Discount Magic

I’m amazed at the amount of discount given during Singapore’s National Day, on 9 Aug. Before and after the holiday, retailers were discounting heavily to get sales. There was 54-everything. Singapore is 54 this year of 2019.

And, who doesn’t love a good discount?

Hmm, businesses.

Well, most small businesses who operate on small margins or have small scale.

But, we all know a good discount attracts customers to buy, yet business must be careful to not overuse discount as an incentive mechanism. This causes customers to be de-sensitised to discounts and expect discount as a norm.

Yet, in a real business, not an inflated one, discounts eat into margins and the long term feasibility of a business is impacted.

Even for large, well funded technology companies, i.e. Grab, etc, it is not feasible to be giving unlimited discount coupons as it impacts their business profitability.

This becomes even more apparent for small and medium businesses who have not reached significant scale. Discounting buys you market share, but always at a cost.

What if the discount stops? Will the customer still make a purchase?

What if a competitor gives an even larger discount? Will your business be able to afford an even larger price cut?

At the end of the day, your product or service should provide a value that customers are willing to pay for. You will have to determine what that value is and what the appropriate price point is. Then you need to hold your ground and tell your story.

If that doesn’t work, maybe your product or service doesn’t have that said value.

If that doesn’t work, maybe the pricing is too high for the perceivedvalue. Remember the keyword here is perceived value, or how the customer thinks about the value they are getting.

If that doesn’t work, maybe you don’t have a product market fit. Or, maybe it’s not the right timing.

Figure out your value and you shouldn’t have to be discounting all the time.

How Valuable is Retail Presence?

Customers often ask us where they can find us in retail, and my first reaction would be why on earth would you want to be shopping in retail?

Then … flashback and I realise Singapore is still stuck in a limbo of old and new. The old model of business, brick and mortar, retail malls, with all the malls in the city and the heartlands, retail is never too far away. As such, the convenience of everything has made e-commerce a topping on the cake, rather than the cake.

In China, where I lived for 10 years, retail was not as accessible and hence, when e-commerce cape along, it was embraced with open arms. Imagine also millions of disillusioned white collar workers stuck in a job they hate, pushing paper and now window shopping online. E-commerce was came at the perfect timing and place.

Now, back to my online business in Singapore.

So, many customers have asked about retail presence and we went about hunting for that.

We found retail to be expensive, like super expensive! Brands would be paying on average 30-50% of the product price just to be on the shelves. On top of that there would be additional logistic cost, joint marketing cost, etc.

The brands returns are minimal.

The retail outlet outlets are average.

The landlords of the malls benefit the most.

What’s the point of retail then, when brands can sell direct to customer and transfer that savings to them as discounts or free shipping?

You might argue that the 30-50% listing fee can be treated as marketing cost, as you get brand exposure. Well, that percentage is too high and inefficient. Malls and retail are passive modes of marketing, whereby you wait for customers to come to you, rather than you going out to find the right audience. So, if the retail outlet is unable to bring in traffic through their own efforts then retail is, IMO, a waste of time.

However, retail works in some instances. It works when brands need customer to experience the product or the brand. Learning to cook, teaching how to use a product.

For example, my wife and I recently bought a Thermomix, and the process to buy one was through a cooking class. You wouldn’t be able to buy one if you did not participate in a cooking experience. We were brought through the process of cooking a range of dishes from soup, buns, vegetables, dessert and drink. All within a span of 2 hours. Hence, we experience the power of cooking with a Thermomix, and the speed and convenience it brought into our life.

So, if it’s just the regular product you have been using over and over again, do you really need to scrutinise it again in person, in retail?

What’s a Convenience Fee?

Singapore is ploughing towards a digital economy, but it seems it’s organisation and citizens are highly averse to it.

Now, going digital has many implications and to think of digital as only mobile payment is highly inaccurate.

In fact, digitalization is leveraging technology to improve quality and efficiency.

I lived in China for 10+ years and had been fortunate to have experienced the hyper growth of technology adoption in China over the last 5 years.

So, when I moved back to Singapore at the end of 2018, I was fairly disappointed with the state of affairs, considering that Singapore had its digital Master Plan for 4 good years since 2014.

So, today I was booking a couple of movie tickets via an App and I was charged a “convenience fee”.

Hmm … yes, it’s definitely convenient for me to book tickets directly from an App, but to actually call it a Convenience fee and charge $1.50 for it, in my opinion, feels a little outrageous.

I personally think this fee should have been charged to the movie theatre, rather to the consumer. Isn’t it more convenient for the theatres now to get ready access to customers now without even having them come down in person? This additional data even helps to plan for schedules as it shows future bookings too.

Besides charging the theatre, the App could develop interesting products around the movies. Could they organise events and sell tickets for revenue? Meet and greet? Meet ups?

How about movie swag?

Pre-sales to get tickets on opening night?

Charging the customer for a basic service of merely buying a ticket is too lazy. Buying a ticket should be hygiene factor of any movie app or theatre app.

For businesses to really embrace technology, I believe they need to rethink parts of their business model and decide where their value really is and charge for that.

If it’s merely a matter of taking something that previously only was offline and now making it available online, that’s like basic. Please go a few steps further and improve the customer experience of enhance the value provided.

Behind the Bustle, Uncover the Hustle

Are you like me, in that you often look at a business (a shop, a restaurant, a barber) and wonder what’s their real business model, i.e. how do the business earn money?

Sometimes, I look at a hawker store and wonder how do they do it? How do they earn enough money to cover the rent and all its operation cost, just by selling low cost bowls of noodles and toppings.

My mind quickly goes into the math: rent will cost $X, staffing cost will be $Y, miscellaneous operational will cost $Z, then they would need to make $A for the whole month, and break that down by day and you need $B in revenue daily. With AOV of $C, the shop needs to sell #D bowls daily. (I’ve been trying to calculate an estimate cost analysis for a small business and hope to share it soon.)

The same equation works for fashion boutiques in shopping malls, electronic shops, speciality shops, service-related shops like hair saloon, photography, etc.

From running my own business, I begin to understand the complexity of the entire eco-system and how every part works individually and yet needs to comes together successfully for the entire business to run efficiently and profitably. 

I am then thankful for the many service staff that serve us, the logistics personnel that move products around, the cleaners to help us clear up after. Every member of the entire business process matters, because every little details counts.

Beyond The Plastic Pollution

The zero waste movement gains momentum everyday, and I agree plastic waste are polluting our natural environment at a scale like never before and are causing harm on the natural eco-system, especially the oceans.

Yet, I like to call attention to other human practises that are destroying our natural resources, in my pov, at a faster rate than plastic pollution is.

Over fishing all over the world is causing the imbalance of the natural food chain. When humans takes more from the ocean than then nature can renew in time, it causes entire species of fishes and marine life to be at risk of extinction. Fisherman historically used nets to catch fishes, but with advancement in technology, entire school of fishes are sucked out of the ocean by powerful vacuum pumps.

This is to feed the ever increasing demand from humans, not just for food and fish oil but also for animal feed. Highly marketed fishes such as tuna, salmon, trout, etc are depleting extremely quickly.

There are many death zones in the oceans as a result of our over fishing. Death zones are areas in the oceans that do not have life, the corals, the fishes and marine life in those areas have all died and/or left because there is nothing left to feed on. Death zones are created when there is a gap in the food chain and one species of fish disappears and another species multiply beyond control and cause other life forms to die. In these death zones, schools of fishes are caught, living micro plankton to multiply uncontrollably and use up all the oxygen in the water, effectively suffocating the marine life in that area.

My personal opinion? Marine life will be gone faster due to over fishing than from plastic pollution.

Organic farming for food and for fabric to make clothing is increasing in demand. The idea was a lofty one. It was to provide quality products to market that did not have unsustainable practises like pesticides that pollute the environment, or harmful practises that affect humans health.

Yet, from my understanding of organic farming practises, more resources are used up in the process. For example to be organic, produce needs to be grown on land that has been allowed to rest and renew itself. Which means farm 2 years, rest the land for 1 year. Now, ask yourself this … what will farmers earn during the year of rest? Do they rest? Most simply clear more land to farm, you can’t expect farmers to stop earning a living just for the sake of going “organic”? So, more forest needs to be cleared to allow for land rotation. This depletes our natural rainforest and eats into the animals habitat and also destroys biodiversity in the forest.

To farm organically, more resources in terms of water and manpower is also needed. Water is already a scarce resource in many places, and diverting supply for organic farming when many regions don’t have clean water, seems extravagant to me.

My take? Buy responsibly, don’t just buy into the trending buzzwords, GOT, RSPO, etc. Take time to understand what that means to all the stakeholders, NOT just the shareholders.

Moving Out of Your Home To A Self Storage Warehouse

As a small business, keeping cost down was always the 2nd most important priority, right after driving sales.

Like me, many small business start off from their homes, where we convert a small room into our warehouse for keeping stock. For the most part, if your product was small and light, that would have worked for a much longer time. For most other businesses that sold products of any heft, then a small room in your home quickly becomes too small.

Beyond your home, what are the options.

Again, I must emphasise the relative ease of doing business in this time and age that allows you access to an abundant options for storage.

Self storage has become increasingly popular in the recent few years. Self storage facilities are run by organisations that convert old industrial buildings into warehousing. The uniqueness of these warehouse is that they lease units of varying sizes out and you could get small or big entirely based on your requirement. They provide 24 hour access to the warehouse and this provides the flexibility for many small businesses to have access to their inventory. Many of these warehouses also have automated lockers, so you can pack goods and place them in the lockers to be picked up by the couriers for delivery.

Popular self storage includes, Work+Store (LNH Group), Lock+Store (SingPost), StorHub, Store It!, Extra Space, Mandarin Storage, and many more.

Tips for choosing a self storage facility:

Location, location, location

My recommendation is to pick a location that is convenient, i.e. near where you live or work. If you drive this is probably a moat point, but if you don’t then location is very important.

Visit and see the actual unit

It is also very important to visit the store and ask to see the exact unit that you will be leasing. Make sure you are comfortable with not just the floor area of the unit, but the storage height limit. Ideally pick a storage facility that has higher height limit, that way you get more bang for your buck.

Contract Length vs Rental

You can always negotiate for a contract length that is longer to get a better monthly rate. Though, make sure that the length of contract makes sense for your business. If your business expands, make sure you are able to shift to a larger unit. If your business shrinks, what are the options? If you eventually scale up and need a more full service warehouse, how would you do that?

Treat Self Storage like Co-Working

Get to know the service staff and you will have access to the network. Many of these self storage warehouse have so many small businesses storing with them. Find out if they offer cross marketing or promotions opportunities. Find out about events they hold. Find out if they can introduce you to relevant partners.

Ask About Axillary Services

Are there trolleys provided? Pallet jack? Air-conditioning? Wifi? Automated lockers? Printing services? Every little thing matters, especially when you are a small business.

Good luck!!

What Is Your Value?

When we look at any business, it really is a transaction between the company and the customer. In this transaction there is an exchange of value and money (in most cases).

What is value?

Value is extremely difficult to quantify as a small encompassing figure. Value means different things to different people.

Some people value quality of product (looks good, lasts long, has brand, etc)

Some people value time (does the product save me time?)

Some people value ease of use (it just works without having to be a rocket scientist)

Some people value altogether something else (entertainment value, charitable value, etc)

In every one of the value mentioned above, you can go deeper and realise that by time, there is an infinite continuum and some might be satisfied with 1 min time saving, while others only value 1 hour or more saving as significant.

Before you start any business, its important to determine what the exact value you are providing to the consumer.

For example:

For some, a pair of Levi’s jeans is valuable because it has a brand heritage and it last for a really long time.

For others, a pair from H&M is valuable because it’s fashionable, wears well for a good 1 year, and at an affordable price.

For some, Mcdonalds is valuable because it fills me up fast, it taste good, convenient and affordable.

For others, a gourmet burger place is valuable because it’s delicious and has great ambience. It’s not that affordable and not convenient location wise.

You get the point. 

So, the question begs to differ, what is you [product, company] value to the customer?

If you are selling the same as everyone else, then it would just be a combination of price and marketing budget that will trump.

If you are selling a differentiated product that is well suited for a segment of consumer, then you will be able to command a premium and you might even win more through “word-of-mouth”.

At this point, I like to thank you for reading. While this maybe just my view as I wade through my own business, I do hope it provides value to you, too.

Made Where?

In a global economy, the everyday products we used are made from every corner of the earth.

Made in China
Made in Japan
Made in Korea
Made in India
Made in Malaysia
Made in Australia
Made in New Zealand
Made in USA

The list goes on …

Does it matter?

It seems, it does to a lot of people.

But, does it really matter?

I’m really not so sure.

In addition to where a product is made, what’s important is which company is making it and what their values are.

Is a company profit driven and sacrificing safety and quality in the process?

I can think of countless global FMCG Brands who have sold large quantities of products that were later recalled due to safety issues.

Brands who have marketed a benefit but in fact was not providing the benefit.

Think of brands who have “relaunched” their brand with “better” ingredients and “better” quality, while concurrently selling the older “inferior” product.

Then there are brands who shout out loud their CSR activities, but totally ignore their actual production process.

Does it matter where a product is made?

At the end of the day, I believe it is more important to understand the company and its production process to decide if a product is of value* to you.

*Value of a product is discussed in a separate post

Shopify vs Goliath

I use Shopify.

Shopify is good, though not great, but it does a good job for you to start and run your online shop.

More on Shopify below, but first … WooCommerce.

I tried WooCommerce, after a brief start with Shopify. I was looking to save operation costs. What I found over the 6 months of using WooCommerce, was that it might seem cost efficient upfront, but it all adds up very quickly.  You also need technical resources to run WooCommerce Store successfully.

WordPress and WooCommerce software are free to use, but you would need have your own web hosting. Note here that regular shared hosting might not cut it as there are limited computing resources (i.e. bandwidth and ram), and you might need to have a more powerful hosting and throw in CDN to ensure site availability. If you don’t, your shop might crash, which means customers can not access your site.

On top of the base WordPress and Woocommerce setup, you might end up installing a premium theme to have more customisation, SEO plugin, Bundles Plugin, Subscription plug-in, etc.

Beyond the monetary cost, there is also the time resource that needs to be invested. There is a significant setup time required as there more more customisation available. There is also an on-going time resource required for maintenance, when WordPress software upgrades, when plugin upgrades, when you reach bandwidth limits, when there are security breaches, etc.

If you are completely lost about what I just mentioned … my suggestion would be to simply go with Shopify.

Now, about Shopify …

Shopify is a total solution (one-stop shop) for your shop. It starts at a basic USD$29 per month. (Note: US dollars) After you register for an account, you could input your store details and upload your product information, and you could be online, ready to sell, in about an hour.

It includes all the basic features of an online store, product and inventory management. Basic sales reports. Blog. Basic SEO. Basic reviews(via a free app).

To enhance your online store with more advanced features, you would then go to the Shopify App Store to install 3rd party apps.

There are loads of 3rd party apps and you almost can find an app for the feature you are looking to enhance. At the end of it, it simply boils down to cost, as Shopify apps can get expensive quickly, as they charge tiered pricing for sales volume or Shopify tier plans.

Apps you might consider getting include a better reviews app, a better reporting app, a bundle app, an up-sell/cross-sell app, a currency converter app, a subscription app, etc.

The list goes on and here’s what I use for my online store.

In terms of cost, you would also have to factor in Shopify transaction fee, which is 1-2% for the standard plans. If you are at a huge scale, then things changes. This is over and above your payment gateway fees, for PayPal, Stripe, etc.

So, you can see the cost adding up very quickly.

The good news though is that, in most situations, everything just works, and you can spend more time selling, rather than maintaining your shop.

No worries about software upgrades.

No worries about fraud checks. 

No worries about hacking.

No worries about downtime (to a certain extent).

Between Shopify & WooCommerce, I’ll pick Shopify if I lack technical expertise or a technical support team.

Are there other options?

Of course!

Bigcommerce, Magento are alternatives which you can run and host yourself. *Think WooCommerce*

WIX, Squarespace, Strikingly are alternative, easy to build (WYSIWYG) platforms that you can register and use directly. *Think Shopify*

There really isn’t a one size fits all, so test drive the various platforms and find out which suits your needs best. Most of them have free trial periods from 2 weeks up to 30 days.

Final important note: plan for at least a year out, if you are looking to expand your product line, then it makes sense to get onto a platform that caters for your required volume in the future.

p.s. So the title would suggest that Shopify was David the little boy who overtook the mighty giant that is WooCommerce. In reality, the WooCommerce has not been defeated and still remains one of the largest e-commerce platform provider. Shopify, too, is no longer the little underdog from 10 years ago. It is a listed company and has massive operations around the world, powering a significant number of all online shops.

External links:
Shopify: https://www.shopify.com/
WooCommerce: https://woocommerce.com/

Technology Made It Easier, Not Easy

It’s much easier to start a business today than any other time in history.

With the advancement of technology, there are now tools that allow anyone to setup an online shop in 1 hours, there are marketplace platforms you can leverage that allows you to sell to anyone, there are logistics platform that allows you to book a courier on demand and send your goods to the customer, there are marketing platforms that allow you to reach millions who might be interested in your product or brand.

So, it’s never easier to start an online business or more precisely a product driven online store than now.

Why wait?

It’s not easy … and I’ll share more later.