From the source: Athan Didaskalou, July
Richard Li and Athan Didaskalou launched D2C luggage brand July online last year, and in the last six months it’s sold 6000 suitcases and is projected to hit $5 million this financial year. Here, Didaskalou discusses international growth, the state of the luggage market and entering physical retail.
Inside Retail Weekly: How did you come up with the idea for July?
Athan Didaskalou: Rich and I founded July last year. We’d known each other just by working in the same area. We were both self-employed. He’d worked at Brosa and I’d worked at 3000 and doing some marketing consulting as well. We spent a lot of time at A-Coffee, a coffee shop in Collingwood, and when you see the same people at a cafe, sooner or later you connect and chat.
We connected because we were self-employed and doing interesting things online, but we’re very different people. Richard is an extremely smart operator, he’s very much a manufacturing/operations/efficiency-driven sort of guy. I’m the entire opposite – I’m a marketing, colour-in-the-pictures kind of guy, who will spend whatever it takes to make someone happy or get the end result.
We come from different worlds but when you are self-employed, you think about where the broken experiences are and how you can fix them. We’d seen some success with direct-to-consumer (D2C) brands overseas. They’re doing really well in Europe and the US, but the notion of D2C hasn’t really taken off in Australia.
If you tell people that you’re D2C, they half-understand it, but they don’t get that there’s no middleman and that it’s cheaper. They don’t understand the notion – you can control the entire experience.
We got alerted to the fact that the luggage industry is one of the worst industries for abusing the wholesale distributor network and using global mass market scale and manufacturing to maximise margins. If you buy a piece of luggage from a big retailer, it’ll be $700 RRP, but it will probably be 50 per cent off, so you think you’re getting a good deal, so you walk away having bought it for $350 and thinking, ‘How good is that?’ Little do you know, it costs $35 to manufacture and the factory still made money on it. The distributor, wholesaler and retailer have made 40 per cent clip on top of that as well.
So once you know how the sausage is made, you go, “This is a bit ridiculous. Surely there’s an opportunity here.” Richard knows how to manufacture things of an extremely high quality and he already knew how to manage factories and get the best out of the relationship. It takes a relationship-building guy to change things at a factory level and get an amazing result. Then we used my brand expertise to take it to market and make it a global brand from day one. So we got together to create July.
IRW: A lot of businesses sell their products online first. How is that different to a D2C operator?
AD: The term is typically reserved for larger-scale brands that are going into larger markets. It’s a differentiating category that is typically dominated by retail/wholesale relationships. It’s like a farmer’s market opening a supermarket.
The issue for D2C businesses is needing the capital to grow and manage the services.
As a wholesaler, you can get a couple of samples, do a deal and order as needed. You can ship the container in and sell it to people who already have customers. Most people feel like they don’t have a distribution platform and customer base but they have a great product that they want to get to the masses, so the hard part is getting the customers. We are bringing those things together.
We got some seed funding which helped us sustain that growth, but it means we do both those things. We’re the retailer, so we have to spend money to find the customers. And we’re the wholesaler, so we have to spend the money to get the container over and hope that we can resell it.
The reason why people don’t do D2C is because it requires double the money, but we get the upsides as well. If you assume your product is going to be popular and you’ve done a great job, you keep the retail profits and you manage your own ordering. You don’t lose the contract. Coles won’t go, ‘We’re going to make our own now, thank you very much.’ You make a clip and you don’t have to worry about that. You provide the product – it’s less hassle and you don’t have to do customer service.
IRW: I’ve heard of a few airlines that have had problems with smart suitcases. Is that something you’ve had to face, given your cases have a battery in them?
AD: We don’t have an issue with the airlines, we have an issue with perceptions. A lot of people think that if you’ve got a battery, you can’t take it on a plane, not understanding that their phone and laptop are batteries as well. This happened because Samsung phones caught on fire. What you can’t do is take a phone or any battery and put it into checked cargo luggage, because if it catches fire, they can’t do anything with it on cargo and it will continue to burn, but if it catches on fire in the cabin, staff can put it out.
That’s the theory behind it, which is why we put the battery in the carry-on suitcase and not our two other pieces of luggage. Some people think it’s kitschy, but if you’re running out of battery and you realise your case has a charger, you don’t realise how much of a lifesafer it really is.
IRW: What makes July cases different to others in the market?
AD: When you’re talking cases, polycarbonate is what you want – it’s light and strong – and we got the best from Germany. The only issue with polycarbonate is where it bends – these become its weakest points, like at the corners and edges, so we created a rounder suitcase. We created an egg-shaped case that bounces back when it lands on its edges. The corners are reinforced with aluminium bumpers and we made sure our polycarbonate can’t be pressed in.
People want suitcases that come with all the bits and pieces that they don’t need to buy, so we put a TSA lock in. We put a laundry bag inside every suitcase, so you can put your smelly clothes in there and you don’t have to take plastic bags. The inside lining is stain- and waterproof. Only the super luxury brands have multi-stop handles, the kind that stops in 30 spots instead of three different heights, but we put that on ours. It costs more, but because we’re D2C, we can absorb that margin. We coated our handles in soft rubber, as most people complained about how the handles feels.
The wheels are the hardest thing. People know good wheels when they feel them but don’t know what they’re looking for. We created our own wheels and trademarked them. We used premium rubber for the wheelhousing then created a shape for better clearing and removed the ball bearings for weight.
There are a whole heap of features people want in a suitcase, but the number one thing is it needs to look good. There’s a real aesthetic people want from their suitcase and if it doesn’t look good, it doesn’t matter how good the wheels are.
We launched our first product in February and our second range of larger cases launched in mid-July. Leading into Christmas, we’ll have new products as well. We’re projected for $5 million this financial year and we’ve sold around 6000 cases in the last six months.
IRW: Tell me about the pop-up store you’ve just opened in Melbourne Emporium.
AD: It’s quite funny. We’ve never done physical retail before, so it was a thrill for us. It comes back to fully understanding customers. If you say things like, “I want to be customer-centric and offer an amazing experience but we only do online”, how can you say you’re really customer-centric? When people are buying gifts especially, a lot of people want to walk out of a store right then and there. You can’t do that as a purely online business.
You need to understand the importance of the omnichannel experience. There’s a term I focus on called ‘linked brand experiences’ – it means that you experience a brand in its totality. So if you’re a July customer and the in-store experience is great and the social media is on point, but you get to the online store and maybe the buttons aren’t working or the images pixellated, you don’t say to yourself, ‘Oh well, that’s a shame, just their site is shit, but I’m sure the brand is OK.’ You go, ‘July’s not really looking after the details.’ You take that one experience and apply it to the entire brand, so it’s important to ensure each moment in the ecosystem is as good as the other and at the expectations that customers want.
So back to the store. Customers want to touch the product. It’s a really simple thing. Customers just want to see what the lining is like and feel the wheels. So we decided that we should open a store. Our plan is to roll them out as much as possible. If we can do a flagship in every city, we’ll be rapt.
It’s in Melbourne Emporium and around 60sqm. It’s beautiful. We had an interior architect help us design it and actually it was the same team that helped design the cases as well. It’s quite nice for them to take that design language they used for the luggage and translate it to the store. It feels beautiful. The curves feel right, it’s part of our design story and we’d like people to experience it. It’s sleek, minimalist and modern with rounded touches. The bench is actually open to the customer to come in and around, so there’s no barrier between them and retail team. They’re free to actually pick up the cases, take them for a spin and walk around the shop as much as possible.
IRW: Do you see yourself opening physical stores in the future? Tell me about your plans for local and international growth.
AD: We’ll focus on Sydney, Singapore, Shanghai and Seoul – that’s our pathway for growth and retail. We sell globally, but in those regions, once we set up proper distribution warehousing, we’ll offer everyone free shipping. Right now, we offer free shipping to greater China. We have a unique situation. If someone from Hong Kong decides they want bags and they’re on holidays and they want three cases, they’re difficult to carry home, so we’ll ship it to them for free anywhere in greater China – Hong Kong, Taiwan, China and Macau. It’s a beautiful experience where they don’t need to leave the store with luggage. Often the luggage will get home quicker than they will. It’s so unique in the experience that no cash register software allows you the option to do that. We’re now in the process of building our own POS software to better personalise it.
IRW: What have been some of the greatest challenges for the business since you launched it?
AD: Other than money, capital is one of the most unique [challenges]. We basically got $250,000 angel investment and then an additional $750,000 seed investment to continue to grow. The initial $200,000 helped us develop the product, because it takes quite a bit to actually test and develop things. The additional funds helped us grow and order large quantities and then also develop the larger cases and ship them over. Without that capital, our growth would be significantly slower. No way could we have opened a retail store because rents are through the roof. We could afford to do it because we had the backing of some confident business partners who can see the vision.
The challenge for D2C businesses is that you need the right team to do everything. You’re usually you’re good at one or two particular things, but because your business is doing everything, you need a multi-disciplined team. Richard’s manufacturing, I’m brand and marketing, then we’ve got an ops guy. We need all bases covered, or you end up dropping the ball in a particular category.
I think legitimacy and having a story around that is genuinely hard. There are a lot of Kickstarter brands out there, but in order to get away from the noise and qualify yourself as a legit brand that’s going to be around for a long time and produces quality goods, you need to be quite disciplined and you need to get your ducks in a row to build that trust.
So getting our social media handle provided a lot of legitimacy for us and the fact that we invested in photography and styling from day one meant our images and social reflect the quality of the luggage. A lifetime warranty doesn’t mean anything if you’re going to be around for a year. No one believes what you’re saying if you can’t provide legitimacy points to build the brand.
IRW: If I looked at your social media, it looks like your target customer base is made up of millennials.
AD: I don’t like the term ‘millennial’ because it makes people sound ditzy. Millennials have a bad name, but I think there’s a broader cross-category of people who are based around this concept of upgrading little elements of their life. It’s a slightly older audience in the sense – they could be considered millennials, I guess. At a certain point they say, “I have certain values that I respect, I want the products I buy to reflect those values.” A lot of people like the idea of well-designed things, so they tend to be creative professionals or they’re creative-at-heart. They’ll think, ‘I don’t mind wearing a $10 Cotton On T-shirt but I’m wearing $500 shoes at the same time.” Or, “I look like shit when I go to the airport and I’m comfortable, but my luggage looks great.” That’s the best way I can describe it.
IRW: In your eyes, how is the luggage market tracking right now?
AD: The market is actually polarising, a lot of people are going to China and having some bags made, then launching these Kickstarter bags with unique product features that won’t last long. Then you’ve got designer luxury brands that want to design something at a lower tier to talk to these millennials and a younger audience.
But I think as a general rule, what we’re finding is that well-designed and considered things are actually becoming more normal now. We’ve spent the last five to 10 years in this design-centric consumerist world where a lot of brands, like Bellroy and Crumpler, have been thinking about design and luggage for a long time. Bellroy just got a $80 million valuation. They’ve been around for eight to 10 years. These guys are thinking about what their current audience wants. You can attribute it to a lot of things, like the fact that this generation of people have never really had a recession or depression and are happy to spend more on well-designed, considered goods. It can be attributed to the fact that they’ve been through a wave of consumerist crap and don’t want it anymore. They want to be socially responsible and not throw things away, they want things to last a long time.
I think the ’80s saw the rise of super high-end luxury stuff that was inaccessible – the Guccis and Pradas came into their stride around then – but that gap is closing in now. People are finding they can manufacture just as high quality products as luxury brands without having to charge the brand premium on top of it.
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