A pioneer of e-commerce was surprised when he compared sales between his online-only operation in Canada with his web-and-salespeople one in Australia.
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Entrepreneur: Abraham Thomas, Managing Director
Company: New Directions Australia
Business type: Manufacturer and wholesaler of natural organic products for the beauty industry
Employees: 300 full-time; 200 part-time/casual (70 full-time in Australia)
Turnover: (2007-2008) more than $64M
Head office: Marrickville, New South Wales
Contact details: 1800 637 697
The New Directions Australia Story
Abraham Thomas arrived in Australia from India in 1983 with a few hundred dollars in his pocket and no grander ambition than to explore the wide, brown land. Now, 25 years later, he runs an international business that supplies and manufactures natural beauty products, with offices in 10 countries and a turnover of more than $60 million. It's been quite a trip.
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Key learning points:
- Relevance - Are you sending out marketing materials for the sake of keeping your logo in front of customers or because you really have something for them? If you want to be read, keep it relevant.
- Customer contact - The Internet has revolutionised many aspects of business but there is no substitute for human-to-human contact in the sales process.
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Thomas travelled the country and wound up completing a commerce degree at Edith Cowan University in Perth. In 1987, he moved to Sydney where a chance meeting through friends put him in contact with lawyer Domenic Ardino. Thomas and Ardino hit it off immediately as both were keen to start an innovative, new business. Thomas says: "We were energised by the idea of working together and started looking for business concepts."
As a child, Thomas was imbued with Ayurvedic principles of health and well-being, a traditional branch of Indian medicine (his uncle and aunt are Ayurvedic practitioners). It was an obvious progression for Thomas and Ardino to consider a business related to that field. They began by importing citronella oil. Thomas says: "To our surprise our first customer ordered 200 kilos. We didn't realise the potential of the industry until we got this break."
Thomas and Ardino soon spotted a gap in the market for a raw, organic-materials supplier that specialised in servicing the natural health and beauty industry. Thomas says: "We saw that there were a few large players supplying large quantities to all industries but no small players servicing the natural-health industry. We decided to bring in product in bulk and break it down to small quantities. We had a no-minimum policy and we serviced quickly."
Thomas and Ardino own 100% of the business and are co-directors.
The Challenge
Selling product profitably online.
The Solution
When Thomas and Ardino started New Directions in 1987 cash was sparse and maintaining contact with customers was a prime task. Thomas says: "We started building a database of our customers and would send out a catalogue and price list. It certainly wasn't stylish; it was a typed, photocopied pamphlet."
As the business grew, the catalogue became more sophisticated and the client list expanded. From 1996 the internet opened up wider possibilities and New Directions soon took advantage of them. Thomas says: "We were pioneers using e-commerce to market natural products."
Thomas used his network of contacts in India to help the company establish an online presence. He says: "We invested $5000 for a website with an online shop. In those days that was considered brave and expensive."
But being pioneers also meant learning the hard way. Thomas says: "We had no benchmarking, nothing to model our web presence on because there was no one else selling natural products online."
The New Directions website began receiving hits but it took two years before the first online sale was made. It would have been easy to despair. Thomas says: "At times it was disheartening but my friends in India assured me that it would take off. Our customers were used to getting our catalogue so we had to use our catalogue to start publicising our online shop."
Once people became more familiar with internet, the New Directions website attracted new customers but in the interest of relationship building the company still preferred customers to phone in orders. In 1999, when New Directions opened an office in Canada, Thomas tried a different approach. He says: "We decided to channel all orders through the web; we only took online orders."
In 2007, Thomas was analysing sales figures from the global offices when he noticed something startling. He says: "Australia and Canada processed the same number of orders per day but the dollar value per sale in Australia was double that of the Canadian office."
How come? Thomas went back to the early days of the business when close, personal contact with customers was essential. Australia still retained a mix of personal and internet-based sales; Canada didn't. Thomas immediately employed five extra staff in Canada and changed its business model to that of Australia's; ordering over the phone was encouraged.
Within a year, Canada's sales had risen to match those in Australia. Thomas says: "I am 100% sure that the reason behind this increase is the relationship building. If you can't talk to your clients, you won't get the higher sales."
In 2003, New Directions began circulating a monthly information e-newsletter to its database of customers. The content has steadily evolved over the years and is tailored to suit the seasonality and preferences of each international market. But content is everything. Thomas says: "People are now bombarded by e-newsletters so we have to include meaningful content from aromatherapists and medical herbalists so that people don't just delete it. When we include ingredients and specific recipes the results are amazing - we sell out."
The Result
New Directions now has offices in Australia, Canada, the United States, France, Korea, Japan, Taiwan, the United Kingdom, Belgium and Portugal. Thomas says: "In the future we plan to open offices in India, China, Brazil and Russia."
In the past five years, revenue has more than doubled to over $64 million. About 20% of the global revenue is generated from the Australian office; the rest comes from the nine international offices. About 50% of sales in the Australian office are generated from the New Directions website.
Prior to starting its online shop, New Directions had a direct mail database of 15,000 customers. The Australian newsletter now reaches more than 45,000 customers. Each international office manages its own database and the newsletter is localised for each market.
Thomas says the first five years of business were the toughest. "We didn't have any staff for the first five years. At the 10-year mark we could relax a bit and started dabbling with new concepts."