Accessory Geeks Karen Kang

Video Transcript

Karen Kang: Good afternoon my name is Karen Kang from AccessoryGeeks.com. If going after Jet Blue doesn’t kill you inside very slowly nothing will. Well here we go, so my topic is Making Investments for the Betterment of your Business, and I have several examples to show you–three to be exact for making some changes to your business. So my name is Karen Kang from AccessoryGeeks.com and we–a little about AccessoryGeeks.com, we were established in 2003 and I came on-board immediately after its inception and I have been with AccessoryGeeks.com for the last 10 years. We are an online retail store for cellphone accessories and we’re quickly seeing growth in our company and we’re expected to see another profitable year this year. So investments for the better of your business – Its a real tough balancing act, I know the VP from Jet Blue and I know the VP from Home Depot but as a mid-sized company I can definitely relate to probably majority of the people in this room to say that there’s a lot of competition out there especially with Amazon and other competitors, big name competitors that are popping up that are making this industry even tougher and tougher to compete in.

So I definitely don’t want to see a slow and painful death of eCommerce and certainly not our business, so constantly making improvement on our company and improving the processes of our company is an extremely big thing for us and one of the big investments that we made in our warehouse, can we get the video? This is a very short clip of our warehouse and some of the investments that we did make and there’s a machine at the end of this clip that you’re going to see that is a packing machine and actually prints and packs and seals all of our packages, outgoing packages in one step. After one scan all of our information is entered–there it is, that machine right there, scan and ship, so this was one of the major investments for our company and this machine cost about let me see cost about a 2013 Ford Focus, it costs just as much but it was a major investment that we made and a major change in our warehouse that made extreme changes, extreme–it brought our bottom line to a positive. And for the long tail we’re seeing a definite positive on that side. Why did we pick a new machine? Well to make, to make our warehouse efficient, we wanted to eliminate the multiple steps and automation was an extreme key factor for us.

With this machine purchase we were able to automate just about everything in the warehouse that was possible. One scan again that takes care of all of the information, customer information, emails, credit card processing that was able to also update our inventory and reducing human error was one of the biggest factors and at the same time we were also able to reduce the training time. We are basically able to pick up anyone from just about anywhere and you’re able to ship in a matter of a few minutes, maybe two to three minutes you’re able to ship in our warehouse. When I do tours of our warehouse I just tell them you know what here’s a bunch of orders go ahead and pick them, you can experience the entire warehouse system and you will see what kind of positive we’re seeing from this investment. And not only with this purchase we were able to reduce cost in our warehouse but we’re able to open the door to many other opportunities, because of the improved efficiency we were able to do multiple drop shipments. We’re able to take on other vendors that want to store their merchandise and we’re able to ship it efficiently and quickly from our warehouse.

Comparison – We started this project back in 2010 and we decided that by bringing in just one machine we’re able to see immediate positive. So in 2009-2010 we had about six full time employees in the warehouse, they were able to ship about 1 order per minute and maybe-maybe 2 orders per minute if they were really experienced but that wasn’t just good enough for us. And after this machine took into effect we now only have two full time employees from six employees where we increased the orders per minute to 4.3 orders and not only that we are able to ship per person over 1900 orders a day. And now with the capabilities of our warehouse we’re able to ship more than 5000 orders and we can add more warehouse staff as needed. And monthly payroll back in 2009-2010 was about $8,000 but now we have reduced that number to a little less than $4,000 a month, so it was almost a 50% saving. Investments – Again the machine itself cost about the cost of a Ford Focus. We purchased one machine and then purchased several more and then monthly savings as you can see of over $4,000 but annual savings was a whopping $55,000 a year for the last couple of years that we’ve seen in savings so it was an incredibly great investment for us.

Some of the major hurdles that we went through were the system upgrades. We needed great teamwork from the IT department, not only did it took a year to implement but it took a lot of man hours, not only that a lot of rejection from the warehouse. Changing the way people think was one of the major hurdles I think that we went through, they feel that with any change what are they facing after, what kind of things are they expecting, are we expecting layoffs after an efficient process takes into place? Those are some of the scary factors for our warehouse staff members.

Another investment example that we made in the last year, in 2012 we launched a program where you can print your photos on a cellphone case but this particular machine we purchased and one of the major reasons that we wanted to make this change was that we wanted to be ahead of the competition. We wanted to offer something to our customers that no one else was offering at the time and by offering a product line that no one else had it kept our customers on our side. Not only kept the customers on our side but it also opened the door for more opportunities.

So this particular printer that prints your photos on a cellphone case cost about a $100,000. It has been about a year and I haven’t seen a return on the investment but we think that it’s going to do well in the next couple of years. Customers are again spending more time on our website which is valuable for us, they’re able to browse through and play with our software and that’s very big factor for us.

And the third investment that I want to share with you today is outsourcing. Outsourcing is nothing new but what we’ve done in our US office in California is instead of using our staff members to do the remedial work such as research or gathering data we send all of that over to the Philippines and by doing so we’re able to make sure our team members are truly doing the key work that actually makes a difference in the business. We’re able to make sure that our employees are actually doing more thinking work instead of actually sitting there and working on an Excel sheet. So cost reduction from outsourcing has been–we used to have four members in our purchasing team, but now we’ve reduced to one purchaser in house.

What we’ll do is we’ll send data over to the Philippines and ask them, okay you need to make these POs and then the next morning we’re returned with a PO we can immediately submit. So the work itself has been reduced tremendously and you make say you use to have four purchasers and now you only have one. Well we’re able to make sure that all of the employees within our California headquarters are paid well and we’re able to keep the employee very satisfied instead of having multiple employees we’re reducing done to several key members and instead they’re being paid a lot more. Customer service again from four CSRs to just two, all of our emails are done from the Philippines, as soon as we go home they start answering all of our emails and the next morning we start the day with almost zero emails in the beginning of the day. Sales department we didn’t have a research group before but now we have a research group that supports the sales department and accounting also we’ve never had an assistant in our accounting department but now they get all of the data and send it back to us the next day. Outsourcing as an investment, there were a lot of problems in the beginning because they’re all sorts of differences, communication is one big factor that from Vietnam and Indonesia we experienced that English wasn’t their best language but with Philippines we are able to see that they’re are much better with the language and they’re culturally more adapt to the English culture I guess. There are pros and cons about that because they apparently need 16 days off during a year but I don’t know that doesn’t make sense to me.

So invest in your staff. In our mindset we always need to have a startup mindset, we’re giving our employees an improved work environment and as cost reduction takes place it’s a big scare for a lot of our employees but at the same time we’re able to keep those key members and we’re able to make sure that they’re in a happy place instead of saying there’s a lot of work instead of the pay. We’re able to pay a lot more by reducing the cost where we were somewhat wasted.

These are some of the takeaways that I have prepared. Again a startup mindset always. We’ve been in business for 10 years but we’ve never lost that survival mode–I don’t know why it keeps doing that, but I’ve always had that startup mindset, I never forget that first day that I received that first customer service call from my 800 number and I make sure that our CSRs never forget that either. Make impactful decisions that you can measure and you can see the effects on, evaluate the most time consuming and money consuming work flow and there’s always room to make investments in your company.

Automation is a big key for us, automation comes with a lot of work for our IT team but at the same time it’s the support that we need and at the same time we’ll benefit from. Long tail versus short tail investments, there’s no investments that’s guaranteed obviously, but there are investments that you can make to make changes. It doesn’t have to be a million dollar investment that returns in you know a couple of years. For us it was just a few thousand dollars to start and then the purchases came into play and another factor is I always try to be or we should always try to be ahead of the competition. If your competition is Amazon obviously that’s a tough act to follow but for us they’re are many competitors out there that are selling cellphone accessories, so that’s obviously something we can offer to our customers by making those changes that our competitors are not offering. And another key thing that I always try to remember is that you’ve got to make an investment that opens the door to many other doors. Making an investment that you can take other sales or B2B decisions or B2B developments and those kinds of decisions are what’s really affecting our business right now.

And instead of just as an eCommerce business just selling products at the same time we’re able to work with many different companies to do the fulfillment and do the drop shipping that also keeps our bottom line healthy because we’re able to use our warehouse space and helps with the overhead.

And don’t break the bank. We were–at the time that we were investing in our case printing machine, we were thinking that we might need to make a–we might need to take out a loan to purchase this machine but we decided not to, taking out a loan meant more liability so make sure you don’t break the bank, make sure you talk to your accountant, make sure you do those analysis before you make those decisions.