Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy.com, where real entrepreneurs come to listen to other entrepreneurs talk about how they built their businesses. We do it because we want another idea, another edge so that we can build better companies.
And joining me today is a Mixergy fan who’s heard a lot of Mixergy interviews who used to work at Amazon and then he had this idea, “Why not create a product and sell it on Amazon? Why not start my own business?” So, he ran a test, which I think is really interesting. When the test was successful, he said, “It’s time to go for it.” And he went for it and he built a business and the business is called KAVAJ.
These guys make cases for your iPhone, for your iPad, for your MacBook. They make wallets now. They’ve really expanded beyond their initial product. And I invited him here to talk about the test that told him that this was the right business to get into. I also wanted to find out about how he even sourced these products. It’s so much easier, I feel, in a way, to create software than it is to figure out where the get the leather that you need if you’re going to create a case, figure out how to manufacture it, how many to buy, how to sell it online, all that stuff. I want to find out about all of it.
So the cofounder’s name, who you’re about to meet, his name is Jöerg Kundrath. Jöerg, how’d I do with the pronunciation for your name?
Jöerg: Perfect. Thank you very much, Andrew. Thank you very much for having me here.
Andrew: I’m glad that you’re here. You’re here partially because of my two sponsors who I’ll tell everyone about later. The first one is the hosting company that will help you have your website stay up and not change you an arm and a leg for it. It’s called HostGator. And the second company will help you find your next developer or team of developers. It’s called Toptal. I’ll tell you about them all later.
Jöerg, good to have you on here.
Jöerg: Thank you very much. It’s a pleasure to be part of your podcast.
Andrew: I should also say that you wrote a book on this. It’s called–you have it there? You’re going to hold it up?
Jöerg: Yeah, sure.
Andrew: “KAVAJ Case,” anyone who wants to really read deeply into it, they can go to Amazon and buy it or actually you’re going to put up a free copy of this, right? So, if someone doesn’t want to buy it from Amazon, how can they get it for free?
Jörg: Yes. I put up a link where you can download the PDF for free. You can find it on KAVAJAcademy.com/Mixergy.
Andrew: Cool. So, you were working at Amazon and the iPad 1, the very first iPad came out. What did you think that led you to this business?
Jörg: Yeah. So, first of all, the other cofounder, Kai and I, we started together and we actually always had the dream for building our own company. So, even during our time at Amazon, we always thought, “What can we do? What can we manufacture or what can we develop to sell to found our business?”
Actually when I had the first iPad, I was looking on Amazon for a thin, genuine leather case which is not too bulky, which doesn’t harm the beauty of the iPad itself and I couldn’t find a genuine leather case or it was very expensive.
Andrew: You just wanted this for yourself because you wanted a nice leather case?
Jörg: Yeah, exactly.
Andrew: What was it about the iPad that said to you, “I’ve got to have a leather case on this?”
Jörg: It’s just I wanted a nice, leather case for my iPad. So this was just because I knew iPhones were already around and people had cases and I thought, for my iPad, I also want a case because it’s so slippery at the back and you need a case. Then I wanted to have a nice genuine leather case. So, I was looking for one and couldn’t find it. Then Kai and I said, “Maybe this is the idea we’re always looking for.” Then our dream started rolling in our minds.
Andrew: But you didn’t do what people say do, which is go quit your job right away, go start this business. You instead wanted to test it. Why did you want to test it?
Jörg: Exactly. We had good jobs at Amazon. We also liked working there. We thought, “Okay, let’s test it.” We thought we knew how to sell a lot on Amazon, but we had not proof of concept. So, we thought we must test it. We didn’t order a genuine leather case right away because it’s expensive in sourcing.
So we went to Alibaba and looked for an ordinary TPU plastic case, transparent. We put a fake name, Masime. It’s in Arial font. Really, nothing ordinary. We thought with this single case, we test everything–the payment to China, the importing, logistics and tax and whatever,” but also setting up Amazon and bringing the product on top of Amazon search results.
Andrew: I see. Can you do search engine optimization on Amazon search so that you could bring your case up to the top when people a relooking for an iPad case.
Jörg: Exactly. What we did was we worked one hour before we worked at Amazon and after work we did one hour on this project. After we put this product on top, we thought, “Okay, our thinking, our blueprint works, but if we want to do this for real, we have to quit and go one step further.”
Andrew: Let me break down what you did here. You just went to Alibaba and you said, “I can’t get a leather case because they don’t exist. I’m going to find the basic, basic case that’s out there and I’ll stamp by brand on it and I’ll make up a fake brand just so that it looks like it’s me authentically selling it,” right?
Andrew: How many cases do you have to buy from Alibaba for them to stamp your name on it?
Jörg: Actually, the minimum order quantity back then–it was 2010-2011, I’m not quite sure–was 500 people.
Andrew: So, you had to commit to buying 500 pieces. I’m looking at this. It’s a really good case. It’s simple, clear, as you said, nothing out of the ordinary on it. You were willing to commit 500 orders, 500 purchases? You were.
Jörg: Yes. We had to commit. Yeah. We had to pay for the samples they sent us because we didn’t have a relationship with these agents in China. They even charged us for the samples.
Andrew: What did it cost you to get 500 cases with your logo on the back?
Jörg: I don’t know anymore. But I know that we had, I think $2,500 in our account for making products for shooting the photos, for all that stuff.
Andrew: Got it. And you did shoot your own photos of this? I’m looking at the case right now on Amazon.
Jörg: No, because this is crucial. Even with this ordinary product, we knew we needed high class photos. So, first of all, we tried some internet providers but they looked cheap and looked like you could do it at home. They just looked cheap. So back then we both used to live in Munich, and we wrote to every studio who shoots product photos and we wrote them, “We are entrepreneurs. We want to start this business. Can you quote us a great offer to start with?”
Then one guy wrote back. He usually shoots photos for BMW. He usually shoots cars and the car parts. So, he usually has a daily rate of $4,000 a day. He said, “Hey, guys, I was in the same situation when I started my business. I’m giving you $35 per picture.” He used a Hasselblad camera, high-end equipment.
Jörg: So, my colleagues at Amazon later say, “Your photos look even better than brands like Samsung,” or whatever.
Andrew: Okay. So now you get it into the Amazon store, not very hard. Getting it to the top of search results at the time when the iPad market was just heating up must have been difficult. What did you do that worked that allowed your stuff to go to the top when people searched for iPad cases?
Jörg: Yes. Even right now, Apple accessories is still the most crowded market on Amazon because it’s a huge business. You have to put a lot of work in it. First of all, you have to optimize your product page. One thing which is key are the images. You have to use all available spots and high quality spots and give them people a look at feel, which they usually have in the store, but they cannot have online.
Andrew: Why does having a lot of images and high quality images help you with search engine rankings for the Amazon store?
Jörg: First of all, you can upload up to nine images. If you only upload only one or two images, Amazon realizes, “This is only one or two images and this might not be as customer-friendly as nine images.”
Jörg: The more important is once a customer or potential customer comes on your site, they of course have to convert because first of all you need sales.
Andrew: Okay. I see. So, high quality images first of all tell Amazon that this is a page that’s really been thought out and has the kind of stuff that people are looking for including images. But you’re also saying it helps increase sales and if the conversion rate on your product is high, then Amazon will bring it to the top of the search.
Jörg: Of course. This is the algorithm. It’s sales and conversions. The more your conversions, the higher you are in the rankings.
Andrew: Couldn’t you just game that? Could you ask ten of your friends to buy your case and give them their money back afterwards?
Jörg: You could do that. Yes.
Andrew: Did you do that?
Jörg: No. We didn’t do that. We didn’t do that. It wouldn’t help us understanding if we could do it or not. If we give it away to friends–
Andrew: No, I mean give the first ten away to friends just so Amazon sees, “This has got 100 percent conversion rate. Let’s shoot it up to the top of results.”
Jörg: That’s true but this wouldn’t prove our concept. When we do it for real, we don’t want to ask friends because for us, this is not customer-friendly.
Andrew: Okay. So then what did you do that allowed you to shoot up? I see the photos but I’m looking at the page on Amazon and frankly, it’s pretty sparse. There are five bullet points with product features. There is about four lines of text describing it and that’s it.
Jörg: So, the product doesn’t exist anymore, so I haven’t looked it up. You have to optimize your title, the pilot points. So, everything you see right now is keyword optimized.
Andrew: I see. The name of the product is the first word in the description or the brand name, which is Masime, right?
Andrew: “Masime Case for Apple iPad – Transparent.” Is it Apple, iPad and transparent case? Those are the words that people are looking for.
Jörg: In Germany, you find synonyms of case or cover, words like this for men. Some keywords are hidden, you can’t see it.
Andrew: How would you hide your keywords on Amazon?
Jörg: When you upload your product on Amazon.
Andrew: I see, then you can tell them some of the keywords.
Jörg: Exactly. It’s like earlier the Google optimization keywords.
Andrew: Okay. You were doing that. What else did you do that worked for you back then?
Jörg: Amazon is like a puzzle. The more you do, the more it fits together, the more likely you can go up. Another thing is FBA. So, you have to use Amazon’s fulfillment service.
Andrew: Got it, have them ship it and then you show up more often and get more sales.
Jörg: Then you’re Prime eligible and this will boost your sales.
Jörg: Then the next thing is customer service. So, it sounds really, “Okay, everyone is telling this customer service, blah, blah, blah.” But if you have a bad review–one, two, three-star review. You have to go back to the review and comment on it and offer a refund or help the customer. Then they’re very likely to change the review, even if you don’t ask because they tell the story in the review and think, “I initially gave one star for the review because the product has a problem, but the customer service was outstanding.”
Andrew: How can you know who it is? I guess you’re looking at their first name and trying to figure out who it is.
Jörg: You cannot, unfortunately. You have to comment on the review and hope they reply.
Andrew: But I don’t see you did comment on the reviews. Did you miss it?
Jörg: Honestly, this is now common practice. I don’t know what we did back then.
Andrew: But today you will comment on someone’s review.
Jörg: Of course. This is the most important thing. So many companies don’t do it.
Andrew: You know what I’m wondering is–I get now some of the things that worked for you back then, some of the things that worked today, what I’m wondering, Jörg is where do you go to learn what’s working right now for Amazon? In a week from now when someone is listening to this interview, what’s working then and a week from now when someone is coming back and listening, what works at that point? How do you go and figure this stuff out?
Jörg: First of all, nowadays you have so much more ways to drive traffic to your product. Back then we also used Google AdWords. We moved people from Google to Amazon. Right now, what we’re doing is Facebook, social media marketing. We enhanced our product packaging. The point right now is we try and test it. You have to bring as many people as possible to your product.
For example, what we did in 2012, Kai and I, we thought it’s a smart idea to print flyers and go to the Apple stores and distribute the flyers. When we launched, we launched in Europe, also in Italy and France. So, we went to Paris and Milan and right in front of the Apple store, we had nice flyers with the 20 percent discount code. We’ve been there for three days, handed out 3,000 flyers and we had great conversations. We were absolutely sure this strategy works and back home in Germany we looked up the numbers and we see that only one person bought the case.
Andrew: Flyers did not work.
Jörg: Conversion was one out of 3,000. That does not work. People who want to buy offline don’t show up online. But what I wanted to say is we try everything.
Andrew: You know, I think the founder of DODOcase told me that he handed out flyers at events.
Andrew: I’m trying to look it up right now in the interview and can’t come up with it fast enough. I get that it makes sense theoretically, especially when you don’t have much money to spend on advertising. All right. So, that part did not work. What else worked for you back then?
Jörg: Back then what we did and still do is we improved our packaging. Now we are talking about KAVAJ.
Andrew: Before we go to KAVAJ, actually, how did you know that the test worked?
Jörg: So, at the end we sold 1,600 of the cases. Kai and I, we said, “We want to be in Germany on top of page one for a certain key word. It was “iPad hülle,” which was case, basically. Once we hit this target, this goal, we knew this works.
Andrew: Once you said that, it’s time to quit and do this full time and go to Amazon and you say, “I need to leave.” How long afterwards were you able to leave?
Jörg: I quit in January, but in Germany, you have to give your employer a three-month notice before you leave. So, I had to stay until at the end of May, actually.
Andrew: That’s a long time when you’re ready to leave. That’s five months.
Jörg: Yeah. Because I have a very good relationship with my manager and I wanted to leave in peace, I gave them one or two more months.
Andrew: What did you do for Amazon?
Jörg: I was manager of vendor relations. So, I supported the buying team with analysis regarding all the back end terms and conditions so that they don’t miss any tiers when they are buying from vendors, a lot of forecasting.
Andrew: Do you feel that working at Amazon gave you an edge when it came to selling on Amazon?
Jörg: It’s a good question and we get this a lot. I think we understood how Amazon works, but no secrets, actually. So, one thing is focus on customers and listening to your customers. Content is king, so you need great images. Something like that, which is more or less common sense nowadays, but this is what we learned. The only thing what we saw from the data is there are crappy sellers who are doing good. So, crappy content ordinary products but doing great, we thought, “If they are doing well, we can do well.”
Andrew: Got it.
Jörg: So, this is what we thought.
Andrew: It always does help to see someone who’s not really that bright and not really hard working do well because it shows you how well you could do if you work hard. And you guys worked an hour before going to work every day, an hour afterwards and you were ready now to start your first company.
Andrew: Before I go into that, let me talk about my sponsor because I know it’s a company you wanted to find out about too. You’ve actually heard them on Mixergy and you’re thinking of talking to them. The company is called Toptal. They’re my sponsor.
They’re the company to go to when you need to hire a developer and get somebody that works with you like they’re part of your team, I mean full-time or part-time or even on a project, work with you on whatever system you use. If Slack is how you communicate, great, Slack. If you’re using Skype, they’ll be there on Skype. They’ll be part of your team and they’ll be the best of the best because they’re been tested and vetted and proven to be really good at thinking through a project, not just carrying on your instructions like monkeys.
Now, Jörg, you told me you were thinking of hiring them. What’s a project that you would hire Toptal for?
Jörg: Yeah. We want to redesign our website and thought, “Okay, maybe it’s a great way to bring a developer.”
Andrew: Why do you need a developer to redesign your site?
Jörg: I don’t know what we want from the site.
Andrew: I see.
Jörg: Maybe they can help us.
Andrew: But why a developer and not a designer?
Jörg: I think the designer knows how it should look like, but maybe a developer, as far as I understood also can have both, also the design.
Andrew: That is a good point. I keep leaving that out but Toptal does have designers also, which is incredible for them to have a team of designers on staff ready for you to go. The reason I was asking why you want a developer is I was wondering if you had any ideas for a different shopping experience or a different way of analyzing where someone’s from. So, if you’re from one city versus another you might talk to them differently. Did you have anything like that in mind?
Jörg: Unfortunately not because we only sell on Amazon, 100 percent on Amazon, so we don’t get any data on Amazon where the customers are coming from. So, we cannot figure it out on our website.
Andrew: Good point. They do have designers. They do also have an enormous number of developers that cover an enormous number of languages. If anyone out there needs to work with Toptal or frankly isn’t sure if they want to, all you have to do is go to Toptal.com/Mixergy, fill out the form and they will contact you.
You can get on a phone with them on your schedule and talk to them about what you’re looking for, what kind of languages you guys work with, what product are you building, where are you thinking the product should go. Do a full consultation, they’ll give you some guidance and if you want to work with Toptal, they’ll be there for you, if you decide to work with someone else, totally fine too.
But if you use that magic URL, which is Toptal.com/Mixergy, they’ll give you 80 free hours of developer time if you buy 80 and they’ll give a two-week satisfaction guaranteed period. Go check out that page for more details and I’m grateful to them for sponsoring, They’re really good sponsors here.
All right. So now you want to go and start a company, why call it KAVAJ?
Jörg: Why call it KAVAJ? Back then, we worked together with a designer and said, “We need a brand name.” He then went back to a linguist and he came and he proposed KAVAJ to us because KAVAJ is Swedish and means blazers. We thought this was a great idea because we wanted to do Blazers for iPads and in the future iPhones. In addition, K is the first letter of K, the other founder and J at the end is the first letter of my first name, so we thought this fits perfectly. We like it.
Andrew: Did you have an issue where some people pronounce it KAVAJ because it’s KAVAJ?
Jörg: Yeah. We have KAVAJ, KAVA J, we have everything.
Andrew: But KAVAJ is the right pronunciation.
Jörg: We thought about this at the beginning but we thought there are so many brands out there, even like Nike or Bose or whatever. There are so many brands which are pronounced differently in different countries. We thought, “We love the name. We don’t care.”
Andrew: Okay. Now you’ve got your name. You got your business. You got your freedom from your company, from your job. It’s time to go and actually figure out how to make this stuff. Where do you get the freaking leather? How do you find a place where you can get leather that makes sense to buy in bulk and a place that will actually start manufacturing this for you?
Jörg: Our trial case we did purely with Alibaba, but we know with the leather thing, we have to go to China to find a manufacturer. We were still employed by Amazon but we took two weeks holiday and we went to Hong Kong in China because we figured out there were three fairs where all the manufacturers are showing off their product.
So, we had no experience, no clue at all how this would work, but we just booked a flight, booked into the cheapest hotel in Hong Kong. Actually we wanted to do couch surfing. We did couch surfing in Mainland China, but we didn’t find a spot in Hong Kong. We went to the shows and then we went to all the guys at the booth. I think this was really tough. It was like the first day at school. We had no idea and so many people trying to sell us their stuff.
Andrew: So, how can you tell? You’re going to booth to booth to booth. Everyone seems nice at the booth. How can you tell who’s going to really get the leather you want or manufacture it the way you need.
Jörg: Yeah. So, the first day was completely overwhelming. At night we went to the hotel and we said okay we have no clue how to go any further. We actually tossed away all the business cards we had up to this point because we couldn’t differentiate about the quality. So, we said, “Let’s focus on three things–on quality of the product they show, on the communication, on English, how can you communicate and the price?”
Andrew: Okay. You’re now looking around and you’re feeling the product. You’re looking at the leather or the manufacturing at this point?
Jörg: Leather. First of all, they had to offer genuine leather. We had to figure out they had to be the manufacturer. At these shows, there are manufacturers who are really the factory who are building the stuff and agents, which are just middle men who are just–
Andrew: Why didn’t you want to work with an agent who might have access to multiple manufacturers?
Jörg: We wanted to control the manufacturing. We were doing genuine leather cases, which is not easy to do it. You can’t do it like a plastic case. You cannot do hundreds. Every single piece looks the same. We want to see the craftsmanship and we really want to develop the case. We had the big vision. So, we don’t want to just give away a small order to one agent. The next time the agent is dealing with another manufacturer.
Andrew: Got it. Then you can’t have consistent product. Then English, how are you testing their English, just chatting them up?
Jörg: Exactly. First of all, figuring out are they really a manufacturer and then we talk to them. If we cannot communicate, we thought, “Okay, let’s go to the next booth even if the products are looking fine.” So, we went from booth to booth and wrote the traits on the business card. We just only kept the ones which would be better.
Andrew: Jörg, what’s the name of the event that you went to?
Jörg: Canton Fair in Guangzhou. In Hong Kong we went to the China Sourcing Fair. This is actually the one I would recommend for any stuff.
Andrew: It’s called the China Sourcing Fair? What can you get there? Is it just there or anything else?
Jörg: The fair we attended was all about consumer electronics. So, you even could buy tablets.
Andrew: I see, so it’s everything.
Andrew: Why do you need to go to a consumer electronics fair if you guys are going to be producing leather cases?
Jörg: Because it’s the accessories of that stuff.
Andrew: But are you buying it? Aren’t you manufacturing?
Jörg: We are looking for a manufacturer.
Andrew: Oh, I see. You’re looking for a manufacturer in this fair of people who manufacturer electronic products including cases and you figure if they can manufacture these cases they can maybe manufacture ours, am I right?
Jörg: Exactly. So, like Apple is not producing the iPhones itself, they are handing it over to Foxconn, who also do for Amazon devices, so it’s the same.
Jörg: We are looking for a factory who can manufacture our cases.
Andrew: All right. I love the hustle. I love how you just say, “I’m going to get on a plane. I’m going to sleep on a couch or a hotel, whatever is cheapest. We’ll figure it out.” The first day, you didn’t figure it out. You were completely overwhelmed, threw away the business cards. The second day, you go in with a plan. Now you have three points you’re looking for, which is, “Do they manufacture it themselves? Do they speak English? What’s their price?”
Based on that you pick the people you want. The next step is you go to the next fair, you see who’s manufacturing. How can you pick the right person there? How do you figure out who the right person is to take your leather product and idea and turn it into a real leather case?
Jörg: This was our approach for the street fairs. Then after the fairs, we said, “We are going to meet you right after the fair.”
Andrew: What was your approach to figuring out who the right manufacturer was? How you can you tell who’s going to be the right person?
Jörg: First of all, we rated them–communication, quality.
Andrew: Again, right?
Jörg: This is what we did. For all the factories with a B or better, we said, “We want to meet you.”
Andrew: Be a better what, on your rating system or someone else’s?
Jörg: Every factory we created from A to F.
Andrew: Got it. Okay. So, anyone who has a B or higher in your rating system, you went and met with afterwards.
Jörg: Exactly. And then we went to the factories after these fairs.
Jörg: Because we really want to ensure A, that’s really a factory and because we didn’t for sure if it’s an agent. So, one story, for example we went to Mainland China to Shenzhen and we picked a taxi and drove really two hours to this address and then we just went to a showroom and we say, “Okay, your showroom looks nice, but we want to see the factory, the assembly line, please show it to us.” They say, “We cannot do it right now,” just excuses. We knew they don’t have to show us anything. It’s just some agent.
Andrew: They were misleading you. They were lying.
Jörg: They were lying.
Andrew: Then you found it, you found your factory finally, you found your leather, you send your leather to your factory, you start to manufacture?
Jörg: They source the leather.
Andrew: They did source it. I see.
Jörg: No. They are in the leather business already if you’re doing handbags or wallets or something like that. They did their sourcing. We went to them and then we sit down together with the sales team and the R&D team and we told them these are the cases we want to manufacture with you. Can you please make samples for us?
Andrew: I see. I guess I misunderstood. I thought you had to source the leather and that you were coming up with criteria for sourcing the leather then criteria for sourcing the factory, no it’s one decision, which of these factories are we going with and they will have to source the leather for us consistently. I see.
Andrew: So, now you have to pay for samples. Who designs it? I’m looking at the first case here. It’s got nice little touches, like the plus and minus on the leather case for the volume, really nicely designed. So, I can see where I would increase and where I would decrease it, but it’s a subtle touch. Who designed that?
Jörg: Yeah. It’s actually Kai and me.
Andrew: You guys sat down with a pen and paper and started drawing this out?
Jörg: When we first started, we basically used the reuse of other cases like fake leather cases and see what the people are commenting, say, “Okay, this case is nice. I want to have it in genuine leather. I like this part of the case. I don’t like this part of the case.” So, actually the customers of other products gave us–
Andrew: What’s one thing you remember looking back on and seeing people complain about for other cases?
Jörg: The material.
Andrew: The material was number one?
Jörg: Yeah, many people said, “I want to have this in genuine leather.”
Andrew: Okay. That’s a way of validating your idea which is that you wanted a genuine leather case. You validated that they wanted to. What else? What was more surprising even then leather? That seems like it’s more reaffirming what you thought. Was there anything that took you in a new direction?
Jörg: Not a new direction, actually because with the first iPad, Apple itself released an iPad case.
Jörg: It wasn’t genuine leather material and our first case was similar to this. The people really liked the case but not the material. So, we kind of looked at what the people liked about the first–
Andrew: Do you remember anything else that they liked about the first case?
Jörg: For example, the stand, how you could stand the case.
Andrew: I see. So, you have a case that also stands.
Jörg: Of course, then after the first batch, we got the feedback directly and could improve the cases by ourselves, so the people said, “Guys, please use a Velcro strap inside so that the iPad cannot move inside the leather so it sticks at the place thumping like that,” or, “Could you please strengthen this part of the case,” something like that.
Andrew: I see. Now you’re starting to see what’s bothering them about your case and you’re fixing it based on their real complaints.
Jörg: It’s tiny things but we’re getting better and better.
Andrew: I see the Velcro. It makes so much sense that the Velcro does hold the iPad in place. Did anyone tell you we shattered our iPad because there was nothing holding it in place?
Jörg: Not because of the Velcro, but of course people dropped their iPhone or iPad.
Andrew: Got it. Okay. Second sponsor and then I want to come back and hear the rest of this story because now we actually have a case and it’s time to prove you can sell it. How many did you have to commit to buying?
Jörg: Back then?
Andrew: The first time.
Jörg: About 500 pieces.
Andrew: Another 500? That’s not so bad.
Jörg: We bought nine different designs from different factories. This adds up.
Andrew: Nine different samples from each factory? How much does a sample cost?
Jörg: The samples were around $50-$60, but our first initial order were nine different designs each 500 pieces because we didn’t go only with one design. Of course, we went to China. We didn’t trust our instinct. We knew, “This should be the top seller,” but we thought, “If not, what happens then?” Then we added eight other designs.
Andrew: Oh wow. What other designs did you get then?
Jörg: We even lost our genuine leather track and produced microfiber cases, another plastic case and they were complete failures.
Andrew: It was just that you didn’t trust that your research had been done right, that people liked the Apple case but they wanted it in leather.
Jörg: We didn’t trust our gut. We didn’t want to put all the eggs in one basket. We knew we had to focus, but we didn’t do it. So, it’s something we tell it but we don’t do it.
Andrew: What other case? You got one that was not leather. You got one that was a leather one that survived to this day?
Jörg: We had three leather cases. One actually also survived. The third leather case was a failure in terms of sales, but was awesome because we choose a different color. At the beginning, we only did black cases, but the other case in cognac brown in this color–I don’t know if you can see it–in the cognac brown color. We thought this case a lot of traffic but no sales. We thought okay this color must grab the attention from the people.
So, when we redid this, we did all in black and cognac and now cognac is even more successful than black. So, three genuine leather cases and a couple of microfiber cases and two or three plastic cases.
Andrew: Wow. Okay. I get it. You’re experimenting. You finally figured out the one that worked. It was kind of a combination. It was a color that you didn’t think was going to sell and a shape that you were convinced was going to sell, marry them together and you have what became your number one seller for the iPad cases for the iPad leather case that looks sort of like the Apple case that Apple released when they launched the iPad one, am I right?
Andrew: The second sponsor is a company called HostGator. If you have any website that you want to host, I urge you to go check out HostGator.com/Mixergy. They’re going to give you a discount if you go to that URL. Let me ask you this, Jörg. You’re a guy that tests a ton of ideas. If you had nothing but a web hosting package, what idea would you test today to see if you could sell it?
Jörg: A physical product?
Andrew: Any one. Let’s stick with physical product because you’re so good at that and I want to inspire people if they’re interested in it to do what you did.
Jörg: A physical product…
Jörg: This is tough.
Andrew: You know what I would suggest? Actually, no, you go. Here’s what I suggest. I really like your idea of just going to Alibaba.com, seeing what you think is going to sell and buying it, listing it on Amazon.com and having your own website where you could describe the process of buying it, where you can describe the process of selling it on Amazon, where you can take people through the journey, kind of like a blog that teaches people what you’re going through but also lets them buy and sends them over into the Amazon store to buy.
So, the commerce doesn’t happen on your site, it happens on Amazon. But the description, the sale, the experience of taking people through the process happens on your site.
Jörg: On your site, you can have so much more content than on Amazon. For example, we put a lot of videos on the site and this is what you have to do on your website.
Andrew: I see. I think you guys use a standard WordPress website, right?
Andrew: Easy peasy to get up and you link people to Amazon where they can buy and you show Amazon ratings for each of your products so people feel comfortable about it. Anything else you want to sell that you can sell on your site, host it on HostGator or do what Jörg did which is sell it on Amazon but creating your own website so that anyone who wants to check out to see if you’re a legitimate company can come and see it, anyone that buys from you and wants to get to know your company better and build a relationship directly with you so they can buy from you instead of going to Amazon can come to your website.
It’s easy to put up. All you have to do is go to HostGator.com/Mixergy. They have a really inexpensive package that will keep your site up that will allow you with one click to install WordPress. But if you want to upgrade from that, if you don’t want to pay a couple of bucks, you want to pay a couple of bucks more, they have WordPress managed hosting. You do not have to pay the hundreds of dollars that their competitors are charging for WordPress managed hosting.
WordPress managed hosting means that they will update WordPress for you. It means they will keep your WordPress site safe. It means they will keep those bad plugins off your site so you don’t’ open up vulnerabilities on your site. They have that over at HostGator, much less expensive than their competition. If you want to host something else and just need cloud servers, they’ve got that too.
All you have to do is go to HostGator.com/Mixergy, sign up. They’ll take good care of you and if you ever have any issues, they also have great tech support. They’re there 24/7, 7 days a week, 365 days a year. They never sleep. I’m glad that they’re out there as a sponsor–HostGator.com/Mixergy.
Jörg: Everyone needs a website. Even if you do like we did, you need a website. People on Amazon checking out the product go back, as you said, and see if this is a worthy company. You can shine on your website and even collect email addresses.
Andrew: Right. You guys do all that. You’re really smart marketers. You’re not just another player in an Amazon store. You’re a business that happens to be selling through Amazon because it works so well.
Andrew: All right. Now, you got your product. It’s time to sell on Amazon. You have all your photos done by the BMW photographer.
Andrew: I can see the style. It looks really good. Simple, clear. Did what you had in mind for the Amazon store rankings work out for you?
Jörg: Yes. Of course, what we had in mind, of course what we thought would work worked, otherwise I wouldn’t be here.
Andrew: I don’t know. Sometimes you change things around. So, you’re saying that having a headline that had your keywords in it made sense, using Amazon’s listing tools to add more keywords made sense. What else worked for you for rising up the ranks in Amazon search results?
Jörg: At the beginning it was Google AdWords?
Andrew: Google AdWords directly sending into an Amazon order?
Jörg: No. Google AdWords, our website then sending the traffic to Amazon.
Andrew: Why put your website in between?
Jörg: Because at the beginning it wasn’t allowed to send directly to Amazon. Google somehow blocked that.
Andrew: What do you do about stats? If you’re buying ads on a per click basis from Google, how can you tell if those clicks are really converting into orders?
Jörg: That’s a really good question.
Andrew: Pretty good? I think that’s a great question.
Jörg: Fantastic question.
Andrew: As long as we’re rating our questions, yes.
Jörg: The answer is we don’t know. At the beginning with Google, we really didn’t know. But the purpose is you have to get sales. Sales is the driving force on Amazon. So, even if your ads are not running on profit, it might still make sense because you move up the ranking and benefit from the massive organic search traffic on Amazon. But now, we don’t use Google Ads much nowadays because there are way more better traffic sources for Amazon than Google AdWords.
Andrew: What else is working for you?
Jörg: Amazon sponsored products, so Amazon’s own advertising tool. I don’t know if you have heard.
Andrew: I’ve seen it and I’ve heard people I interview talk about a lot.
Jörg: Exactly. Nowadays, you can bid on keywords and you can show up on the first page of search results and the customer really doesn’t see the difference between the organic results and the paid results. It’s just the little word “sponsored” on top. You cannot really see it. Here you see how the ads are doing. So, here you can really optimize.
Another thing is Facebook, social media advertising. Here, there are two ways we see how it works. First of all, you can have a code, so a discount code on your Facebook ad, so 20 percent discount, buy it right now and you can see how often this code was applied. Another thing we are testing is we look at the people who are clicking on the ad, looking where they are located in the world and when we see we have a certain timeframe and order for this product, we think this matches.
Andrew: I see. You see where they came from and then you see where your order came from and if it came from the same place, then you can connect that. I see.
Jörg: It’s not 100 percent, but with this approach, you can see which ads are performing better.
Andrew: That’s a lot to do just because Amazon won’t give the data you need.
Jörg: But why should they give us the data?
Andrew: Then they will allow you to buy more intelligently. The more data they give you, the more aggressive you can get with your ad spend.
Jörg: Yeah. But they don’t want–actually, the people are not like us. We sell 100 percent on Amazon because for us Amazon is the best marketplace to grow our brand. So, we’ve sold more than half a million units across $18 million in revenue. For us, this works. But other manufacturers or brands tend to sell on this own website.
Andrew: Let me not glaze over your idea–actually, I’ve heard other people say this–of creating coupon codes. You can actually create a stack of coupon codes almost to give one per person who comes to your site, am I right? So, you can connect the order directly to the individual that came to your site from a Facebook ad.
Jörg: The problem is whenever you put on a code, so when I have to say, “Go to this place and you can save 20 percent,” and the people actually have to enter the code, you might lose them on the way.
Andrew: Right. The idea is to send them directly in.
Jörg: Especially if you’re mobile and you’re going through your Facebook feed. Then you have to save the code going to Amazon, going to checkout, enter the code, it’s too complicated.
Andrew: So, you don’t do that often anymore?
Jörg: We do that, but it’s not always. It’s just for certain deals.
Andrew: Okay. You know what else I’m seeing? If you see me looking down it’s because for some reason my browser is not working, so I had to go to my phone to look you up on Similar Web to see where your traffic is coming from. So, you can see here, organic search is really big for you guys, about 40 percent. Direct hits now are 30 percent. How are you getting direct hits coming from your site, to KAVAJ?
Jörg: Honestly, I don’t check the stats for my website.
Andrew: You’re saying I check it more. Do you guys do anything? I guess you’re doing some podcasts?
Jörg: I do some podcasting, but not quite often.
Andrew: Not enough for it to hit those numbers.
Jörg: We get a lot of reviews from bloggers and YouTubers.
Andrew: I see also Google.
Jörg: Community management, social media.
Andrew: Social media I see.
Jörg: Yeah. Including part-time workers and students, we have ten people and the majority is working on social media.
Andrew: Really? What are you guys doing on social media beyond buying those Facebook ads you mentioned?
Jörg: Community management. This is key. Our vision when we founded KAVAJ are two things. First of all, we wanted to build a brand. We don’t want to be one of these guys to be get rich quick. We really wanted to build a brand. We wanted to be the next Kleenex. So, when you buy an iPhone, your next thought must be, “And then I need a KAVAJ,” if you like leather. So, this was our idea. What we learned at Amazon is that the customer is key. Even when we only are 10 people, if you have a question to our Facebook, Twitter, Snapchat or Instagram, you get an answer within one hour on average. This includes weekends.
Andrew: What do you guys use to keep up with all the questions and issues that come up with on social media? What software?
Jörg: They are using Hootsuite.
Andrew: Hootsuite. Okay. What else are you doing for community?
Jörg: We are fast at creating content, stories. We tell our stories. For example, of course we tell our people how a KAVAJ product is made, we take them on a journey. The people decide on our product. Last year we launched a wallet because our community wanted it. So, I did a wallet for myself a couple of years ago and I posted it on Instagram and the people said, “Where can I buy this wallet? We want a wallet.” We take them on the journey but we also talk about KAVAJ because I don’t know if you know it, but all our people are working from home. We don’t have a shared office.
Andrew: I didn’t know that. Okay.
Jörg: We’ve been nominated by German government as one of the most family-friendly companies in Germany because everyone can work from home whenever they want.
Andrew: I’m looking still on the phone. It’s so much easier when I have it up on the browser. I don’t know what’s wrong with my browser. It doesn’t look like I’m researching everything you’re doing. As you’re saying you take people on the journey, I went over to your blog to see how you describe it. I’m getting a little sense of it on the blog. I’m seeing a sense of your numbers on the blog. What revenues are you doing?
Jörg: Last year we did $4 million. Since founding in 2011, we crossed $18 million.
Andrew: Wow. When you do $4 million for 2015, what’s your net margin on that? How much do you get to keep?
Jörg: I knew you would ask this question. After taxes, we still are in the double digits.
Andrew: Double digits net margins?
Jörg: After taxes.
Andrew: That’s pretty good. That means over $400,000 after taxes. Wow. I would have thought it would be so much slimmer because it’s leather and because you’re in such a competitive market.
Jörg: But we crossed out all the middle men. We are the manufacturer and we don’t sell to any reseller, for example. So, it’s only us who wants a slice of the cake.
Andrew: Howard Stern bought from you.
Andrew: How did Howard Stern buy? Did he just go to Amazon and buy it?
Jörg: Funny story. It was in late 2012, we just launched in the US and we figured it out after his show because someone was tweeting about it. So, what he did, he bought the first iPad Mini. In his show, he said he bought five cases on Amazon and he said which cases he bought. He said he’s now going to test it and he said he was going to tell which one was the winner and our case was the winner.
Andrew: Oh wow. And he actually mentioned your name?
Andrew: Did he pronounce it right?
Jörg: Honestly up to this date, I never heard it.
Andrew: Oh, really? Do you know the date it was on?
Andrew: Do you know the date?
Jörg: Yeah. I have it in Evernote.
Andrew: Send it over to me. I think I can find it. I know when I was researching–I had his head writer on here for an interview, which was such a good interview and I researched it by going back and finding older interviews and older episodes of the show to see what I could catch up on.
Andrew: What did it do for your sales that he was talking about you?
Jörg: I think it wasn’t too much right after the show. Also, we were blocked at Amazon in US right after the show for one week right in the holiday season. I don’t know if you know it. But we just launched in the US and Amazon stopped–
Andrew: Yeah. You’ve got to talk about why that happened because I had no idea this was an issue until I read your story from our producer.
Jörg: We launched it in the US. Of course the Howard Stern Show, but this was just one case that people were referring, but then Amazon blocked us because we were selling too much and for just a short amount of time.
Andrew: What does it mean you sold too much? Why would they care?
Jörg: Because they didn’t know if we were fraudsters. So, they let the people, the customers rate us as a seller. Once we hit the metrics, they let us sell again because we actually sell genuine leather cases but send out–
Andrew: Right. Fake leather or nothing.
Jörg: Or plastic cases and could run away with the money. So, after the people commented and were happy with it, one week in December we could start selling again, but never the less, we were one of the most successful sellers in this holiday season.
Andrew: That’s shocking that that would be an issue for them. To get your ratings, I heard you started emailing people who bought and saying, “Please go back and rate it.”
Jörg: We said, “Hey, we have this problem. We cannot sell anymore. Would you do us a favor and rate us as a seller.”
Andrew: That’s fantastic. That’s such a good campaign too.
Andrew: The other time that you guys had a big setback was when somebody gave you a negative rating. What was the negative rating and why would it have so much impact?
Jörg: It was actually Kai’s last day at Amazon. We launched our product in 2012 in the middle of 2012. I left one months earlier and we started selling and we sold our first 30 pieces or units. We had a five-star review and a second review on our cornerstone was a one-star review and this was horrible.
The guy accused us of fraud. He said he’s going to report us to Amazon and he might report us to the police because our description was wrong and misleading and everything. Of course, with this kind of review, on average the product has three stars, which is difficult to sell. If you read both reviews, the one-star review is totally killing it, the product. So, we didn’t sell any product at all after this review.
So, what we did is first of all we took our product and we took it to a leather expert. We thought, “Maybe this guy is right. Maybe we were fooled by our manufacturer in China. First of all, we have to prove it before we can take action.” Then after we got the confirmation that it’s really genuine leather, we were lucky enough that this guy reviewed on Amazon with his real name.
Back then, we only had 30 sales, so we could look him up and called him. It was an hour long call. We just talked and said, “I’m sorry that you feel that way, but what you write is just not true. It came to the table that he bought a lot of cases on Amazon. It was his seventh or eighth case, I don’t know, and he always got fake leather and he never wrote a review. Now he was so sick of getting all the fake products he said now he’s going to write a review. He put all his anger in this single review and hit us.
Andrew: Did he accept that your leather was not fake?
Jörg: He said, “I’m not a leather expert.” He had another issue and this was a fair point, but he changed his review to a three-star review and of course the content, he completely changed because he was wrong. So, on average the product has four stars and the sales picked up again. Now this product only in Germany has more than 2,300 reviews.
Andrew: What was the issue that he had?
Jörg: What kept it three stars?
Jörg: The case was smelling.
Andrew: Was it really smelling?
Jörg: Yes. This was true at the beginning. At the end of the process, the leather cases are polished and cleaned or something like that. The cases need some time on the air. When you pack it into a bag, it might smell odd for one or two days. This happened at the beginning because we didn’t know this would happen. This was a fair point.
Andrew: Now can you fix it?
Jörg: We fixed it, of course.
Andrew: All right. So, it’s not happening anymore?
Jörg: This was what we learned at the beginning. Yeah.
Andrew: I’m looking here at my notes to see if there’s anything I missed. Here’s one thing I didn’t talk about, which is–it’s so weird to look at my phone in the middle of a conversation, but this is where my notes happen to be.
Jörg: Don’t worry.
Andrew: We asked you about celebrating success because you’ve come so far. Do you remember what you told Brian Benson the producer of this interview?
Jörg: Yes. I remember. I said first of all that Germans, we are not pretty good in celebrating.
Andrew: That’s it. The one time I think you guys did celebrate was when your cofounder bought champagne to celebrate his last day at work at Amazon and then you got the one-star review. I can see how that would keep you from celebrating.
Jörg: Exactly. But what we did actually is because we could work anywhere in the world, we went for 10 days to Egypt and started kite surfing. So, this is what we did. We’d say, “Now we can work from everywhere. At this point, we didn’t have kids. So, let’s go to Egypt and take kite surfing lessons and work in the hotel in the evening.” So, this is what we did.
Andrew: That worked for you? Were you actually able to get good work done and have a good time or did it feel like a lot to do all at once?
Jörg: In Egypt, the problem was the wind was not very good, so we didn’t progress with the kiting as much as we wanted. The connection was pretty bad in the hotel. It wasn’t that great of an experience working there. But right now when we work from anywhere in the world, so in the summer in Italy and Lake Garda or Kai is working at the Baltic Sea. So, it works fine.
Andrew: There’s one thing I want to do before we go, two things, actually. I want to put this on Snapchat. But first, I got this package. I never open packages unless they’re in interviews lately, it seems. So let’s open it up. I know what this is. All right. This guy, I wonder if he’s selling his stuff. This is Cortex, a nootropic for elite achievers. I’m an elite achiever. So I can see why I would get this. Do you know anything about nootropics?
Andrew: I don’t either. I keep hearing people talk about nootropics and anyone who brings up nootropics gets a lot of attention. Ah, “Thanks for the opportunity to send you a bottle of Cortex.” How cool is it that I do interviews and people thank me for the opportunity to send me a gift.
Jörg: It’s great.
Andrew: Which is a really nice thing for him to do. I this is from a guy named Ryan Barrow. Check out this story from Ryan. Ryan, thank you so much for sending this. I was going to do an interview with the founder of iCracked on stage at an event and I said, “I’ve got to understand the details of this business. What’s going on here? Is iCracked really doing as well as it’s doing?” So, I started researching him. Then I found this one guy in the comment of some post of The Verge or Gizmodo who said, “And I happen to, in full disclosure, run a company that’s competitive with iCracked.”
I looked him up, found his phone number, called it, no one picks up the phone because who picks up the phone anymore. I found his email address. I send an email saying, “Later today I’m going to go to do this interview on stage will you send me some feedback on what’s going on with this industry.” So, he sends me a response really fast. I give him my phone number so he texts it to me. We go back and forth and I say, “Can you get on a call with me.” And he does.
He breaks down the economics of it. He goes, “Here’s what it costs us to get these screens in China manufactured, not just me but everyone in the industry. Here’s what Apple is doing. It used to be you could sell the stuff for a couple hundred bucks, now Apple is selling a brand new screen fixed for the customer for $108.” So, he goes, “This is a really tough market to compete in. Here’s how we’re all getting squeezed. You could talk about high revenues, but you should also talk about high revenues and a lot of competition from Amazon.” He gave me all that information.
At the end I said, “Why did you give me all this and respond so fast?” And it turns out he was a Mixergy fan. I had no idea. I’m just calling a random stranger and he’s a Mixergy fan. And then I said, “What are you doing now that your business is going well but it’s still getting squeezed.” He said, “I’ve always been into nootropics.” So, he started this new company. It’s called Surrogate Labs. That’s why he sent me this.
The point of that is that I freaking get obsessed with understanding a topic. If you’re really going to get into something, whether it’s a conversation on stage or for you getting into your business with leathers, you want to really get into it. You want to understand as much of it as possible, am I right?
Jörg: Totally. You have to love what you do.
Andrew: What’s one piece of research that you did that would make people feel like you were a little insane but you’ve got to be insane to win?
Jörg: I think one of our iPhone cases, I think the people in the factory thought Kai and I are insane because we are so picky on every little piece of the case the customer will never ever notice, but we thought, “This has to move a millimeter more on the left or right.” I think this is something where we do not compromise.
Andrew: Yeah. I have to own that too. Sometimes you feel a little bit bad telling somebody I know you just made this and thank you, but I need another millimeter changed, but you’ve got to if you’re going to get the quality you’re looking for.
Andrew: I’m like that with guests sometimes. Before the interview starts, I say, “Don’t worry, don’t worry. I can riff on this.” I’ve gone through these interviews enough that people forget the best stories. They forget about these big setbacks because they’re on a high of doing an interview. They forget about the thing that they did to figure out the product. So, I have to really push them. We’re not going to just wing it. We’re going to do good work here and I’m not going to count on you having a good day the day of the interview.
I really want to make sure that we’re going to have a great interview. That means a lot of research on my team, a lot of prep from the guest and you did that, right? You talked to our producer, Brian, and you came in and you did the work and I think it’s worth it. If people want to check you out, your website–the cool thing about having KAVAJ is you actually get to own your URL, which is a really short five-letter URL, KAVAJ.
Jörg: KAVAJ, so KAVAJ.com. You can find us on Facebook, on Twitter, on Snapchat, on Instagram, of course. You can find me personally on Twitter at @JoergKundrath. And of course, you can go to KAVAJAcademy.com/Mixergy to download the book.
Andrew: Good point. And you said Snapchat, you reminded me. I want to snap this. If we do a snap right now, can you in like 5 seconds or 7, 15 seconds tell your story? Do you think you could on Snapchat right now?
Jörg: 10 seconds?
Andrew: Yeah. We’ll see how it goes. You ready for it?
Andrew: Go for it.
Jörg: I make genuine leather cases which enhances the beauty of your Apple device.
Andrew: Yeah. It’s called KAVAJ and I just interviewed him. We’ll have it up on Mixergy soon. Boom. That’s the first time that I added an interviewee to my story.
Jörg: That’s cool. What’s your Snapchat name.
Andrew: I freaking hate that it’s not Mixergy. Some guy took Mixergy. Please, someone out there help me get Mixergy back. Until I get Mixergy back, I am MixergyAndrew as my username, MixergyAndrew. I love it if you guys all add me there. All right. Thank you for doing this. Thank you all for being a part of Mixergy.
My two sponsors for this interview are the company that will help you find your next developer or team of developers. They’ve done such good work for a lot of Mixergy listeners. You should hire them or talk to them by going to Toptal.com/Mixergy. And if you need your website, go to HostGator.com/Mixergy. They keep buying new ads because they’ve been doing such good work for our audience and they keep getting more and more customers for us and I’m glad for it. And of course subscribe to the podcast. Bye everyone. See you next time.