Richard Li, Founder and CEO, July
Richard Li puts customer service above all when it comes to his luggage company, July.
This unfaltering commitment is why he personally makes house calls to address complaints and why he recently hand-delivered packages after realizing that some customers wouldn’t receive the luggage they ordered in time for the holidays. But this high level of service is only a small piece of Li’s success story with July.
Li, who has previous entrepreneurial experience from his furniture company Brosa, has also figured out a “magic” formula for manufacturing, marketing, and selling physical products. He used this knowledge to grow July from $0 to $5 million in revenue in just a year. And now he’s looking forward to opening up additional retail stores, introducing more products, allowing for more luggage personalization, and expanding into international markets in 2020.
If you want to learn more about what it takes to launch and scale a business that revolves around a physical product, be sure to give our interview a listen!
Also be sure to check out our latest online course, Ecommerce Masters, where Richard Li is one of the five instructors teaching advanced ecommerce skills.
ATTENTION: We’re excited to announce that Richard Li has partnered with Foundr to teach one of the modules in our course, Ecommerce Masters. Get on the Free VIP Waitlist to be notified when we open enrollment!
- The opportunity Li saw in Australia’s furniture market that led him to launch Brosa
- Why he stepped back from Brosa after five years to focus completely on his new direct-to-consumer luggage company, July
- An overview of July’s funding journey, go-to-market strategy, and first sale
- The journey from $0 to $5 million in one year
- How to find a manufacturer that can grow with your company
- Why Li offers July customers a 100-day trial and lifetime warranty
- The rules of product development that Li follows
- Why Li decided to follow the direct-to-consumer trend of opening up a physical store
- July’s four growth pillars for 2020
- Li’s best advice for entrepreneurs building a business around a physical product
Full Transcript of Podcast with Richard Li
Nathan: So Rich, tell us the first question that we ask everyone that comes on is how’d you get your job?
Richard: It’s actually a very interesting story, because, fresh out of Uni, I submitted my resume to a few places and I couldn’t find a job. I didn’t get even get a response, and I was like, fuck that. I’m just going to do something myself. And I started selling products online on eBay first, then gradually I found that it’s actually more meaningful if I start something myself, I started a brand myself with a particular category that needs to be fixed. And the first category we identify at that time was furniture. It was very, very painful to buy a piece of furniture in Australia and people were putting huge, huge margin in all the products they sell. And like Jeff Bezos once said, your margin is my opportunity and we identify that being a huge opportunity. That’s how we started Brosa and similar scenario for July luggage.
Nathan: When did you start Brosa?
Richard: We had the idea end of 2013 and we quickly mapped out the plan and what we want to do. We launched the business February, 2014. So the business is still growing and it’s doing fantastically well.
Nathan: Interesting. And you mentioned that you’ve kind of taken a step back from Brosa to focus on July. Why is that?
Richard: I’m one of those who always want to challenge myself, and I have been with Brosa from day one, when I co-founded the business and it’s been five years and I figured that I need a new challenge. That’s the time that I decided to take a step back and I have two amazing co-founders in the business, and they continue working in the business and with our investors and board members. And I figured out the business at that very stable stage and I could actually take a step back and to do something else.
Nathan: Yeah, I see. So how’d you come up with the idea for July? How did it start? You only launched last year, right?
Richard: That’s correct. Yeah. So we had the idea because we found that buying a piece of luggage is a very bad experience. It’s always the department store or luggage retail chain, you walk into the store and nobody was helping you. And also everything was done in a traditional retail way, which is going through distribution and you buy a piece of luggage. And a very often something goes wrong with the luggage. You have to find the brand to get fixed or to get it repaired. And there’s a very, very painful experience. And from my experience at Brosa, we figured there’s a better way, which is going direct. We do the design and the product development ourselves and it’s our brand and we sell to our consumers directly and we look after the customer as well. And so, by taking a direct to consumer approach, we’re actually looking after the customer better.
Nathan: Yeah. I see. So when it comes to launching July, what was your go to market strategy? How long did it take to conceptualise and work on the product? And have it ready?
Richard: Sure. A good question. We had the idea, I think May or June last year, and it took us maybe like I think a couple of months, to figure out the brand, to figure the product and to get the design ready. It took us a couple months to find the best manufacturer to help us realise the product. So it take roughly about half a year for us to have the product finalised, to have the brand ready, to have the website ready and to launch the brand. So we soft launched the brand December last year and proper launch was February this year, which is 20, So February last year. Sorry. So, which is 2019.
Nathan: Yeah, I see. Interesting. And in the past year, you guys have had incredible growth and traction. Would you be able to share some numbers around that?
Richard: Yeah, absolutely. So, as I mentioned, we launched the business in February last year and the business quickly grew and the entire financial year we are on track hitting $5 million. And the growth was from the love of the brand from customers in Australia, and also just from a good word of mouth, and people talk about the brand and people love the product. People keep coming back to buy more. And so that’s where the majority of growth is from.
Nathan: Yeah. Interesting. So, yeah, zero to five mil even. Yeah. Like for an eCom product, that’s incredible growth. How did you fund it originally? Can you talk to us about that? And I’d love to talk more about the growth strategies and even the scale side.
Richard: Yeah, yeah, absolutely. When we started, it was just me and Ethan, so two of us. And very quickly there’s an angel investor who wanted to come on board. We thought about it and it made a lot of sense at the time. So we raised the angel round with a local investor here. And then early 2019, someone approached us, and wanted to put in more money for our seed round, and we raised it like a small amount of seed round. We actually talk about it to the press, it’s about a million dollars. And right after that, so we got approached by two amazing investors, and they wanted to put more capital into the business to fuel the growth. And we thought that makes a lot of sense.
And one of the investors is actually Strandbags, which is one of the largest luggage retail chain in Australia. And it’s been a crazy year, and also been an amazing year.
Nathan: Yeah. So I’m curious, do you think you could have launched July without capital?
Richard: Yeah. Yeah. Good question. Actually. I managed to do that for Brosa. We actually didn’t raise any capital for the first year and a half. Like what Jack Ma from Alibaba said, 99% of startups didn’t die because they didn’t have money. They actually died because they have too much money, and very often like a lot of startups, a lot of companies, a lot of people who think that I don’t have money. That’s why I can’t launch a business. And because this job pays me really well and I’m not going to get the same amount of pay if I start a business. So a lot of time it’s actually not because they don’t have money, actually they have too much money.
So to answer question, definitely, if I didn’t have the capital, I would do it the same way. It’s just going to be a smaller scale.
Nathan: Do you think it would have grown as fast?
Richard: Probably not because they are a lot of tests that you want to do only when you have a good amount of capital behind. Like a lot of the marketing strategy, because sometimes it’s a lot of risk. You’re putting money in a campaign that might work, might not give you the return. So I don’t suggest when you don’t have good amount of capital behind, and if we didn’t have money, I’d probably think twice for the sort of campaign that we’re doing, because we have capital, we could actually play some bets.
Nathan: Yeah. I see. Because I think sometimes people look at physical product businesses and you think of, furniture or luggage, very capital intensive type companies. A lot of people think, yeah, you have to go out and raise money.
Richard: Yeah. I guess to a degree they’re correct. Because, especially with, because furniture is actually very different. If I talk very specifically about the two different categories, furniture in Australia, if you go out and buy a piece of furniture from Chestry, you actually have to wait for about anywhere between, 12 weeks and the 20 weeks or sometimes even longer. And the entire furniture industry is actually broken. You pay a deposit, but you pay a deposit for something they don’t have. So that’s, we call it a negative cash cycle, which is pretty good.
That’s helped us bootstrap the business for Brosa at the beginning as well, because we could collect money upfront and then pay a deposit to our manufacturers to produce a piece of furniture. So that way it’s actually very easy to build a furniture business from that perspective. For luggage, I guess it’s a little bit different because, especially for July, nothing is off the shelf. We’ll have to all modes, we have to do a lot of product development, and there’s a very high MOQ. So which means minimum order quantity.
I guess when I say, I didn’t need external capital to build a business, not 100% correct. You do need some capital, like in our case, each one of us had to put in some money, 50 to 100K, you gotta have putting some money to start a business.
Nathan: Yeah, of course. You can’t start with zero.
Richard: With physical product it is very difficult, unless you have amazing term with the manufacturer. And also you don’t do product development, you have to buy stuff off the shelf. That’s a different story.
Nathan: Yeah. Okay. Interesting. So one thing that I’d love to talk to you about around the scale piece is, you were an instructor for one of our courses that we’re launching soon.
Richard: Thanks for having me.
Nathan: So, e-commerce masters where, your expertise that you teach in that module is around manufacturing and scale and operations. So, with July in particular, with that kind of scale, zero to five mil in 12 months, that’s a lot of product.
Nathan: Sometimes. And even from my experience, manufacturers can’t keep up. When you’re dealing with that kind of scale, did you have to use multiple manufacturers? Like, how’d you, can you just give us a bit of an insight there? What should you be doing?
Richard: Yup. So, you have to, at the beginning, when you find a manufacturer, you have to make sure that this manufacturer can grow with you, because a lot of businesses when they to work with a small manufacturer, then they grow to a medium size and they have a large size. What you need to make sure, is that this manufacturer can actually grow with you. That’s the first thing. And the second thing is, and you want to make sure you have proper planning. You want to make sure that you plan out the next six to 12 months time. Very often people forget about planning, because factories need to lock in production slots.
As long as you give them the production slots and they allocate the production slots for you, then you will be okay. And when you have explosive growth, you have to make sure that there is another manufacturer better, bigger manufacturer waiting. So you have to develop those relationships early on. And this is something that I talk about in the course, how you find the perfect manufacturer for your products, for your business.
Nathan: Interesting. So when you’re starting out, for example, do you think you need to go to China to find a great manufacturer or just test it and find something off Alibaba, what’s your take there man?
Richard: Yeah, yeah, absolutely. There are many, many ways to find a great manufacturer. And like I said, I also talk about this in the course. People always have the perception that they have to go on Alibaba to find a manufacturer. Actually, some of the top manufacturer, they’re not on Alibaba or they’re not active on Alibaba. You have to find, use other ways to find them. So there are many, many ways to find them. You can go to the fairs. There’s a big one called Kendall Fair. There’s an international Furniture Fair in Shanghai, in Guangdong, and Delighting Show in Hong Kong for example. There are many, many ways to find them. One of the best ways I actually talk about in the course, is through software. You can actually use software to find the perfect manufacturer for your products.
Especially look at your competitors in a different market and see who they’re using. For example. You actually find these suppliers. I think depending on the scale that you are in, depending on the product categories you’re in, for the category that we’re in, which is luggage, it made a lot of sense to go to China. It made a lot sense to talk to a manufacturer directly. So it really depends on whether you’re doing larger products, whether you’re doing a huge volume, if you’re doing small volume that’s different, if you’re doing job shipping, that’s different. So if you’re doing your own brand, it makes a lot of sense to go to China, go to the manufacturer and talk to them.
Nathan: Yeah. Interesting. So talk to me around Connie. One thing that I think is interesting is you said planning, especially, we’re speaking right now, it’s first week of Jan, 2020. We know Chinese new year’s coming. I’m sure you guys are loading up. How far ahead should you plan? Like let’s just say, you’ve launched your product, you’ve got some sales coming in right now. Should have you already been back ordering, how do you work out? Because cashflow can be difficult when… How far advance, and what are your rules there?
Richard: Yeah, absolutely. So you always want to have to, at least three to six months for planning, and we always place our last order before we change the year, our last order is in October. Because our production will take roughly about two months, and then you have to allow some time for loading and that kind of stuff. So you always to have like three to six months. In terms of the cashflow, what you can do is, you can negotiate better term with your supplier. For example, you can put down smaller deposit, or you can choose not to pay deposit, depending on the agreement that you have with your supplier. So there are many, many ways to limit your risk. Yeah.
Nathan: When it comes to, if you were to negotiate with a manufacturer, you’re starting new company tomorrow, what kind of favourable terms would you be looking for?
Richard: So as a standard term, it’s 30, 70. So when you go to a manufacturer, they will ask you to put down 30% deposit and 70% before shipment as a first fresh order, or 70% on copy of bill of lading. So that’s like the standard standard term. I always try to get better term. I think, you can actually get say 10 or 20% deposit. Then the rest on shipment, you can ask for these kinds of terms straight away. Sometimes you get a yes, sometimes you get a no. But one thing I know for sure is that, you don’t ask, you don’t get. So I always try to ask these questions and as you work with that manufacturer a lot more, you can actually start asking for payment afterwards. So when you have a bit of trust between each other, you can pay 30 day after shimmer, 60 day after the shipment or 100 day after the shipment, depending on the arrangement. You can actually talk about this with your suppliers.
Nathan: Yeah. Wow. Interesting. And as you grow with your supplier, you’re ordering, your company’s growing like you guys, right? You’re ordering more, like how often should you be asking for, you’re ordering more products, so you get better margin, cost per unit, but then also like discounts, all that kind of stuff. How often and what kind of terms would you, like even from a percentage range when you first worked with them until higher quantities? What kind of ranges should we look for?
Richard: I mean there’s no set rule of when you ask these sort of questions to your suppliers, but if you think that your volume is doubled or tripled, you should definitely ask these sort of questions, and you probably get a no, then what you should do, is you should get a quote from a different supplier and go back to them and say, hey, I got a quote from this supplier and it’s a lot cheaper. What can you do about it? And then that’s a time that they will probably consider this properly, and there’s no set rule. But you should ask these questions.
Nathan: Coming back to July, incredible growth. Like I can see you guys building something very, very big and significant. You’ve come into the market quite aggressively and you’ve grown quite aggressively. Yes, you had capital, but I would argue that even if you didn’t, the product is incredible. You’ve made us like this special Foundr bag, which we’ll show on the screen. It’s so cool. Like so pumped, because I travel a lot, because we have offices internationally and whatever. So thank you. I’m curious, what have you done to differentiate, because there are a lot of luggages, there’s so many to choose from. What have you done and to appeal to the younger generation in particular that are buying online?
Richard: Well, so, the major difference from a business perspective is actually the business model. We first of all, we are digital native and we’re direct to consumer. So there is no middle man. The cost of making these pieces of luggage is a lot higher than any other brands out there. So something that’s sell for, 300, $400 in the store, probably only cost $20, $30, because there’s so many people in the middle and everyone needs to take a margin. But for us it’s a little bit different. We are the only one that take the margin. And because of that, we can actually pass on the savings to our consumers. And something similar like July luggage. If this were to retail in a proper retail shoe store, let’s say, David Jones, it would be priced at around 800, $900. A lot of for everyone to make some money.
That’s the major difference. And of course, because we’re direct to consumer, we’re able to look after the customer, we’re able to offer one day trial. So if people don’t like the luggage for any reason, we can return it for free for customers. And plus there’s a lifetime warranty. So anything goes wrong with the case, we’ll always look after them. And we’re very confident because we build the product ourselves, we design the product ourselves, and that’s the major, major difference I would say.
Nathan: Yeah, that’s a pretty incredible offer. I interviewed the founders of Warby Parker, and similar kind of offer. Like you can try on the glasses, you don’t even need to leave. You can, incredible warranties, incredible guarantees. And then they also have some special cause that they donate a percentage of profits, and incredible offers. Like you can’t lose. So talking about service, we actually, we’ve met each other today for the first time. You shot the course with Zach and all the guys. Right. But this is the first time we met, but we, Emily and I, my partner, were going to Vietnam. We just come back, and I’m recently engaged now.
Richard: Oh, Congrats.
Nathan: Thank you. And yeah, we wanted… she needed a new bag and I was like, Oh, you should get it July bag. And she went to the store in Emporium, and she loved it. And then just before, everyone was going on break about a month ago, the lock wasn’t working, and it was supposedly the first time it’s ever happened, and you didn’t even know it was Emily and you actually came to her house. When everyone was, it’s the end of the end of the year. Why did you do that? Why would you as a CEO of a company, take time out of your day to go and visit a customer, to fix a lock. She was super embarrassed because as soon as you walked in, she said, it worked straight away and it’s like… yeah. Why did you do that man?
Richard: Yeah. I think for us, what we want to build is an amazing brand, an amazing brand is reflected in many, many different areas. It’s reflected in the product quality, the product design and ultimately it’s the customer satisfaction. For us, customer satisfaction sits here, right on the top. And we will do whatever to make the customer happy. And just to give you an idea, we have some deliveries that we couldn’t get delivered on Christmas Eve day, I basically drove a van around Melbourne and delivered all the cases myself, one by one. And I needed to do that because I know that some people are gifting a suitcase to someone else. So it’s super, super important for us to look after our customers. And I will do this today. I would do this next year. I will do this in five years time. Actually to tell you a very interesting story.
We went to see an investor in Sydney, right before the round was closed. And we had lunch at to the investor’s house. Then right after that I actually scheduled a repair work for a customer on a different side of the city. When we got there, I fixed the lock for the customer and the customer actually took a photo and posted on her Instagram, that night, she discovered that her sister was actually the head chef at the investor’s house, and it was a massive, massive coincident, and I don’t know if that played a role in the investment, but we got the investment in the end. So that was a very interesting story.
Nathan: Yeah, it’s crazy. Some people might be watching it, it’s like, Oh, this was set up. He’s just saying July’s amazing and he just visited his girlfriend, but it legitimately was random.
Richard: Yeah. It was. Yeah.
Nathan: What were the chances that you would just appear at …?
Richard: Yeah, that’s right. Yeah, yeah.
Nathan: And you sold thousands of units that month.
Richard: That’s right. Yeah. We don’t really have a lot of product issues, whenever we have product issues, we take it very, very seriously. Is it really a product issue? Is it a human issue? So, we have to find out, what the problem is and resolve it for the customer.
Nathan: Yeah. So, crazy. What are the chances? What a small world, one thing that Paul Graham talks about in the early days of launching companies, do things that don’t scale. Is that kind of part of…?
Richard: Yeah. Yeah, exactly. And one of the investors that we have Strandbags was very, very surprised that’s sometimes we use Uber to deliver. Uber to deliver, because some people just want the case straight away. We’re like, you know what? We can make it work. If you’re in Sydney CBD, if you’re in Melbourne CBD, we can actually Uber to you in the next 10, 15 minutes and we could do this. And Strandbags was very, very surprised about it. And I completely agree with that, at the beginning you don’t do things as go, you just do all the little things that makes sure your brand is unique to the customer, look after your customers. And ultimately this customer will come back. Ultimately this customer would tell their friends and their family, because word of mouth, is the best marketing tool and it has the lowest customer acquisition cost.
Nathan: Yeah. Because, how many people do you think Emily told after that story and how many do you think I told? It’s crazy, right?
Richard: Yeah, that’s right. Exactly.
Nathan: Talk to me around the direct to consumer trend, and you said, it’s doing really well for you guys, that we were talking about where, every time I go to the States in New York, you’ll see a Warby Parker store, you’ll see a Casper store, a lot of these big Glossier. Emily’s favourite brands is Glossier. So, you see these big, direct to consumer physical product brands, where they have an almost cult following and they’ve, very targeted the younger market and they’re so cool. They always have physical stores now and it doesn’t seem like they just stay purely online. You guys did it. Why?
Richard: We opened a store August last year, which is exactly half a year in business. We believe that business should never just be online. It should also be offline, because a majority of customers do offline. And it’s an extra touch point for people to come and have a look, have a feel, touch and feel the products and talk to your staff, get to know the brand and get to know the business. And it’s working incredibly well. And people discover us through Instagram, through Facebook, and they come in and they touch and feel the product and they purchase on spot, or they buy online. We actually don’t have a target. We don’t have a hard target for our offline store, because the offline store for us is a way to kind of say, to get to know our consumers and that our consumers to get to know us, and we don’t need our staff to close the sale on spot.
It’s not a target for us. The target for us in the store is to tell the story and to tell them the product features, to show them the different colours. Because online, offline there’s always discrepancy, from your screen and to the physical products, you want them to see the product in person. Then whether they choose to buy or not, whether they choose to buy from the store or online, it doesn’t matter. And we’ve seen huge growth, not just from offline store, but also online, after we have the store back in August last year.
Nathan: When it comes to a retail store though, that is a totally different beast man. Talk to me about that. Because personally, online companies have no interest in doing a retail outlet. Maybe we’ll do a coworking space in bits and pieces like that.
Richard: It’s a completely different business. I completely agree. But, we had a thought about it. We thought that’s something we need to do. And the way to make it work, is to have amazing people. And if you don’t know certain things, you make sure you hire the right people for the right job. And that’s what we did. We hired an amazing retail manager and teach us at what to do. I’m not going to pretend I know everything. And we don’t pretend that we know everything about retail, and it’s our first store and there was still a lot of learning. But it’s a great start, and for us, it made a lot of sense and it’s something that we had to do, is actually one of the main growth pillars for the business.
Nathan: Yeah. Interesting. That’s what I’ve read that, that’s what Jeff Bezos does at Amazon, when they’re looking to enter a new market, for example, cloud storage, they hire people that have done it before, that are incredibly strong there. And that’s where they start to build up their own IP and start to execute.
Richard: Exactly. You need great people, because just two of us, we can’t do everything, and the huge growth is actually from our team, not just ourselves.
Nathan: So talk to me around what’s next growth strategy. You said something very interesting to me offline, because I was like, Oh man. Obviously, Asia Pack and then that’s probably going to be your springboard. You do some stuff in Singapore, and then probably springboard to US. And you said, Oh, no, no, no, no. We’re looking at different markets. So talk to me about that.
Richard: Yeah, sure. I just said retail store is one of the main pillars of our business. There are actually four growth pillars for July in 2020, and a retail store is one of them. Personalization is one of them, more products and international markets. So these are the four growth pillars for the business. And international is actually very, very important to us. And Asia Pacific is the main focus for us. We recently launched in Singapore. We actually did a hard push in Singapore in November and December last year. And it’s working really well for us. We don’t have a retail store there yet. But for online it’s working very, very well. And so the next big market for us is China. And we’re thinking to launch the business sometime this year, maybe second half of the year, to have a presence in China.
Nathan: Yeah, that’s really interesting. So, China is a massive market, much bigger than the US in many aspects. Well, it is bigger than the US. So I’m curious, one of my mentors, his company, they launched in China, and he said, it’s like totally different. Even the way you do business over there, love to get some insights, if you guys are direct to consumer brand online, predominantly, and you’ve got your few kind of flagship stores and that’s the play. You’re not going to be using Instagram, you’re going to be using WeChat, the other tools. So they have all their own tools. So do you set up an office there? Hire local people? What would you do?
Richard: Yeah, absolutely. You said something absolutely correct. In China, it’s a completely different world out there. We’re using very, very different services over there. So, in Australia we use Instagram, Facebook, Google, a lot. In China, everything got blocked. So, you actually can’t use Instagram. You actually can’t use Google there. And you just use something equivalent, like WeChat, Weibo, and now TikTok, in China is pretty big as well. The go to market strategy for us is that, obviously setting up a business there and setting the office, you need to be able to hire local talent to execute a lot of their strategy for you and with you. Because most of the strategies that are working for us in Australia wouldn’t work over there. It just a completely different market and you just need to take a completely different approach. You want to be able to give the decision making power to the local team. Airbnb is actually a great example.
They made a very important decision early, early days when they set up the operation. China, everything is run and managed by Chinese, and one of the co-founders actually moved to Beijing to work with the local team. But ultimately the decision is made by the local team. That’s exactly what we are going to do over there.
Nathan: Interesting. And you wouldn’t use a distributor, because I know a lot of physical product companies when they want to get into different markets, or different retail stores they use a distributor, no?
Richard: No. Still no distributor, because July is a D to C brand. We want to be able to control the experience, and because of that, it doesn’t matter which market we’re in and we want to be able to look after the customer and experience. So, the major difference though is that, as a D to C brand in Australia or in the US, you actually can launch a brand on your own website like July.com. In China is very, very different. And most of the D to C brand, they actually don’t have the website. They actually have a store on timor.com or jd.com, they actually don’t have a website. Website, don’t get traffic at all in China.
So that’s the major difference. It’s a decision that we are still making, what we do, whether we open a store on Timor, or we open a proper website, because a website will be very, very challenging and very expensive to bring traffic to.
Nathan: July.com is great domain. It’s four letters. I know how costly it was for us to even get foundr.com without the correct spelling. So founder without the E. How’d you get that?
Richard: When we started the business, we wanted to get July.com, but it was for sale, super, super expensive as you know, and what we did was that, just like Dropbox when they first launched, it was called getdropbox.com. And we were like, if Dropbox could do that, we could do that as well. Our first website was getjuly.com, and when we raised capital and one of the first expenditure was to acquire this domain, and I believing a great name, great domain, because we are a brand I want to make sure that we have July.com. So we reached out to the domain owner and negotiated a deal and finally acquired the domain. And I can’t disclose the total amount, but a was expensive.
Nathan: Yeah, no, I totally understand. Same kind of situation for us, and I agree with you 110%. We were Foundr mag at first. Yeah. But yeah, I agree. There’s so much white in a strong domain. People just don’t, you just don’t see it, right? We don’t even think about it, but where even, if someone goes to your website and they see, well, July.com these guys must be legit.
Richard: Correct. It’s the instant credibility.
Nathan: Yes. Like so much. Inherently, us as humans because the Internet’s been around and domain names. We’re just trying to think shorter, whole word or something very commonly used. Wow, this must be a decent company. It assigns a lot of value.
Richard: Exactly. I can’t agree more. Especially if you want to be around for a very long time and we want to build, many, many products under this brand. And I felt like July.com is super important for us.
Nathan: Yeah, I agree. No, super cool. So I’m curious as well, when it comes to your first sale. When did that happen? How did it happen?
Richard: I still remember, our first sale was end of November when we first launched the business, and it was actually a friend of Ethan’s to show support, it was amazing. We actually got a lot of support from family and friends very, very early days. And I remember when we first launched, each one of them, we gave them a founder tag. Just like when Tesla, launched in Australia, they have a founder edition. So we made each one of them a personalised luggage tag with the founder stamping at the back. It’s funny because yesterday there was a customer coming into the office and say, “Hey, I’m one of the originals, and I want to buy a larger case now.” Well, what do you mean one of the originals? Look at this. There’s a luggage tag.
Yeah. And we were like, then we talk about, we told all the staff about the early day story. It was very interesting and yeah, we were very, very lucky and we’ve got a lot of support from people around.
Nathan: What channels were most effective? Facebook ads?
Richard: Yeah. Facebook is very effective for us. Because we got lot of UGC, user generated content, and people submit, people send us the photos and videos when they’re using July cases, we actually use them as marketing tools. So Facebook is very, very effective. And also at the same time, bottom funnel we’ll actually, we use Google shopping. We use Google ad words. So he’s working very well for us as well. So these are performance marketing, on top of that, obviously we work very closely with our PR team.
PR is an amazing tool for us. Again, it’s instant credibility, and a lot of brand awareness. And on top of all of these, we also run some above the line, radio, interviews, podcasts, we actually do a lot of these as well. And yeah, it’s working. Everything works. So there’s nothing, so if you’re relying on just one channel, your customer acquisition costs is increased over time. You have to have multiple channels working together. So that it would drive down your acquisition cost. Yeah. So that’s our strategy.
Nathan: Yeah, I like that. And I’m curious as well, can hear a little bit of an accent, but still, little bit of an Asian accent. When did you come to Melbourne? Like how long? What’s your background?
Richard: My background in Chinese? I was born and raised over there. Came here when I was 17, to further my study. So, I did one year of high school and started going to Melbourne Uni, and I did finance and economics in the university, and yeah, it’s been great. I love the mixed culture in Australia. I’m also very, very fortunate being able to speak Chinese and understand the culture over there because this makes the business side of things very, very easy for us.
Nathan: And how often you go back?
Richard: I try to go back, once every month or every two months.
Nathan: Oh really?
Richard: Yeah, because it’s important to see what’s happening there, it’s important to go to our factories and make sure everyone’s happy, make sure that our QC is done properly. And ultimately it’s important to be there and to show face.
Nathan: Yeah. When it comes to doing the QC, what do you use? Do you use a service or you have someone internally or?
Richard: We have people internally from Australia. We actually send our QC guys from Australia to China, to our manufacturers, to QC and all our cases are 100% QCd, every single case is inspected by our QC guys.
Nathan: Wow, that’s crazy. That’s a pretty big cost man.
Richard: Not really. Not really, because the cost of losing a customer, the cost of an unhappy customer is actually more expensive.
Nathan: How did you work that out?
Richard: Because how I work that out is, I look at the average lifetime value of a customer. At the moment I’ll LTV is roughly sitting close to $1,000. If I lose a customer, that means I lose $1,000. So that actually is a lot more expensive than sending a QC guy from here to China and inspecting every single case.
Nathan: Yeah. Wow. Interesting. Okay. So talk to me around how you met your co-founder. How’d you guys meet?
Richard: We met in a cafe called A coffee, so just in Collinwood, because he was running his own business. He’s the founder and CEO of a business called Three Thousand Thieves. It’s an online coffee subscription business. So, I was running Brosa at a time, so we’ll always end working in the cafe, sitting, next to each other, and naturally we started talking and we became friends and we talk about business ideas and we talk about my experience in China, because he launched his business in China as well.
And yeah. So, when we had this idea, instantly we’re like, let’s do this.
Nathan: Wow. That’s crazy. So talk to me around, I’m curious, you’re obviously really short at product development.
Nathan: What are the rules that you use…?
Richard: When it comes to product development? My rule of product development is going to the factory. Don’t sit in front of computer in Melbourne and do all the drawings, because very often the technical drawings here do not work in the factory. You have to be redrawn, at the factory. So my suggestion is, if you’re working on a project, make sure we bring this project to the manufacturers, whether your manufacturers are in Vietnam or China, it doesn’t matter. Talk to them, because very often, they have very strong understanding of what you want to build, it might surprise you.
Nathan: Should you try to do local first if you can.
Richard: Well, depends on what products. There’s a lot of products, it’s actually very hard to even get a prototype in Melbourne now, because we are losing manufacturers in Australia. We don’t have a lot of manufacturers and we don’t have a lot of product developers here. So it depends on the category that you’re doing. If it’s a luggage, I’m 100%, you have to go to China, you have to go to Indonesia. You don’t sit here, you don’t talk to the manufacturer here because there’s no manufacturers here.
Nathan: When it comes to product development, the actual product itself in terms of specifications, unique value proposition, how do you work out what it is that people want? What is enticing? How do you make sure you don’t have too many features, too less design to meet your product, all those things. What do you do?
Richard: Well, when we started July, we listed out all the different product features we think that people might want and people want. Then we rank them. Then after that, we actually talk to real people, people around us and people we don’t know, and ask those questions and get them to rank them. And ultimately their opinion with our opinion together, we list out the top features that we want to have in the products, sometimes you don’t want to have too many features, because having too many features in the luggage, for example, it’s going to end up too heavy. It’s always a tough one. It’s always tough one, it’s almost like a piece of art. So you have to make sure that it’s something that people actually are going to like and people are going to use.
So, I think it’s a lot of initial research and it’s also product iteration, because, you don’t develop a product and that’s it. You actually change along the way. If you look at our case, for example, this is probably version three, even though they look very, very similar, this is already version three and we’re making more changes this year as well.
Nathan: Wow. So when you got your first prototype, did you speak to a lot of people or…?
Richard: 100%. The first people I speak to is my family, so I show them and get their opinion and then I talk to friends. We talked to random people. When we develop this product, we asked probably hundreds of different people, and to make sure that we actually on the right track, we had a lot of different pilot ideas. And in the end we shortlisted. And so this is the final piece.
Nathan: Yeah. Interesting. And how do you know what to cut and what to keep?
Richard: Sometimes, from those feedback sessions, and you make decision, what to cut and what to keep. But sometimes it’s also your entrepreneurial sense, what is… Correct. What is the right, what is wrong? Because, I can’t say that this is definitely going to work. Sometimes you have to throw to the market and see what the market feedback is. And we were very, very lucky, because when we launched the product, everybody loves it, and we’re very, very fortunate about it.
Nathan: Even the colours to choose from. How do you work that out?
Richard: Yeah. Colours it is… there are a lot of ways to find the right colours, you look at the trend report, you ask people around as well and you launch with the several colours and test, and we’re going to introduce more colours as well. We’re probably going to do some colour refresh this year. So, there’s no set rules, what we do. Sometimes it’s always hit and miss scenario I think.
Nathan: And you’ve obviously got your luggage, which is your flagship products. You said that you’re going to launch a full suite of products.
Richard: That’s right.
Nathan: What sort of complimentary products are you looking to add on?
Richard: Anything to do with travel. And we want to elevate people travel. And the year of 2020, especially is all about self expression. And when people travel, people want to use good products, and that when people shop these days, they want to shop in our shop once. People like us right now, I believe you guys are the saying. We want to buy good quality products that we can use for a very long time. I don’t want to use a product that’s going to break. I don’t want use a product that’s going to break within several weeks or several uses. And that’s the sort of product we’re going to develop, we’re going to develop high quality product that are going to complement your travels. And we’re going to complete the entire family, starting with soft rangers and some other accessories. So 2020 will be a big year for us, there’ll be a lot of products releases this year.
Nathan: What do you think will be the most popular in demand?
Richard: What luggage? Our carry on range is the most popular products by far. And I think when we launch the soft goods, I think soft goods is going to be very, very popular as well, because one is, our soft goods is going to work with our suitcases perfectly. They’re also amazing standalone products so that we’re going to launch I think first half of the year.
Nathan: Awesome. So look, we’ll work towards wrapping up, man, this is incredible conversation. Thank you so much for your time. The last question I’d like to ask you is, what would you share with anyone looking to start or grow a physical product based business now? Now doing it two times reasonably successfully?
Richard: I think, starting a physical product and business is actually very, very hard. There are many, many things that you need to be careful. Like there are many, many things that need to do and not just a branding and marketing and a website. You also needed to be able to build an entire supply chain. My biggest advice for people when they start a physical product is that, to know your margin. So what is your gross margin? What is your contribution margin after delivery ends at marketing. A lot of people actually, you’d be surprised that many, many people don’t actually know their margin. And that’s the biggest piece of advice I give to people. What is your gross margin? What is your delivery cost and what is your marketing cost? So that’s the biggest advice.
Nathan: If people want to find out more about yourself and your work, where’s the best place people should go?
Richard: The best place to find my work is, go onto July.com and buy yourself a piece of luggage.
Nathan: Well thanks so much Rich. Really appreciate your time man.
Richard: Thank you very much. Thank you for having me.
Nathan: If you really enjoyed this interview and you have an eCommerce store or brand and you’re looking to scale it up, so you haven’t, like you’re not looking to launch, but you’ve actually, you want to scale it up. I highly, highly recommend these new course that we’re launching called e-commerce masters, where Rich is one of our instructors, where he teaches how to work with manufacturers, how to scale your operations. And we have five other incredible instructors who have all built very, very large eCommerce brands. They’re legit founders, legit practitioners. If you want to know more, you can go to foundr.com/e-commerce masters, and if you want to know how to start an eCommerce store, we also have an incredible course as well, taught by Gretta Van Riel, who’s launched four multimillion dollar eCommerce stores. To find out more. Just go to foundr.com/ecommerce. All right guys, I’ll speak to you soon.
Key Resources From Our Interview With Richard Li
- Visit the July website