The Jay Kim Show #76: Lui Tong (Transcript)
Hey, listeners. I’m happy to announce that the Jay Kim Show is an official media partner and supporter of the Inside Retail, Retail’s Cutting Edge Vertical at the Startmeup Hong Kong Festival at the end of January. The actual event is on the 31st of January, which is a Wednesday, and it’s going to be an all-day event at the Hong Kong Convention Center. It’s going to be an action-packed day full of seminars, panels, pitching, networking, and, of course, cocktails. As a media partner, I also get a special 20% discount code for my listeners. So if you’re interested, head on over to Live.InsideRetail.hk/register. That’s Live.InsideRetail.hk/register. Use the promo code JAYKIM20OFF. Hope to see you there.
So it’s officially been one year since I first launched the Jay Kim Show, which I launched this time last year in conjunction with the 2017 Startmeup Hong Kong Festival. And because of that and the support that InvestHK gave me to launch this show, I always try to give back a little bit and help support them where I can.
Now, the Startmeup Hong Kong Festival is one of the two largest conferences here in Hong Kong — the one being RISE, which takes place in the summer. Startmeup Hong Kong is an entire week full of great speakers, panelists covering everything from fintech, connected city, retail, healthtech, and, of course, the flagship venture forum where we had Elon Musk come speak two years ago.
So this year I’ll be doing a two-episode special to help support the cause, and it will be in the Inside Retail vertical, and I’ll be interviewing two world-class entrepreneurs this week from Hong Kong who have started their own companies within retail. And so we’re going to talk about the future of retail.
Today’s show guest is Lui Tong, COO of Strawberry Cosmetics Ltd. Strawberry Cosmetics, which is also known as Strawberrynet is a leading beauty online store carrying over 800 brands and 33,000 products which ship to nearly 200 countries around the world every single day. Today, we talk about her exciting journey from the early dot-com days in China where she helped launch the popular Chinese social network, RenRen.com to starting her own luxury lingerie business, then, to finally starting Strawberrynet in 1998, which she still runs today. That’s 20 years that she’s been running this successful e-commerce business, which is one of the largest in the world within her niche. Let’s get on to the show.
Hi, Lui. How are you doing tonight? Thank you so much for coming onto the show.
Lui: Hi, Jay. I’m good. Yeah, thank you for inviting me.
Jay: We’re very excited to have you on. Just for a little bit of color for you, I launched this podcast exactly one year ago during the Startmeup Hong Kong Festival 2017. I had an opportunity to interview some of the other speakers at the time, at the Inside Retail Vertical. This year, for the audience listening in, Startmeup Hong Kong Festival 2018 is at the end of January. The Retail Vertical is actually on Wednesday, the 31st. Our guest tonight, Lui, is actually one of the speakers that day.
If you guys are interested, I’ll have this all linked up in the show notes. I actually have a discount coupon code. If you want to go to the Inside Retail on Wednesday, January 31st, you can punch in the code and get 20% off your ticket. I highly recommend you guys do that. If you’re into retail, and you want to hear some of the great speakers, including Lui.
Thank you so much for your time, Lui. Thanks for coming on. Why don’t you introduce yourself to the audience?
Lui: Okay. Hello, everyone. My name is Lui — Lui Tong. I’m from Hong Kong. I have been in this online business nearly 20 years. It started at the beginning of the dot-com boom. If some of you have some history, you might remember there’s a company called RenRen.com. That’s how and when I started to get into online media, which helped to start the business. The company was actually quite an early entry. Eventually it went IPO. It is the earliest Chinese community site in those days before Facebook started.
Eventually, I helped PCCW to do another venture to do an online media consultation for integrated media called Adsociety, before I actually set up my own business doing completely something different, which I started a retail business, brick and mortar business, representing top brands, top international lingerie brands, distribute and retailed them in Hong Kong.
Pretty soon the business evolved into an online business, and I was one of the earliest startups for trading fashion items, not to say luxury lingerie, on an online basis. To my surprise, my shoppers were not necessarily from Hong Kong. Most of the people who actually came to shop are actually from Europe, US, and Australia. We’re talking about in 2006. That was actually a really great experience in selling an article of lingerie ranging from $2,000 to $3,000 an article. It was a great experience, considering a lot of the country was only starting to finance their broadband network.
Lui: Eventually, that brings me today to where I am, completely involved in an online business with Strawberrynet.
Jay: Right. Thank you for sharing that, Lui. How did you initially get into tech? Was that your background? It sounds like you probably—I’m making assumptions here, but it sounds like when I hear that you went into retail and then now you’re doing online retail, it sounds like that was what you wanted to do all the time. How did you end up doing tech first?
Lui: Very good question, Jay. I actually never thought about going into tech. I’m actually trained as a chemist, Chemical Engineer.
Jay: Oh, wow.
Lui: After working as a chemist and chemical engineer for some time, we were trading pigments in those days. Trading items like that, you were really taking a long time for a company to make a deal. Sometimes you have to involve government regulations and lobbying. Each deal would take two to three years, sometimes. But, the reward is actually amazing.
As a young person, especially living in Hong Kong, things are really fast. A lot of people are into banking. You see things happening really fast. I started to ask myself, is this the direction I wanted to go? Is there something else I wanted to do? Then, I had the opportunity to meet the founders of RenRen.com when they first started, Michael Robinson and Anthony Cheng, two McKinsey ex-consultants.
We hit it off after a coffee. Before I knew it, the next day I joined their venture. That’s how I got started with technology.
Jay: Wow. That’s amazing.
Lui: It’s been a very great experience and great point to change my life.
Jay: Yeah, absolutely. This was web 1.0, so this was like the initial tech boom. You were there for that, which is pretty cool because RenRen was like the first Chinese social media network. Right?
Lui: You bet. Yeah.
Jay: Yeah. Absolutely. Then, after that, after the exit, you worked for PCCW for a while. Then, you decided, “Okay, I’m actually—I don’t want to do like pure tech anymore. I want to go back to retail,” I guess. So, you did the high-end lingerie. Is that sort of the thought process that you were having at the time?
Lui: Those days, everything happened so quickly because I think that was still the stage of time when people thought about technology, dot-com as, actually, a new media. The word new media actually still exists today, but gradually a lot of people understood new media is not necessarily meaning new business. Your budget is only this much. You have to cut your pie differently to reposition yourself, how you want it to be exposed.
Everything happened so fast, especially in those days with technology companies. We have an investor like News Corp, the best in the VC funds from Silicon Valley. Apart from developing our technology backend, also partnered with Intel. Things were moving very, very fast. Market was expanding very fast. Technically, we were working about 20 hours a day because, even though we say that we’re working just for the Chinese community, our partners actually involve people who were maybe a technology partner, actually stationed in the US who are 16 hours difference from our time difference. In the evening, we’ll go back and then make conference calls and get things going.
After a few years of actually being fast-paced like that, I started to ask myself…I can continue to help people to start a business, or perhaps I could start up a business by myself and see where it goes. At that time, weighed different kind of options. What do I want to do? Do I want to start a tech company?
I went back to one of these ideas I had when I was in college, which is an inspiration from Victoria Secret, for those who live in the US.
Jay: Right. Sure.
Lui: It’s a very inspiration of brand, how to make such a simple product as such a big successful brand. We’re not talking about product. Marketing in Hong Kong is very nascent and so I thought, “Why not try it?”
I was actually quite naive and nascent at that time. I just thought maybe that was what I wanted to do. But, I didn’t realize I had no experience in retail. Forget about managing a company. I’ll start a business. Alright, but managing your own company’s very different versus managing other people’s companies.
Jay: I also feel like the niche that you picked is quite progressive because Asians are quite conservative. The luxury lingerie was definitely a bold niche for you to try to conquer.
Lui: Yeah. I think thanks to being young that all I can think of, even today… I think I was actually very nascent in thinking that that’s what I wanted to do. I decided to just go for it. I never really thought about all of the product nature, how am I going to market it? I’d never done any marketing in terms of consumable goods or fashion items. I got training from my supplier actually how to sell lingerie. I didn’t even know how to measure people. But, I learned quickly. It was a very exciting period of time. The best thing is actually, I don’t know what I don’t know. Everything I learned is something that I would make the best out of it.
Jay: Yeah. I think that’s about as practical on-the-job training as you can get. Just throwing yourself into a startup and never having any experience in a very difficult niche. Just figuring out as you go. Obviously, you learned some valuable lessons there that have now translated into a very successful 20-year business, Strawberrynet. Maybe you can tell us a little bit about Strawberrynet. What is Strawberrynet? Where did the name Strawberrynet come from? I know you have a nice little juicy-looking strawberry icon on your website. How did you come up with the idea? Please, share with us the story.
Lui: Strawberrynet, as its name sounds, is actually a—we wanted to remind everyone how fresh our business could be. It’s actually the freshness of a beauty product is what we are based on. So, Strawberrynet is an online e-commerce company focusing on beauty products from skincare to makeup, cosmetics, haircare to fragrance. It is the world’s leading beauty shop online that carries about 800 international brand names. Whatever names you can think of from Europe, US, Japan, Korea, existing brands, niche brands, classic brands, we all have for over 33,000 products on our catalog.
Lui: We’re selling to about 190 countries in the world. There’s a lot of penetration. There are only 196 countries in the world. With 38 languages, 24/7, pick and pack. It’s a very vertical and wide range of offerings that we have.
Jay: That’s incredible. Has the business model changed at all from inception when you first launched Strawberrynet? Has it always been skincare and beauty products?
Lui: The major product has always been the same. A founder started the business, believe it or not, very traditionally with a brick and mortar store in TST.
Jay: Oh, wow.
Lui: Within a year—yeah, we’re right in front of the Star House.
Jay: Okay. Yeah, the Ferry.
Lui: The business is really good if the traffic is exceptional. However, how many locations are there in Hong Kong, and how many locations are there around the world? After a year, the business decided to change its business model and convert itself completely to the online space. The big change actually happened within a year’s time to convert it from offline to online.
Lui: At that time, it was quite early. It was 1998. During that period of time, we slowly built up the business to make it into—to expand. It went from one country to another country, and expanded our portfolio. Since this is a very data-driven business, it also allowed us to understand what product and what area is actually popular that we should actually focus on. Eventually, it led us to developing to where we are today.
Jay: Do you keep the products in—do you warehouse the products? Do you actually carry the inventory in a warehouse somewhere in China and that’s where it gets shipped from?
Lui: Well, we do carry all the inventory. Actually, our inventory is not carried into China. It’s actually carried in Hong Kong.
Jay: Oh, it is?
Lui: Yes. In China, you would have actually very high tax.
Jay: That’s quite true. Yeah.
Lui: Carrying the inventory allows us to have a very fast turnaround time dispatching our products to our shoppers.
Jay: Hong Kong is obviously known to be globally one of the best and most efficient hubs for logistics, so it does make sense to have your warehousing here. As far as the products go and expanding that into other countries, you said there are multiple languages. First, initially, was it localized here in Hong Kong or was it English? How did you end up building on that to expand?
Lui: Right. I think as a basic, English/Chinese is a prerequisite. Right? Eventually, as we actually expanded to countries like Japan and Korea, local language is actually critical in order to be able to penetrate and work into this market. We started building into these languages as we wanted to expand into these markets. Bit by bit, we started to do that as the market started to have a little bit more opportunity until where we are today.
Jay: What is the shipping? Is there global shipping policy or is there a—if I ordered something online like a skincare product, how fast can I expect to receive it? Is it vastly different if you go around the world?
Lui: Absolutely. If you actually order from Hong Kong before 11:00 every day, you can receive it by the end of the day.
Lui: Same-day delivery service for Hong Kong. Of course, you can opt for actual delivery the day after, which is also possible. If we go a little bit further, you can go to Japan, maybe three to four days. Same is Korea, maybe three to four days you would be able to receive door-to-door from the time you order to the time it arrives at your home or your office. Wherever you want it delivered.
If we want it to go a little bit further and go to the US, it would maybe take a little bit longer. It really depends on the location. If it is a big city, it’s actually a lot faster. If you live in a small town, maybe it would take a little bit longer. So, we’re talking about maybe four to six days. Each country and each location may have some variance, but overall, we’ll be looking at within 10 days it should be there.
Jay: What intrigues me is that a seemingly very niched and simple business, you guys have managed to dominate for so long and for so many years. If you ask me, “Do you want to buy our skincare product” I don’t even know where, like in the states, I would go to Sephora and pick up something or the mall. Then, I would naturally just gravitate towards a brick-and-mortar website and then see if I could order it from there. Or, maybe the brand itself. If it’s Kiehl’s, I’ll go to Kiehls.com and try to order it.
What are some of the challenges that you have experienced, especially now that—I think you were an earlier adopter with e-commerce, so that obviously helped you. You had the first-move advantage. You dominated the niche, so that obviously helped you.
But now, I feel like it could be quite easy to throw together an e-commerce site and maybe try to compete. What are some of the challenges that you have experienced and continue to experience as you see this sort of ease? Like the barrier to entry for online business has gotten extremely low. Right? What are you guys experiencing there on that front?
Lui: These days, I think basically the information online could also be information overload. As you said, it’s so easy to set up an e-commerce company and so easy to promote it, then get it established, and maybe it even looks really professional. I think at the end of a day, a lot of the people go online, even the younger generation are even more savvy of doing their search. However, for everybody who invests money to buy something, they want to have a product that meets their expectations, that is reliable, and that is genuine.
So, how can a shopper determine whether the company they’re buying from, the website they’re buying from, is a legitimate business? For them to pay the money, it is that they will receive the goods. Or, the good is actually worth good value. They can search a lot and see the price comparison. These days you can see a lot of companies actually doing promotions, price cuts, and some company will have a lot of funding. They probably don’t really care about how much discount it is, as long as they actually aggregate enough shoppers. Then, they can actually start to make the money.
Everybody’s objective is different, and the funding situation is also varied. So, to justify what makes sense, I think a lot of the time, especially for more experienced shoppers or for the first-time shoppers, I think reputation is very, very important. Coming to Strawberrynet, for us to be an online space for nearly 20 years, it says so much about that what we have offered to the world has been so reliable. Therefore, we’re still here 20 years later, and we still continue to be leading in this category.
One other thing is we don’t market ourselves so much. For people who actually look for beauty products and find us, they always stay with us. I think this kind of reputation is not a beautiful website or something a short-term marketing campaign can build up.
Jay: It’s funny because you talk about authenticity of product earlier. One of the questions I wanted to ask you is, have you ever been challenged, of the products that you have? I mean, our proximity is right next door to China where it is notorious for fake goods. Has that ever been a problem with your customers?
Lui: It’s such a fair question. Next door to China… Whether it’s China or anywhere else, I think for our category, this kind of question comes in a lot, especially with people who may not have actually discovered us during the process of—they shop online. It’s new to them to find out who is Strawberrynet or they know us, but they never actually bought from us. People are curious about that. It’s important for us to be able to communicate with them and to let them know what we represent.
A couple of years ago there was a really great research report. I can’t remember off my head right now which company published it, but it’s one of the biggest publishers that actually published a research report about the top ten beauty companies in the world. Nine of them are all-brand owners. One of them is a multi-brand trader, Strawberrynet. We were actually shocked and also flattered, at the same time, that we were actually considered one of the top ten in the world.
Jay: Right. Nice.
Lui: I think I would not be surprised if this kind of question would continue because we are living in the digital world. There will be actually a lot of opportunity for people who may not know us and who want to know whether our suppliers are suppliers with the right kind of product.
The funny thing is, Jay, sometimes people buy things, whether it’s actually in the traditional store or online space, there are always people that want to change and switch. Sometimes, actually, we send them our product, and they can actually return it with a fake product. There are all kinds of people in the world. You asked me if people worry if we’re selling the fake things. We worry whether they return the fake thing.
Jay: That’s incredible. Oh, man. Yeah, when it comes to dealing with customers, you get the whole spectrum of people. Unfortunately, that’s the world that we live in. I think to your point, Lui, is that you built a business that has lasted for 20 years and that goes well beyond the smoke and mirrors that you can sort of hack together with a snazzy website.
A lot of these new companies now are using customer testimonials and then you find out those are also manipulated or faked as well. It’s absolutely a maze out there because of this democratization of information on the internet. Again, it’s a testament to your brand and the work that you guys are doing there that you were named in that study. I’m happy to hear that.
Lui, let’s just talk a little bit about the future of Strawberrynet and the future of e-commerce. If you have any broad outlook on how the future of e-commerce is going to evolve in the coming years.
Lui: These couple of years, I think the word cross-border e-commerce is becoming more and more seen and talked about. Before, in the past, e-commerce was basically a little bit more a regional thing. But, with the maturity of e-commerce around the globe, more and more countries can actually trade across the border. Trading across the border would involve different kinds of logistics and also taxation, duties.
Famously, maybe four years ago, when Chanel decided to cut their China price of five items in their handbag by 10%. Well, the world was going wild. They said, “Wow! They cut the price.” Little did they know, actually a lot of the fashion brand has already started to have a global pricing, even though it is not unified. But, there are some guidelines to make it a little bit more transparent because internet online e-commerce gives you the opportunity to look at prices in different countries.
The future of e-commerce is you are going to have a little bit more less price disparity across the countries.
Jay: Yes. Absolutely.
Lui: Cross-border trading is becoming a lot simpler. However, you will see a lot of countries, a lot of governments also adopting new taxation laws to ensure all the cross-border e-commerce in the trade, taxation, are captured.
As an e-commerce operator, these are the areas that are also critical to the success of the company, because when you start to actually comply to every single one of the new rules and regulations, that would also cost a lot of structural change, or even financial burdens, whether it is e-commerce company can afford to really have a true cross-border trading or not.
In locations like Hong Kong, we have such a small population. Unless we really go global… Hong Kong population, if we actually had 30% of the Hong Kong people all buy Strawberrynet, we’re still talking about 2 million people.
Lui: That would be nice, unless they buy every day. Right?
Jay: Right. Some, I’m sure, get close to that. Thanks for sharing your outlook. What about Strawberrynet—specifically as a company I’m sure along the 20 years there’s been ups and downs, changes, and potentials for—I’m sure people have come along and wanted to buy Strawberrynet and this sort of thing. Any plans for the future? Are you just going to continue the legacy, building that legacy of Strawberrynet within your niche?
Lui: Well, there are a lot of new things coming up and good things coming up. Some I may not be able to share with you at this moment. But, certainly I think one of the areas we can say is there’s a lot of new technology out there, and we want to actually make sure that we would be able to engage into this new technology, but without losing focus of what we are trying to offer. We are an e-commerce site.
AI and AR are very popular. Is it necessary for us? These kinds of opportunities where you evaluate constantly and see how we can integrate with our self. Influencer, social media, or even we work and collaborate with a lot of marketplaces. We can actually reach out through our own customer or who we can actually work together with to make our offer more reachable to their shopping habits.
Jay: That’s exciting. I like how you left a little cliffhanger there for the audience. We’re definitely going to put Strawberrynet on our radar now and follow closely because I think that there’s going to be some exciting news or some exciting data points coming up.
Last couple of questions, Lui. Again, I thank you for your time. I think that the forum is going to be great on the 31st. Last two questions. Second to last question is you have had, obviously, a vast and very successful career building your company there, the e-commerce brand. Obviously, the legacy of Strawberrynet and it’s being one of the dominant players in the space. If you were to give one piece of advice to say someone just starting out their—someone just launched their website and they want to build an e-commerce website in whatever niche it is. Maybe it’s a—I don’t know—a women’s luxury lingerie. They want to be the next Strawberrynet. What could you tell this young person that just started their website and they aspire to be the next Strawberrynet? What piece of advice would you give them?
Lui: Well, one word: persevere. I think it’s natural for everyone who starts a business is eager to see results and to see return. But, I think building a business is easy. It’s just building a structure. To make it work and sustainable is something that takes a lot of perseverance because whatever happens that is great today, tomorrow could be another challenge. So, it is important to learn as much as you can about the business and talk to as many people as possible. Plan as much as you can in terms of the options and contingency. Try as hard as you can. Prepare as much as you can because, at the end of a day, anything can happen.
We expect a good result to come up, but if it doesn’t come through, at least you know everything that happened is actually a result of careful preparation. You learn from it and move forward.
Jay: Sound advice. Thank you, Lui. The last question is where can my audience find you or follow you or maybe learn a little bit more about you if they want to? I’m not sure if you’re active on social media or if you have a website of your own that people can reach out to you if they have any questions or just want to follow-up. You don’t have to give it if you don’t want to get flooded with—don’t give your email.
Lui: Well, personally, I quite enjoy LinkedIn. I think professionally it’s a great location to exchange ideas and share some insight. So look for me on LinkedIn.
Jay: Okay, fantastic. Thank you so much, Lui. We had a really good time hearing your very unique and inspiring story. Thank you for sharing that with the audience and we’re looking forward to seeing you speak on the 31st at the Inside Retail event. Thanks again.
Lui: It’s my pleasure.
Jay: Much appreciated.
Lui: Thank you very much, Jay.
Jay: Thanks a lot. Take care.
Lui: Thank you. You too.
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