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Episode 6: Embracing competition and innovation

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All Xero In episodes

Hosted by Jeanne-Vida Douglas and Rob Stone

It’s easy to become complacent when your business is the only player in a particular market. Dean Ramler, CEO of Milan Direct, Australia’s largest online furniture retailer says it was incoming competition that pushed his business to innovate and stay on top.

In its infancy, Dean decided to test his product’s popularity by putting furniture up for auction on Ebay. He soon discovered a huge market for his furniture and used the profits to build his very first business website.

Xero In hosts Valerie Khoo and Rob Stone talk to Dean about how Milan Direct expanded into Europe and the UK and why Google’s online tools are integral to his overall business management and success.

He also reveals the key to providing customers with an online shopping experience they’ll never forget.

Episode transcript

Participants: Valerie Khoo (Host) (VK), Rob Stone (Host) (RS), Dean Ramler (Guest) (DR).

VK:   Hello small business owners. I’m Valerie Khoo and you’ve just tuned in to Xero In. Joining me today in our Sydney studio is Rob Stone. How are you Rob?

RS:    I’m well thanks Valerie. What have you been up to lately?

VK:   What have I been up to? I have been playing around with my Apple Watch, my new Apple Watch trying to figure out how to work it. At the moment, I can successfully tell the time and count my steps which is you know, it’s a good start. What have you been up to?

RS:    I think I need to get an Apple Watch. I’m getting back on the bike. I’ve signed up for a Fun Ride. Nothing too adventurous. Later in the year but it’s definitely aspirational.

VK:   That’s energetic. Well if you had your Apple Watch, you’d be able to measure your activity on it if you learn how.

RS:    Also aspirational.

VK:   Yes. Well today I’m really excited because we’re talking to Dean Ramler from Milan Direct and Milan Direct as many people will know is a huge online retailer of furniture and I was speaking to some people saying you know, I was going to interview Dean from Milan Direct and they’re small business owners and they’re wanting to get online as well because you know, it takes quite a long time before you can get to the level of growth that Milan Direct has. So I started chatting with them about the kind of tools that they might need and maybe you can share some of your thoughts on this as well. But you know, if you’re not online at all, if don’t have – can’t do any online transactions, you know, one start, one thing that you can start with is PayPal quite simply because you don’t necessarily need a merchant facility or anything like that.

     You can just start with simple transactions on PayPal. It may be a bit limited but at least it’s a start. And then as you get more confidence and you realise that you’ve got and – you know, you’ve got a hungry market for your products, I think that’s when you need to start thinking about how to start applying for a merchant facility and using a shopping cart like Shopify or Big Commerce or other programs like Infusionsoft which of course then you need to connect with a payment gateway like eWAY and there are also other ones apart from eWAY.

     So it’s a little bit of a journey but you know, you don’t if – you don’t necessarily have to plunge in you know, full pelt into the most complex types of e-commerce arrangements if you haven’t done anything to start simple. We’ll learn from I believe that Dean started simply on eBay.

Interlude

RS:    Okay. Let’s get started and we’ll jump straight in and talk with Dean Ramler from Milan Direct. It is Australia’s largest online furniture retailer and I think he’s going to be sharing a lot of interesting insights with us.

VK:   Thanks for joining us today Dean.

DR:    Thanks for having me.

VK:   Now I’m currently buying furniture for my new house so I have been browsing through Milan Direct quite a lot, along with other sites but for people who aren’t familiar with the site and with your business, tell us a bit about it? When you started and what it does?

DR:    Yep. So Milan Direct is Australia’s largest online furniture retailer and we’ve been in business now nine years, next year will be 10. We were the first company back in 2006 to sell furniture purely online. So it was a – a new thing to do at the time, and at the time everyone told us we were crazy, who’s going to buy furniture without touching it or feeling it but we could see that online was the future and you know, people wanted to, would understand the benefits of shopping online and the greater savings there. So yeah. Essentially we’re just a big online furniture store. We have 15,000 products. We do have warehouses in Melbourne, Sydney and two in the UK and we have a UK business. And majority of our products is shipped within 24 hours so you purchase online today and we’ll have your order dispatched tomorrow.

RS:    And where do you source all your furniture from?

DR:    All throughout – all throughout Asia for our private label import products. Mainly in China but other countries in Asia but then we also list a whole lot of Australian companies’ products on our site in like a market place type model similar to Amazon. So we have yeah, many Australian designers list their products on our site which is how we’ve been able to expand our range from a 1000 skews probably two years ago to 15,000 plus today.

RS:    That is huge. And the type of infrastructure that you’ve built behind that, was that something you began bootstrapping in 2006 or did you set up the infrastructure from day one?

DR:    We took a pretty, we tested our model on eBay. So we brought in the products but didn’t really set up a big website initially. We just wanted to see are our products in demand and so putting them on eBay at one cent no reserve, that’s you know, a sure fire way to see are your products in demand or not and we got good prices and basically yeah, test the market for six months and kept reinvesting the profits into further orders before we invested into a really good website. And our first website was just a $150.00 shopping cart solution. You know, a really basic thing and then six months later when that was proved to take sales then we invested into a more significant site.

VK:   What happened after the first six months on eBay that made you think this can be a goer? What were the signs?

DR:    We just had so much demand for our products and the products were getting prices above what we were expecting to sell the product for so then we thought you know, a lot of people didn’t want to wait seven days or five days for the auction to finish so we thought the solution there was to get a site where people could buy the product instantly.                

RS:    So that really sounds like if you’ve got a great product, that’s what drives the business model and then distribution comes second.

DR:    Yeah. A hundred percent except there are you know, challenges in distribution which you have to – have to master but there’s no point mastering that if your products aren’t in demand.

RS:    That’s great. Can you tell us about some of those challenges?

DR:    Yeah. So a few challenges we had starting up. My background is in – in furniture and I’ve been making, my family has been making furniture in Australia for over 60 years. So I’ve got a really good understanding in how to make quality furniture. So going off to – off to China to get our first orders going, I wasn’t concerned about making a great quality product but what I – what I neglected at the time was in investing time in having a great quality package solution. So our very first container which arrived, we unloaded a container and we actually unloaded it ourselves to save some cash instead of paying the warehouse and saw that it was a great quality product which we pulled out of the container but we forget to tell the suppliers about our packaging. And the chairs for example, instead of coming in box, came in a bag.

RS:    Oh no.

DR:    Because it’s apparently what factories used to do. So yeah, I guess mastering the challenges of manufacturing in – in China and dealing with your Chinese manufacturing partners. We had to overcome that quickly you know, as young kids from day one.

VK:   Since you started, you’ve grown to become Australia’s largest online furniture retailer reported by BRW and the AFR has named you Australia’s fastest growing furniture retailer. What have been the key factors in that very fast growth?

DR:    I guess like when, we use a lot of data to – to make all our decisions. So we’re not – we’re not really guessing like which products are going to work or not. We use the free tools that Google provides to see exactly what are people searching for and then it takes the guess work out of running a business and then making profits and you know, much easier. Like there are free tools like Google trends and insights where you can see literally what people are searching for and so we start our – our product decisions at that point instead of gut feel and as a result, all our early products were all big winners because we knew this was what Australians are searching for online.

VK:   Can you give us an idea now of your size? Like nine years later, whether that’s by headcount or turnover or number of pieces of furniture shipped. What does it look like now compared to 2006?

DR:    Yeah. I guess in the nine years, we’ve sold over a 100 million dollars’ worth of furniture to 40 countries all from our head office in Albert Park.

VK:   Wow.

DR:    We’ve shipped products as far as Spain, Israel, Greece, Italy, all – all across Europe and the UK and yeah, that’s – that’s just from a Melbourne office. We’ve got – we started with just two skews in the range, today we have 15,000 plus products on the site and yeah, so we’re grown quite fast. We’ve shipped thousands and thousands of containers and yeah, I guess it’s seen as like the go to place to buy furniture online.

RS:    It certainly is. And when you were starting out, your family has been in furniture for 60 years. So was this set up as a side business or was it incorporated in the actual primary business of – of your family?

DR:    Yeah. So it’s got actually, except for my family background and experience, it has nothing to do with my family’s business. They independently have their businesses which are going really well in the furniture space as well. We are basically, I worked for my dad for nearly nine, ten years growing up as a – as a teenager and then quit the family business to start Milan Direct because the family business, although extremely successful, they do big projects like the Olympics which is a million pieces of furniture for two weeks. It wasn’t online so, yeah. Decided to go about it with a good mate of mine, you guys would know was Ruslan Kogan from Kogan.com. We started the business together. But yeah. We’ve, a good education experience that I got from working in my family’s business.

VK:   So I’ve read that you and Ruslan Kogan now consider yourselves competitors because you’re – in a sense you’re offering some of the same products and you even have price wars. Is that – is that the case? You know, is that a challenge for you to be in competition with your business partner?

DR:    Not so in that we’re competitors with absolutely everyone. You know, we compete with Officeworks for office chairs and Bunning’s for outdoor furniture. The Kogan company has become a department store so they’re selling thousands you know, thousands of products in all different categories whereas Milan Direct is very focussed just on the furniture category. So there’s a – a tiny crossover of products but I wouldn’t consider them a competitor like Temple Webster or Wayfarer, or Zanui who you know, they’re our direct competitors in the space.

RS:    And when you, you had a phenomenal growth. A lot of demand out there and you were I imagine, catching up with your backend systems. What was some of those challenging chokepoints where you had to you know, invest and have a step-up change in your – in your back office?

DR:    Yeah. Our initial website couldn’t, it functioned really well when we had 200 products on the site but really struggled once we got over a thousand. So we spent a good year or two building our current website so it could cater to unlimited products. And even now we’ve got that fine and we’re just about rebuilding it again because the more products you put on, the better search and functionality and filters and attributes that you need. So technology is you know, never ending, you’re never going to complete a project, you’re always going to be making improvements to it to keep up with the business. Same with our backend systems too.

VK:   You’ve referred to Milan Direct as a, you know, people think of it as a go to place for furniture and it certainly has become that but obviously it wasn’t back in you know, 2006 and 2007. What did you do to build up to that level to position yourself as the go to place? What’s some of the key strategies?

DR:    I think the key strategies to really focus on – on your – on your brand and you know, having a great brand to be known as you know, the one stop shop for furniture but you have to back that up by treating your customers amazingly well. So you need, we’re a great brand because our customers are repeat customers and keep coming back and tell their friends about the great experience they had and that word of mouth increases the momentum into your business. So yeah, I guess if – if you look after, and it sounds corny but if you look after your customer, the rest will take of itself. You can’t really focus on anything else if you’re not looking after your customer. Like nothing else matters if your customers aren’t happy. So everything we do is centred around you know, will our customers like this product. Are they happy with our service? Are they coming back? Was the user experience with the technology a good one? And just always have the customer in mind and that’s led to a really well established brand after nearly 10 years now and as a result most of our sales each day happen from people searching Milan Direct and coming direct to our site.

VK:   A few years ago, you know, well certainly when you started, there wasn’t a lot of furniture that you could buy online. But now there are some of the other brands that you’ve mentioned like Temple and Webster and Zanui. When they came on the scene, you were obviously there first but when they came on the scene, how did that impact your business?

DR:    Yeah. We looked at it as a real big positive because for the first you know, four or five years, we had next to no competition so as a result, you can get a little bit complacent and you know, don’t innovate as fast as you should. Whereas when, especially when Temple Webster and Wayfarer when they launched into Australia, it really woke us up and it made us realise these are you know, great companies heavily funded and backed with a great management team. If we don’t constantly innovate every single day, we’re not going to stay ahead of them and you know, you end up getting run over so the changes we’ve made and our growth since these big competitors launched, it’s just, that’s probably a key factor in Milan Direct being a big hit today.

VK:   What kind of changes?

DR:    We’re constantly making every day 20 to 40 you know, business improvements throughout the company. Whether it’s from the product team, the buy in team, logistics changes and a big focus on tech changes too. So yeah, it’s hard to you know, say which is it because in any given week, we’re launching all these different projects.

RS:    That’s an amazing amount of change. Dean, how – how do you prioritise that during the day? Do you sit down in the morning and go, I’ve got everything to do, what do I focus on first?

DR:    Yeah. Big challenge for the day. So I tend to focus on whatever’s going to bring the most value to the business and you know, focus on that in the morning and it’s really just making sure your managers of all the different teams know what their goals are for the day or the week. So you know, I’ll rotate between making sure our import manager and her team are under control. The tech manager knows what projects he’s got to get on board. So it’s a mixture between always furniture tech and marketing and if those three things are working well, the business tends to run quite well.

RS:    That’s great advice. And speaking of challenges, when you moved into the UK, a fresh market, what sort of the challenges and learnings you got from that experience?

DR:    Yeah. That was a tough one because launching into a new market with, really with no brand presence, you know, the customers aren’t familiar with your brand there so you have to be really specific and pinpoint with your marketing. So that’s the big advantage of Google ad words that you can launch a company and launch as specifically targeting the products that you sell and get instant sales. So the same way that we launched in Australia and the same strategy worked in the UK. The important thing was again, going back to using the data we used. We saw what people were searching for in the UK to base our decisions on which products to launch in the UK. So we didn’t just launch the exact same range that we have in Australia. Even the way people search or call products. Like people don’t refer to outdoor furniture in the UK, they call it garden furniture so we had to rename the products to match up with what people were searching for.

RS:    And how did you find out about that type of product knowledge? Was that – did you do a lot of research before moving into the UK? Or was it something that iterated as you went along?

DR:    It’s really just where you start everything with, with Google. You know, there’s so much information on Google and yeah, we Google – Google trends and insights is just a wealth of information there and we had a look. We were like, because we plugged in our top ranges from Australia and we had a look at outdoor furniture and we thought it was really odd that there are no searches in the UK for outdoor furniture but then we played around with it and then we saw a few other key words and plugged in garden furniture and then saw okay, so in the UK, people are calling it garden furniture even though it’s the exact same thing. So then yeah, just a bit of trial and error but it’s always good to start with what people are searching for.

VK:   So I have to ask. With all that data from Google and thus the products that you offer for sale, what are some of the key differences in what people in the UK like versus what Australians like? Or even you know, what people in different states in Australia like? You know, that – that you found surprising?

DR:    For people in the UK, they prefer and are more familiar with European styled furniture whereas Australians are more – more comfortable purchasing modern furniture or you know, a bit more trendy designs. So a few quirks there. And then Australia wide, you know, there’s a lot of searches for outdoor furniture in the Gold Coast obviously because of the weather. So we have different campaigns targeting Gold Coast people who shop online compared to Tasmania for example.

VK:   Let’s talk about headcount a bit. What – what kind of staff numbers do you have these days after nine years?

DR:    Yeah. We’ve got around 35 in our head office in Albert Park then you have you know, other employees who work in our 3PL warehouses but they’re not direct employers of Milan Direct so yeah. 35 to – to 40.

VK:   So presumably you started with just you in the early days, now you’ve got 35. What were some of the biggest learnings you’ve had when you’ve had to scale up with so many people?

DR:    The biggest thing would be learning to delegate. Initially, every single role, myself, and my business partner, Ruslan, we created. We create processes for each role and I kind of you know, when it’s your company, you have a feeling no one’s going to care as much as you and do a good of a job that you would do. So I found it hard to let go of key roles and it was only when you know, we were trying to work out how can the business grow and it was probably at that point when I started to delegate all these key roles and build up the team and you know, grow the team from one staff member to 10 and hand off all the roles whilst overseeing them. That’s when the company took off and before that, it’s really just the little hobby, you know, side project that you have so that’s the key difference there and yeah, it’s just important to still, to manage your managers and oversee the work everyone’s doing and be really hands on but you can’t do it all yourself.

RS:    And a key success factor of any very successful e-retailer is the logistics part. Not just getting the furniture in, but then actually getting it to the – to the customers. Hey dean, can I ask you to define 3PL and talk a little bit about your own experience with logistics given how critical it is to your business?

VK:   Yeah. For sure. So 3PL means third party logistics and that’s where effectively we partner with a warehouse who’s an expert in logistics and they handle all our dispatches for the day. So on any given day, we’ll send them the orders in the morning and they’ll dispatch the goods and then at the end of the day, they’ll email back the tracking numbers which we can email to our customers, so they can track their order online. And we’ve had major challenges, We’ve actually, we’ve been partnering with a great 3PL in Australia for the past, close to five years now but for the first couple of years, we struggled finding a good 3PL provider because online was new and all 3PLs were used to was a brick and water type of experience. Like similar to like the IKEA model where once a week, one truck would pick up a 1000 products and send it to one IKEA store where every single day, we’re sending a thousand products to a thousand different customers right around the country and you have to label each product and so it took us yeah, quite a few years and we moved warehouses I think 10 times in the first two years before we found our current provider who really understood the online requirements and the expectations of our customers and that’s all really about, being transparent. Like people want to know where their product is and when they’re going to receive it. So it was definitely a major challenge to overcome in the early days.

RS:    And any helpful tips for those junior e-retailers out there when they you know, running the ruler over their 3PL supplier?

DR:    I mean, you can start with an easy Google search of, you know, top 3PL providers. And then yeah, it’s really, I would interrogate the you know, grill the 3PLs about what you’re requirements are and make sure they actually understand what your requirements are and can meet that.

RS:    Great.

DR:    I don’t think it’s as hard today. You know, many 3PL’s today understand what online retail is and they’ve probably get a few online retail customers and they’d understand it. But yeah, it’s – it’s really all about proper communication and good tracking. So your 3PL, your warehouse has to provide you with your tracking numbers at the end of the day so you can pass that on to your customer.

RS:    That’s great. Thanks so much Dean. And would you mind giving us you opinion about where you see the future is going to be? Is Australia going to become a fully catalogue society? Or where are we going to end up?

DR:    I think it’s definitely a place for both online retailers and brick and mortar retailers too. Like online retailers is a really small part of the total retail landscape like less than, less you know, between five and eight percent. There are some people who you know, only want to purchase in store, others only want to purchase online. So I think really Omni is going to be the future of online. And you have to be where your customers are at all times throughout the day so there’s really no online, offline retail anymore. All – all retail blends between the two and yeah, it’s probably important to have a presence in both.

RS:    I’d personally love to know, what are some of the things that you’ve learnt from, you know, your father and your grandfather have so much accumulated knowledge that you’ve brought into the new business.

DR:    It was actually really good in that my grandfather was very like, he made furniture with his hands, he was always in the factory, never wore a suit in his life. So I learnt like how to be an entrepreneur and a hands on manager from my grandfather whereas my dad’s very much like the best businessman I’ve ever met. So they have two really different skillsets which I was able to you know, learn a bit from the both of them and try to combine into, when we started Milan Direct, and yeah it’s kind of cool like my dad, he just goes from one Olympic project to the next. Currently he’s in Brazil working on the Olympics for next year.

VK:   Wow.

DR:    And every now and then he comes back and because he’s based overseas, he just comes into the MD office and works out of the office for a couple weeks with me whilst he’s in Melbourne so.                          

RS:    That’s fantastic.

DR:    It’s all good.

RS:    Well I hope there’s a fourth generation.

Interlude

RS:    Its time now for the small biz quiz. It’s not really a quiz in the typical sense but it is a chance just to find out a little bit more about you Dean. Are you ready?

DR:    Yep. Ready for it.

RS:    Okay. Who’s your favourite entrepreneur?

DR:    Donald Trump. For sure.

VK:   What wakes you up in the morning?

DR:    The alarm clock at 5:30.                                                

RS:    What’s your favourite business related book?

DR:    All the Donald Trump books, I’ve read many times. But there was another good one Bryan Tracey wrote a book called Goals.

VK:   What do you do when something in your business isn’t working for you?

DR:    Check the data, work out why it’s not working and then fix it and then check the data again.

RS:    And what inspires you?

DR:    I’d say my grandparents who came to Australia with next to nothing and started a furniture manufacturing factory in Cheltenham which is the you know, the family tradition today.

VK:   What are the three apps on your phone that you can’t live without?

DR:    I’d say Gmail, Google analytics and a weather app. I’m outdoors a lot.           

RS:    And the best piece of advice you’ve been given?

DR:    Best piece of advice that I’ve been given. Probably to spend your life doing something that you actually love and enjoy doing and that’s much more important than how much you’re going to get paid to do that because if you love what you do, you know, success should follow.

VK:   On that note, thanks so much for your time today Dean.

RS:    Really appreciate it Dean. Thank you.

DR:    Cool. Thanks for your time guys.

Interlude

RS:    It was some really interesting insights from our discussion with Dean. I don’t even know where to begin. What I loved was how he was so customer-centric. He understood the importance of big brand but then he really stepped through that virtuous cycle of you know, treating the customers well, you then get repeat customer, they then give referrals and talking about it to their friends which then drives even more sales. It was also fascinating to hear about just how much his business his driven by data.

VK:   Yeah. Absolutely.

RS:    You know, going into the UK as well. Talking about products, different challenges there and I thought particularly fascinating, it was his opinions about 3PL so the logistics and how that’s changing the landscape of what consumers in Australia actually get their physical items.

VK:   Yeah. Certainly very important for people who are actually selling products. But whether you’re selling products or services, that data insight is really useful and I thought what was great is that you don’t have to have some fancy data you know, collection program or anything. You can just use Google analytics and Google insights and Google trends which are all free. So I’m going to – I’m certainly going to be paying more intention to my Google insights and trends and analytics as a result of this conversation.

RS:    I might just also add the, it was really, I guess very heartening to hear how being a third generation inside the same industry. In this day and age, when we you know, disruptions just a common word to hear how he’s disrupting and innovating his own business and getting on the front foot but then still finding that kind of heritage and tying it back into his father and grandfather.

VK:   Yeah. And I thought it will be useful to share this new book that is out by Simon and Schuster and it ties into today’s conversation. It’s called Online Gravity: The Digital Giants Driving the Way You Live, Earn and Learn by Paul X. McCarthy. Don’t know what the X stands for but that’s the author’s name. Paul X. McCarthy. And you know, he poses questions like why have local video shops disappeared and been replaced by Netflix? Why are hotels being replaced by Airbnb? Why is your taxi driver from Uber? You know, and it ties into today because certainly there was a time not long ago that we never would have thought we would have bought furniture online. We definitely would have thought we had to go to the shop and measure it and look at the colour and all the rest of it. And now, we don’t think twice about it. I certainly don’t think twice about it. So certainly some interesting insights from this online business expert and technology entrepreneur. Paul McCarthy.

RS:    We’ll be sure to put that in the show notes. For more useful information about business management and e-commerce, check out the Xero small business guides also in today’s show notes. Well that’s it for this episode. Be sure to join us next time. I’m Rob Stone and thanks for tuning in to Xero.

VK:   And I’m Valerie Khoo. See you next time.

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