Alan Lim from Purely Gadgets – Podcast Transcript

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Shaun Ryan: [00:02] Hi, I’m Shaun Ryan from SLI Systems, and this the E-Commerce Podcast. Today I’m talking to Alan Lim from Purely Gadget. Hi Alan.

Alan Lim: [00:08] Hi Shaun.

Shaun: [00:10] Now, Alan, traditional first question: what was the first thing you ever bought online?

Alan: [00:14] I think it was really quite a while ago, but if I do remember correctly it was a Fuji digital camera, and I think it was from eBay as well.

Shaun: [00:23] A digital camera from eBay?

Alan: [00:25] Yep.

Shaun: [00:26] Fantastic. And just out of interest, what was the most recent thing you bought?

Alan: [00:31] I think really everything, from grocery shopping to theater tickets. I really hate shopping in the high street where there are queues and things are hard to find as well.

Shaun: [00:41] Yeah, I understand. And particularly with your background I imagine you must do a lot. [laughter]

Alan: [00:47] I’m sure. I always hope there’s going to be a search engine of high street stores. That would be very good.

Shaun: [00:52] Now, can you give me some background on yourself?

Alan: [00:56] I was actually born in Singapore and educated in the UK. While I was in my final year back in college in London about six years ago, I realized I could buy electronic products from eBay on hot sunny days, summer days and football days where everyone is happily having fun outdoors. Where the closing bid on eBay was very low. I ended up selling sim products again on cold, wet days when the closing bids are very high. So, I basically managed to sell sim products based on reading weather forecasts.

Shaun: [01:30] Interesting. And so that experience of selling and buying on eBay was your first introduction to e-commerce. How did you get to where you are today where you’re now running the Purely Gadgets site?

Alan: [01:42] I think it was a lot a lot of hard work, sweat and determination. I think most importantly the people who works with me. They’re highly motivated and they have contributed tremendously to the business. I think also working with platform providers, with Amazon and Google, and using new technology like SLI systems or channel advisers and intelligence and so on. [02:13] I think that all has contributed to being a pioneer. Using this technology has helped us to get where we are today.

Shaun: [02:18] OK, cool. So can you tell me a little bit about Purely Gadgets, for starters, what does your company sell?

Alan: [02:25] I think today we run the whole, and Purely Gadgets is one of the first companies we started about five years ago. But if we are looking at Purely Gadgets, I think with Purely Gadgets we are very focused on high-tech, high-end consumer electronics. Usually we probably will be the first one or second guy to implicate these products.

[02:51] It’s really high-end, and the initial target was yuppies, as well call them. But that has changed over time. We always initially would like to focus on products that help people feel and look more important, look important. So having a fresh new iPod makes a guy feel brilliant, wonderful, and very happy to himself. But I think over time that has changed and we are more mainstream than where were a few years ago.

Shaun: [03:15] OK, so you focused on the yuppie market to start off with, and it’s gone broader. The types of gadgets you sell are primarily electronic gadgets, right?

Alan: [03:32] Really quite gadgets. The biggest market for us so far is digital cameras, camcorders, MP3 players, iPods, netbooks, and all to do with the very extreme stuff like wireless waterproof earphones or headphones, and to things I’ve never before heard of as well. But the mainstream is the digital cameras and camcorders. That’s our main source of product range that we sell.

Shaun: [04:02] How do you source the goods that you sell, Alan?

Alan: [04:08] I think initially, a few years back, we sold primarily from the far east. Today we are 100% buying direct from UK distributors. We buy directly from the manufacturer, because have large accounts of gear. We sell quite a few items a day and we get a great discount and advertising budget from the manufacturers themselves.

Shaun: [04:31] Right. And just out of interest, how do you decide what sort of stock you should have on your store? Is it driven by what people are asking for, or is it driven more by what you can find from the manufacturers?

Alan: [04:45] That’s the four billion dollar question, isn’t it? I mean, my competitors are probably going to listen to this podcast. I think that’s a wonderful question. I think the trick to that is that consumers want to see that we have a huge variety of products, but in reality we follow the 95/5 rule. 95% of products we sell very little of those, but 5% of the products are products we really sell in huge quantities, and good profit margins as well.

[05:15] And we will probably not stock the 95% sufficiently, and will probably do drop-shipping with our supplier. But for the 5% products, how we do this, it’s going to be a very easy decision if it’s going to be a new Sony camera or iPod, or so on. We’ll probably stock that right away, because we know from our previous experiences that these are products that will fly out the door.

[05:42] But it will be more tricky with maybe a midrange camera or camcorder. We will probably be very skeptical about sourcing and buying and selling these item. We’ll probably be buying small quantities to start off first, and really look at our analytic and really look at the reports they generate of what people are searching for, and so on. If there’s a secure market for that, then we start selling more of these products.

[06:09] So we are very much conservative. We don’t stop and show off. We need real data and real reports to make that informed decision.

Shaun: [06:18] Cool, that makes a lot of sense. It sounds like a combination of using the data that you’ve got and the experience that you have to make those decisions, and obviously they’re critical decisions for the success of your store.

Alan: [06:33] As I said, it’s a million-dollar question. I think to do this well sounds very simple but to do it effectively is actually very very challenging task all the time. We use search engines a lot. We use Google Analytics, for instance. We did what people are searching in Google. That is one way to look at what people actually want and whether they like this product or not. Then with SLI systems we do the internal search report and see whether those people who do come to our website are interested in the same products as well.

[07:04] If we get that information synchronized, it’s almost 80% that products will sell well, and we stock a little bit of those and see how it goes.

Shaun: [07:14] Very interesting. Now, do you have a physical store as well, or are you purely online?

Alan: [07:21] We are purely online at the moment, but there are plans to open up a chain of stores next year when the opportunity arises.

Shaun: [07:30] OK, that’s interesting. It is really interesting to see these pure play e-commerce operators like yourself looking at moving in the bricks and mortar business, which must be quite a different business.

Alan: [07:44] I think it will end in the opposite direction. I think when we started the business, e-commerce was easy to run. It was very simple. I think clearly now running a brick and mortar store seems to be easier than running an online store. But I think it’s a natural transition, because 70 or 80 percent of sales are still on high street in the UK. That market needs to be captured.

[08:10] We’re never going to have a standard retail store with lots of sales guys. I think it’s really going to be a pickup store, and it will probably help increase credibility and conversion when people know that you can actually be found on high street as well. It’s going to be a generation of online sales. I think we all have to have some sort of brick and mortar experience if we want to succeed in this very competitive environment.

Shaun: [08:35] Right, very interesting. Now, you talked a little bit about the Purely Group. So you have other sites apart from Purely Gadgets that you’re working on or that are live at the moment?

Alan: [08:47] The second company that I run right now is Purely Beauty. It mainly sells perfume, cosmetic products, and skincare products. The main reason I would like to do this is that the gadget business, the products that we sell, is a 60, 65, 70, or 75 percent male market. I thought it would be interesting that women are just spending more money on themselves on beauty products as well. So it’s best we follow the same sort of thought process that we have.

[09:21] The website is yet to be up. It will be up in several weeks’ time, but we’ve started at eBay and Amazon Marketplace so far, and the results have been very positive.

Shaun: [09:30] Excellent. Obviously you’re building up this Purely brand, so you’ve got plans for other types of stores using the Purely brand?

Alan: [09:41] Indeed, I think a lot of stores. We really don’t set up a lot of legal domain names. This is going to be Purely. What we are going to set up next week is going to be Purely golf, Purely toys, Purely laptops, Purely entertainment, Purely finance. We even have Purely sex, as well. [laughs] That’s probably not in the pipeline because I have too much demand for my male employees – they are probably different.

Shaun: [10:08] [laughter] Now can you share with us how well the business is going in terms of how much you are selling online per month?

Alan: [10:17] We ship out about 500 products per day, so I think it is probably about 500 times 22 days. So it is about 22, 000 products per month and slightly over about 1-1.5 million Pounds worth of sales every month.

Shaun: [10:36] That’s great. What’s your growth been like? How fast have you been growing over the past year?

Alan: [10:42] If you really look at this, I started selling one or two cameras on a daily basis five years ago compared to our current business. We probably have grown quite fast over the past few years. However, over the past 12 months, business environment has been very, very challenging. I look at what we can do to maintain our growth. Usually, we are probably growing about 20% a month. Last year, I reckon we are probably growing about 5% or 6% the entire year. It’s very difficult.

[11:20] I am very positive. I believe in today’s economic environment. We are in a once in a lifetime crisis and yet again, this is a once in a lifetime opportunity as well. We see a lot of competitors going under over the last six months or so. The market is truly consolidating and profit margins are now increasing as well and we are winning a lot of market share.

Shaun: [11:42] OK. That’s interesting. Let’s delve with how you are dealing with this financial crisis. Have you seen a decrease in the number of orders or is it just that your growth has dropped off?

Alan: [11:55] Growth has dropped off until July this year, after Lehman Brothers collapse. I am in UK and if you see sales drop 50% in one single month and that’s drastic.

Shaun: [12:11] That’s amazing.

Alan: [12:12] It is amazing. I think we are lucky in the UK. We are in the heart of the financial crisis right now and not helped by that we are selling high end items which are high disposable income. Things are tricky. I think that this is a wonderful opportunity as well. In the past, it is too easy for not very competent competitors to come into this market and do this kind of paltry margin. I think now people get left behind and will be left behind. We are an experienced ecommerce seller and we all know where is our position in the marketplace. I am actually very positive and I feel this is a good change for us.

Shaun: [12:59] OK. That’s really interesting. You expect a few of your competitors to go under, and you see that as an opportunity for you to increase your market share and to increase your margins.

Alan: [13:10] That’s really been happening for about six months now.

Shaun: [13:14] Are you having to cut costs yourself to survive this downturn?

Alan: [13:21] I think indeed. For the first time in my career, I made people redundant because of decreasing sales. I probably made about 15 people redundant over the last month or so. Not massive, about 20% of our workforce. We are now very conservative about cost. We are looking into capturing every single profit that we make. All of a sudden our expansion growth plan isn’t being… In terms of anything that doesn’t generate cash right away are being passed onto future notices.

[14:04] For one thing we are in a better position because the entire business is being generated from cash flow, organic…from the cash flow that we made from day one. So we are debt free and hence in a better position than a lot of our competitors.

Shaun: [14:19] Yeah, being debt free is a very strong position to be in at the moment. It sounds like the cuts you’re making are sensible, but they must be very difficult to do.

Alan: [14:29] Yes, they’re very difficult to do. I mean, it is… If we put ourselves in four months ago, before this crisis really hit. It’s amazing that now we have been trying to get a new office… I mean, we’re trying to get far larger offices and finally signing a contract for those as well. And we are looking into huge growth trends from our companies, and we’re doing extremely well. Suddenly, things just change overnight.

[14:59] So it’s been very difficult, and the entire atmosphere of the company has been moved from, we are doing extremely well. We’re the market leaders. We’re young, vibrant. And suddenly we now need to tone down our spending, and we need to be careful and maybe cautious. And we need to think about what’s going to happen next.

Shaun: [15:20] Yeah, it’s a change of culture. Now, what are you expecting to see over the Christmas period? Are you expecting to see sales growing over last year, or is it just too difficult to tell what’s going to happen?

Alan: [15:38] I think last year’s sale was extremely difficult to tell. I mean last year, when the credit crash hit America in last year. In hindsight, what last year I think was very surprising, I think Christmas arrived in the UK very, very late. And usually, they arrive by now, where people are shopping… I mean, we probably have to try to position our sales by now two years ago.

[16:03] I think last year it arrived in about the second week of December, where competitors are all trying to [unintelligible 16:10]. They’re not sure whether Christmas is coming, and have to cut down their profit margin to heavy discounting. And by the time Christmas does arrive, they don’t have enough stock.

[16:19] Last year a [unintelligible 16:21] of mine post-Christmas sales even come before the real Christmas sales. So by, then again, discounting of lots of stock sell and people [unintelligible 16:28] have any. It’s a wonderful time for all last year. This year, I’m actually not sure what’s going to happen. I doubt… I mean personally, I think there’s going to be a very weak Christmas. I anticipate it’s going to be… I think we’ve positioned ourselves to be in two position.

[16:48] I think best scenario, we do extremely well. It’s going to be a good Christmas. But I don’t think that’s going to happen. Or there’s not going to be any Christmas at all, and all of our competitors who are hoping for a great Christmas, it’s not going to come and they will probably need help by next year.

Shaun: [17:04] Interesting. And the Christmas shopping, I know in the US it sort of gets kicked off after Thanksgiving. They have their sales on the Friday after Thanksgiving. Is there a day or sort of a time when the Christmas shopping traditionally kicks in in the UK?

Alan: [17:24] Traditionally, I think from last year, it’s going to come in the first week of December.

Shaun: [17:29] Right.

Alan: [17:30] It will probably peak on the 21st of December where obviously on a Monday. 22 of December maybe, and I know for instance Amazon offering, you can still buy until the 22 of December and arrive on the same day of sales. And they will probably capture a huge number of customers.

[17:52] But I think it’s probably going to be 21st or 23rd of December that’s going to be the peak, followed by… There’s going to be the heaviest traffic on the 26th of December, Boxing Day.

Shaun: [18:04] Right, the Boxing Day sales.

Alan: [18:06] It’s probably not going to be heavy sales, but heavy traffic. [unintelligible 18:10] do a lot of research. And then over the next few days, there’s going to be crazy sales again.

Shaun: [18:15] Right. So, tell me a little bit about how you market your site. How do you attract new customers to your site?

Alan: [18:24] I think we really use all kinds of online advertising that are available in the marketplace. I think from Google adverts to Yahoo! Advertising. Really all the major price comparison sites, strategy affiliate programs, email marketing, Google based, SEO. I think basically everything that is available, we’ve been making use of them as long as the cost of conversion is lower than our profit margin for the products.

Shaun: [18:53] So you’re doing everything. I mean, well as much as you can. So, how do you go about doing that? Do you have people dedicated… Like, what size is your marketing team that are doing that?

Alan: [19:06] I’ve got about 15 people on my marketing team. I have two offices, one in Hong Kong and one in London, so they work in two shifts. So for instance, when the market closes in London, then after several hours, the Asian market opens. What they do is they advertise… We developed our systems so all the online information will go to this single [inaudible 19:33] on the product basic level.

[19:35] So for instance, as long as we know that Google Atlas list the possible conversion for the particular Sony P Series camera is five pounds, I mean it would be fifteen pounds where the profit margin is ten pounds. Clearly, the more we advertise the more money we lose. So they will automatically be switched off from advertising to Google Atlas for instance. But at the end of the day, it is still required as a manual intervention and human intelligence to input the results.

[20:06] What we did…I’ll come back to this…We capture opportunities faster because we cover two times zone instead of one time zone and react to new product pricing or product sourcing on the same day sales.

Shaun: [20:20] Wow and that must be quite challenging running a business with two offices that far apart. I mean there are obviously advantages but there are also challenges from doing that as well.

Alan: [20:33] I think it’s clearly challenging. I look as a point of staff retention program as well. I think…What I did was I sent all my most competent guys I work with in London for the past five years. I planned for them to development sale they want to go to and as a result, basically Hong Kong. Send them abroad and build the team up from there. So people who are very competent with the culture and life in the U.K. know exactly what they’re doing and are able to hire very good people who share the culture as us as well.

[21:08] So I would say it’s challenging but it’s clearly achievable and this gets the guys very motivated as well. The guys from London could have the opportunity to work in Hong Kong, and the Hong Kong guys could work in London, as well.

Shaun: [21:19] Yeah, yeah know I see that. Your product markets in the U.K., do you sell outside of the U.K. as well?

Alan: [21:26] We do Kruger checkout all across Europe as well and we’re planning to do in Australia and New Zealand. Initially it was planned to be launched about two weeks ago that was being paused because the Australian dollar is so weak at the moment. So it doesn’t make sense that we go to the market right away and what [inaudible 21:55] and what we are doing is we, apart from building different industries of product, we are also getting different countries. So Purely Gadgets is going to be in whole German version of Purely Gadgets in Germany. As opposed to a different site and that’s what we are going to be doing in France as well. And that’s what we’re heading towards.

[22:15] And at the moment we are selling…It’s not very competent or effective to sell, for instance, English Purely Gadgets in Germany. Where I don’t think…we have to sell with much heavy discounting to capture sales. So I think the niche is very small followed by Q1 Q2 the next year we have pure different languages across Europe as well.

Shaun: [22:36] Wow that must be a huge challenge creating all the different language versions of the site.

Alan: [22:43] I think the challenge is there…But I think too everyone is vying for first place and there’s not going to be money in that. I think challenges opens opportunities as well.

[22:55] But we are about 60% from completion of doing that so I am pretty happy with the progress.

Shaun: [23:02] So how about Asia? Are you selling into any of the Asian markets as well?

Alan: [23:08] Not at the moment. I think the Asian countries are far too small. It’s too convenient to buy from retail store or from people on high street you get it delivered. Because you can get it from a local town so I don’t think it’s a good market for online retailing in Asia. China is a market we been looking for, for a long time already but currently in China the pre-obstacle for us again there’s a huge market which we are very comfortable with so we’ll do so in the next two years is the delivery systems and payment structure.

[23:43] One are…I’m in the process of doing that as well we will advertise online and pick up on the retail store in Shanghai, for instance, and advertise just in Google averts only for targeted to Shanghai in rich town people. I think it’s advertising to customers and direct them to traffic your retail store, pick up store in high street where there is no problem with delivery payment at the time.

Shaun: [24:14] OK. That makes sense. Moving on. Do you have an E-commerce site that you particularly admire, a competitive site or a completely different industry?

Alan: [24:30] [laughs] Amazon. Amazon, I remember four years ago when I first started working with Amazon on Amazon Marketplace in the U.K. that was one of the first marketplace customer. I remember Amazon at the time was not functioning very well. It’s very, very still into market demand. The prices are way off market expectation. Today, it has come so far so quick, so rapidly as well and so they have great technology within the site. It’s very easy to use, huge product catalog. I mean it’s the online supermarket. You can find everything on Amazon store today, and extremely competitive pricings as well.

[25:14] I think more importantly, why I really admire Amazon, despite its size and the number of people it got, it can react pretty quickly to the market condition and environment.

Shaun: [25:27] Yeah. It really is the gold standard isn’t it?

Alan: [25:31] It’s the benchmark today.

Shaun: [25:34] Now let’s talk about the technologies you use to run your store. What E-commerce platform are you using.

Alan: [25:43] We actually developed from scratch bought from PHP so we are not using any solutions that you can buy off the shelf. We write from a piece of white document and we develop our site from scratch.

Shaun: [25:56] Wow. That gives you a lot of flexibility but obviously there is some overheads to running that and developing that yourself as well.

Alan: [26:08] I think yes it does although I think it’s necessary because of the way how we want to change on a daily basis business processes, how we fit in the system. If we were to use off the shelf packages that’s pure…So there’s some limitations. We basically design based on what we require for business and we develop that in the website.

Shaun: [26:35] So you mentioned earlier you are using SLI. Are you using any other third party technologies on your site?

Alan: [26:45] I think that web loyalty, for instance, I think web loyalty is another penalty as a website…I’ve got to think about it. There are so many. I have to think what is relative or not.

Shaun: [27:03] So just when you think about that would you recommend web loyalty to other retailers?

Alan: [27:08] I would certainly recommend web loyalty to my non-competitive retailers. I think it’s a fabulous piece of application and it’s a win win-win situation. I think whether you’re going to be an affiliate or you can be a merger, it makes more money from web loyalty or customers who get money back for your next purchase. I think it’s a wonderful idea.

[27:35] I think we use other applications like Live Chat for customer communication on website and there are quite a lot of fabulous things the we bespoke where we can relate to anyone else but I think the biggest sort of things that we’ve done is SLI and we are very happy with implementations and web loyalty obviously that’s a very good implementation as well. Obviously we have group checkout, PayPal checkout, and so on which is standard. And Live Chat for communicating with customers and there is where our software’s as well.

Shaun: [28:14] Excellent. So you must have quite a technical team there since you are running an E-commerce platform. How many people do you have in there?

Alan: [28:24] In my web development team, we are four full timers and quite a lot of freelancers as well. On average, I’m quite a geek myself, I don’t do programming myself but I basically got a Project Manager that I relate my business ideas to her and she will relate it to her team in a techie manner. And manage sometimes to feedback to me in email, I will be able to implement. I understand what they are. I understand what is the opportunities and what can be done and what couldn’t be done technically and I think we have a very good team here.

Shaun: [29:03] Well Alan, thank you very much for your time today. I really appreciate it. I think there’s been a lot of useful information there and I wish you all the best for the coming Christmas season.

Alan: [29:13] Thank you Shaun, it was a pleasure.

Shaun:[29:16] That was Alan Lim from Purely Gadgets. I’m Shaun Ryan from the SLI Systems.