales initially.
Yeah. Now when we have a, something like 300, 400,000 subscribers on the newsletters, it’s going to be much easier to launch a product on Amazon dentist, if we will be as non-name brand. Nope. With no followers.
Yeah. I think everyone that starts email content basically has a following though. Biggest thing when I talked to them is they wished they did earlier on because you see the snowball effect and with everything right. At first, because you’re doing it in this really no one coming to the blog, there’s no one, you know, you’re emailing 10 people and it feels a little like, what’s the point. But like you said, as it grows, now you have an adorable asset, right. Something that you can reuse, something that is long as you treat everyone, right. They’re going to treat you right. And you’re not just, you know, you’re not just selling them whatever, but you’re actually curating your products. And you’re saying Harrison things, I like, you’re using your kind of creative eye and saying, Hey, you know, check these out. These are actually pretty interesting. And if your audit, if that resonates with the audience, then it’s going to grow over time.
Yes. And with the same thing with like designing a product for ourselves, like it’s going to be so much easier if you have some kind of audience you can ask, ask for advice, like instead of coming up with your, with your own like assumptions and spending money on the testing.
So you, so then you use your internal audience to basically float ideas right. On this color. Yeah.
Basically, basically AB tests, like if would this ESL, if, if, if we make it
Very cool and what do you reach them via email and kind of just say, here’s what we’re thinking, these products, what are you, what are your thoughts and folks kind of reply back.
Yeah. And then we can have a popup on the, on the, on the, on site, which is like a simple question, click the image you like more, or we use gleam for that. So there are many options we can just quickly test. What would the basic, what would customer or potential
Customer be interested in very far? Alright. I think that that’s helpful. And I think probably a good place to wrap it up though. But if people want to kind of check out this site, if they want to check out the description box business I’ll put links in the show notes about working with some of the best places for folks to find you are stories [inaudible] dot com B L I P P o.com. And the box is Kauai box.com K w a I box.com. Awesome. I will link to the show notes. It’s love for our community. Super interesting. Thank you so much for having me [inaudible].