This week’s episode, we go on call with Qing Gui Huang, CEO of Thailand’s leading online beauty retail company. As a beauty retailer, Konvy supports thousands of brands with a combined portfolio of more than 25,000 SKUs, through various channels, from their app to ecommerce platforms, TikTok, and offline stores. Konvy kicked off 2024 with the announcement of their latest funding round as they look to expand regionally, starting in the Philippines.

In part 1 of our conversation, Gui shares more about Konvy’s expansion into offline retail and TikTok Shop in 2023, as well as stories behind their decision to go beyond Thailand and take a big brand campaign to become the top of mind beauty retailer in Thailand. 

Recap our 2022 call with Qing Gui Huang

TLDR

What it really takes to become the leading omnichannel beauty retailer in Thailand: 5 ways Konvy went out of its comfort zone

(1) Going beyond online. While Konvy pioneered beauty ecommerce in Thailand, they didn’t settle there and managed to unlock new market segments expanding offline. While they weren’t as experienced in offline retail, their online retail background came in handy developing a product strategy differentiated from existing platforms. 

“Instead of bringing products that have similar assortments with [existing players], we use our data from our online platform and we sort it out internally with the data that we have…”

Online pain points also inspired unique offline customer engagements. 

“And all the products we open [samples] for people to try, which is also a very new concept…the problem that we are trying to solve is that a lot of people want to buy new products on our platform, but they have never tried it before. And they’re scared to buy it. So we try to use our offline strategy to solve these problems…It is doing very well, and people love our concept.”

Ultimately this led to uncovering new market segments, specifically tourists, which built up confidence in their thesis to go regional as well. 

“When we positioned ourselves [in our offline store], we found that the customers entering our shops, almost 40 percent of them are tourists, which in the past we never really distinguished between a local customer and a tourist customer. So the customer is looking for products that are completely different from the ones we have. We have products that are very popular with the local Thai customers, but we never really tried to build for the tourist customers. So we had to sort out with the merchandising team to expand our assortments, adjust our assortments to fit that market.”

(2) Going beyond ecommerce platforms. While Konvy started with its own platform, they didn’t settle there, and expanded distribution through multiple platforms. From early on they recognized that different channels specialize in different things (ecommerce marketplaces for search, Konvy’s own platform for product-related content and deals, and TikTok for entertainment / watch time) and leveraged these advantages to build brand recognition for quality products and service. 

“Throughout the one year of working with TikTok, we became their biggest beauty player on the platform, and we’re working very closely with them on their new strategy…to convert entertainment to shop-ertainment…with the algorithm TikTok provides, it’s quite complicated for brands to really do it themselves, especially in the very beginning…it’s more about picking up trends.

For example, a product that goes viral today can sell 10,000 units tomorrow, and a brand is not going to prepare people to pack those 10,000 units tomorrow. Two days later, the order becomes zero again. So this kind of business model is not suitable for everyone…

So let’s say a product goes viral on TikTok, they are not sure that they can buy it from this video creator, but they know that Konvy’s TikTok shop is also selling these products. They will buy from Konvy’s TikTok shop, because Konvy provides quality products, quality service, and that’s very important now for the ecommerce world.”

(3) Going beyond Thailand. Konvy has always had its eyes set beyond Thailand.

“Business-wise, I always looked at the market as the overall global market, and we started our e-commerce beauty business in Thailand. Throughout these last 10 years, I’ve always been looking at what are the possible opportunities around…How did we come to the Philippines? We have been working with all these neighboring countries for a few years. With the Philippines, we started working in the Philippines with the partners we have had there for almost two to three years.” 

(4) Going beyond performance marketing. Konvy had built mindshare in consumers that they were a go-to ecommerce platform for beauty products — but the problem is that ecommerce is not as widely adopted as one would expect and not viewed as “big” or “leading” in the market. After a decade of focusing on performance marketing, they didn’t settle and took a big bet on a branding campaign. 

“In the last 10 years, we’ve been very focused on performance marketing. Everything should be measured, the results should be measured. What is the ROI for this ad? Everything was by numbers…we never dared to put a big bet on something that is [relatively] unmeasurable. So in 2021, we invested in a one-year campaign, hiring top celebrities as presenters. I would say that it paid off. In terms of sales, we did have a spike in sales, even though it’s not a continuous spiking. But because of that, people view Konvy completely differently…

Because we made that move, our commercials, our TVCs, our ads are everywhere in Thailand, you can see Konvy everywhere.That just concurs in people’s mind that Konvy is a small business and now they have jumped to become one of the biggest beauty businesses in Thailand.”

(5) Going beyond bootstrapped. In order to make these big, strategic moves, like the branding campaign, and more recently, going regional, they needed to find the right partners. 

“That’s why this time when we officially entered the Philippines, [we did so] with the strategic investments coming from the Philippines, including Robinsons [through New Day Ventures].

We think that it’s hard to just start entering it yourself. That’s why we looked for local partners.”

About our guest

Qing Gui Huang is CEO and co-founder of Thai ecommerce beauty brand platform Konvy. He is a US-educated Chinese serial entrepreneur who, after building online fashion businesses in Beijing, in 2011 he moved to Thailand spotting the opportunity to start an ecommerce platform for beauty brands which he did in 2012 with his co-founders through Konvy. He received his Bachelor’s in Management and International Business from Purdue University.

Transcript

Note: Transcripts are edited for concision and clarity

Paulo J: For our first-time listeners who aren’t familiar with Konvy yet, you can give a brief introduction and then jump right into what 2023 has been like for Konvy.

Gui: To give an introduction and background of our business, we started as an e-commerce platform focusing on beauty retailing, a little bit different from marketplaces like Lazada and Shopee. 

As a retailer, we basically collaborate with the brands, and we do take stocks to ensure the quality of the product. 

10 years ago, when we started this business, we found that the beauty industry was somewhat very safety-sensitive, and there were a lot of fake products in the market. That’s why we started with a retail model instead of a marketplace.

Today, we’re working with more than a thousand brands, with the SKU of more than 25,000 to 30,000 SKUs, mainly selling on our app, but we are also on Lazada, Shopee, and TikTok.

Last year, we also opened our first offline store. So that was a very exciting experience for us as well. 

And we’re always number one online in Thailand. Exciting news is that we are also expanding regionally this year.

Paulo J: You mentioned a couple of things there, which we’ll get into. First is, congratulations on the offline launch. There’s also TikTok, which has been making a lot of moves recently in Southeast Asia — we’ll also talk about that. Then obviously your regional expansion as well.

How going offline unlocked a whole new segment

Paulo J: But first, going back to the offline part, can you share with us what the thought process was for opening up offline and what are some of the learnings that you’ve had from expanding into that channel, especially coming from e-commerce?

Gui: My background is in programming, and throughout my career, I’ve always worked in management and marketing roles. 

Offline was never part of my experience in the past, so it was very hard for me to decide on a strategic move going offline. 

If we decided to do it earlier, I’d probably have done it five years ago. But it’s not my strength to go offline, so why did we decide to go offline? 

The first reason is post-COVID last year, 2023, was the first complete year where people started to [go out more], and people are not wearing masks anymore. We really began to rethink a little bit about what Konvy is really about to us. Is it going to be an online business only, or is it going to be a multi-channel online to offline? In the future, it could even be virtual reality. 

I made the bold decision that Konvy should not be just online. Yes, offline is somewhat challenging for us. We don’t have experience, but we’ve got to make the move to try it. Let’s try it first and see how it goes. That was the mentality behind the decisions. And it turned out to be quite better than my expectations.

Paulo J: Any learnings so far that you can share with our audience when it comes to, especially with your background, this being your first foray offline? What have you learned so far, specifically for the Thai market?

Gui: Thai offline retailing is very competitive compared to neighboring countries. 

For people that are used to traveling to Thailand, you’ve probably seen some of the best malls that you have ever visited around the world. The offline shops are really nice. The service is really good. So the question to me was, how are we going to differentiate ourselves from others? 

Most of the stores are in the malls. It’s not like we’re going to find a better location than other people. So the question goes, are we going to do product assortment differently? Are we going to do service differently? Are we going to do a completely different model? 

Our answer was to try to do something different from what traditional business was doing. It’s like Watsons and Boots, they have been in the market for beauty retailing for many years. And I was thinking, I don’t want to do the same thing as what they did. 

If they’re already doing so well in what they’re doing, as a second mover, there’s no point for us just to try to copy the model that they’re doing. So we discussed it internally and came up with a new concept. 

Instead of bringing products that have similar assortments with Watsons, we use our data from our online platform and we sorted it out internally with the data that we have, with the reviews that our customers are voicing, with things that people are searching for. 

We created an assortment and alignment on the products on the shelf very differently from a traditional business. And all the products we open [samples] for people to try, which is also a very new concept. 

No business in the market [had samples for all] the products and were letting people try. But for us, the problem that we are trying to solve is that a lot of people want to buy new products on our platform, but they have never tried it before. And they’re scared to buy it. 

So we try to use our offline strategy to solve these problems. So good products that people are searching for recently in this month, let’s get those products on our shelf and open it and let people try it. That was the mentality behind it. It was doing very well, and people love our concept.

Paulo J: You have those food samples in the supermarket and coffee. You can do something for these beauty and healthcare products as well. It’s interesting that you got the data and insights from e-commerce and plugged that into the product mix for offline. Is there that much of a difference in terms of what people are looking for in offline SKUs or brands versus online or not as much?

Gui: There’s definitely a big difference. For online, we have a dataset, which is complete with overall sales data. We also can break down the sales to zip codes, to demographics, but when we entered offline, how we did it in the very beginning was to pull our overall data and list the product and see how it goes. 

What we saw is that even in those zip codes, the behavior of the customers differs by the location of the shop. 

So the first shop that we opened was in Siam Center. Siam Center is where there’s a lot of tourists. Young people like to shop around there. It’s the mall next to Siam Paragon, which is a sister mall.

So Siam Paragon is more of a premium mall and Siam Center is positioned as a trendy mall. There are a lot of fashion brands and new brands there. When we positioned ourselves there, we found that the customers entering our shops, almost 40 percent of them are tourists, which in the past we never really distinguished between a local customer and a tourist customer. 

So the customer is looking for products that are completely different from the ones we have. We have products that are very popular with the local Thai customers, but we never really tried to build for the tourist customers. So we had to sort out with the merchandising team to expand our assortments, adjust our assortments to fit that market. 

We opened our second shop in [another mall], where it’s more of a family mall. Usually not young people, but the whole family travels to that mall, the parents, the kids, so the assortments where customers buy products is also very different. 

So that comes in handy that we have very strong technology to support [our offline expansion] in the future. We’re thinking that each shop should have different products and specifically, not just on zip code, but on the behavior of customers of that shopping mall.

Paulo J: I think the tourist trend was pretty interesting. I wonder if that has any relation to how you view regional expansion now as well. Like looking at what tourists are interested in and what they bring home.

Gui: Konvy is always very strong with the “office lady” kind of positioning. 

I would say that almost everyone in Thailand knows Konvy, they buy Konvy, but there are areas that we have never entered. So tourists are one segment that we never entered [before]. 

Thailand has one of the largest tourist populations around the world. There’s a big proportion of that market that we would like to get, as we’re expanding to the Philippines now. And yes, there’s some interesting information that we do have a huge number of tourists coming from the Philippines. 

The [tourists] were asking [about] us. Because I told the teams in the mall to gather information, to gather questions that customers ask. And one of the questions that they gather is that a lot of Filipinos [say] that they don’t have similar shops in the Philippines, compared to Thailand. 

All they have is Watsons drugstores, and they would like us to open a shop there. So, that also increased our confidence in expanding our business to neighboring countries.

Paulo J: Pretty interesting story there. I didn’t know it would all tie in together.

Why TikTok as a channel is best leveraged at scale

Paulo J: But before I get into the regional expansion, I also wanted to cover the TikTok Shop. I think probably two years ago, it was still in the experimental phase. But now, you’ve pretty much developed that channel as well. How does it compare when you help brands expand into TikTok Shop? And how does that channel stack up compared to other Konvy’s own platform, offline, and other channels that you guys use?

Gui: Four years ago, I think the last time we talked on our podcast, I mentioned that we were just entering TikTok. It was a very new channel for us. 

Four years ago, we decided Konvy was not going to be a single channel strategy. So we entered Lazada, then we entered Shopee, and last year we entered TikTok seriously.

I think the first time we entered into TikTok was in late 2022, where TikTok Shop just opened their first shopping cart functions in Thailand. And I would say that we were probably one of the very, very first beauty players to jump into these markets. 

I think this goes back to our genes. As an e-commerce company, we believe that Konvy should always innovate. We need to be humble. The channels that we are building are not going to be the sole channels for everything. I don’t believe that there’s one channel for everything kind of theory; there will be channels that are more specialized in doing certain things, and there’s another specialty where another channel is better. 

For example, Lazada and Shopee, as marketplaces, it’s more of a channel for people searching around, searching our products, giving some recommendations, where the Konvy [platform] is more of a content-driven, deal hunting, looking for what’s going on in the market, and looking for trends. We are specializing in that [through our] company app. 

But for TikTok, the thesis is for entertainment. And people are spending a lot of time on entertainment on a daily basis. People are spending an average of three to four hours on TikTok for people that play on it. That’s crazy. That’s [a long time], and usually, shopping apps like us have per session, probably 20 minutes. They find and see the trends, then they close it. 

We’re not going to give up on a platform where customers spend a few hours a day, and that’s not related to us. I don’t want to see this blindly as, okay, are they a competitor? I don’t see it that way. I see that this is a new trend now. 

People are using TikTok for entertainment. How can we leverage this platform for us as a retailer? So we start to explore different types of possibilities. Now, throughout the one year of working with TikTok, we became their biggest beauty player on the platform, and we’re working very closely with them on a new strategy.

So people in TikTok, they also want to convert entertainment to shopper-tainment, right? They want to convert entertainment to shopping, to people buying products, and they need players like us to work with them. 

Especially with the algorithm TikTok provides, it’s quite complicated for brands to really do it themselves, especially in the very beginning. It’s tough. It’s even tougher than Lazada and Shopee because, for Lazada and Shopee, you build a team, the traffic starts to come in, people are searching the products, people are buying the products, and the orders are quite sustainable. 

But in TikTok, it’s more about picking up the trend. For example, a product that goes viral today can sell 10,000 units tomorrow, and a brand is not going to prepare people to pack those 10,000 units tomorrow. Two days later, the order becomes zero again. 

So this kind of business model is not suitable for everyone. I would say it’s not suitable for most businesses. I think this is one of the challenges TikTok is facing right now in the global market. There are a lot of small vendors. 

But when a vendor starts to become big, they start to see logistics problems, they start to see service problems, they start to see quality assurance problems, and that’s where Konvy can solve all these problems for TikTok and also for customers. 

So let’s say a product goes viral on TikTok, they are not sure that they can buy it from this video creator, but they know that Konvy’s TikTok shop is also selling these products. They will buy from Konvy’s TikTok shop, because Konvy provides quality products, quality service, and that’s very important now for the ecommerce world.

Paulo J: I was curious to know, cause I think the problem that you brought up with the logistical side of things, pretty interesting. How does Convy help address that pain point? In particular, especially with regards to virality and ensuring that the brands are able to keep up, right, with fluctuating demand.

Gui: Konvy invests so much into the backend and the infrastructure of this business. Because we learned that this problem would not be able to be solved anytime soon. 

With the demographic we have in Thailand, with a population of close to 70 million people, let’s say beauty brands in the Thailand markets, most of their market size is about a million USD per year, which, if you break down to 12 months, on a monthly basis, it’s about 300,000 USD per month. 

For them, it’s really hard to build a very complete e-commerce team, complete fulfillment team, and complete logistics team. Because of that, we have 1,200 brands that we’re serving. I would say more than 70 percent of brands face these problems. 

Because of that, we are building, investing into warehousing, investing in our systems, investing in our real-time smart forecasting systems, supply chain systems, to solve these problems.

Paulo J: So really building out the infrastructure for these brands to use because a lot of these platforms like TikTok, it can be hard if you’re not at a certain scale.

Expanding Regionally, Philippines first

Paulo J: Moving on from TikTok Shop, I wanted to get into regional expansion as well. You did just raise a fresh round and Insignia has been happy to support this new round as Convy goes regional, and specifically to the Philippines. 

I wanted to zoom in on that market in particular. You did mention Filipino tourists as an angle to increase confidence in expansion. But maybe you can walk us through that thought process again of why the Philippines? Are there other reasons that you found out across your research? For Konvy, what makes you, compared to other foreign players that are looking into the Philippines, better positioned to actually break into this market?

Gui: Konvy, from day one when we started this business, was never positioned as [just] a Thai platform. I myself am coming from China. I finished my college in the US. I lived in Taiwan for a bit of time. I went back to Beijing to do my first startup. And then I came back to Thailand. 

Business-wise, I always looked at the market as the overall global market, and we started our e-commerce beauty business in Thailand. Throughout these last 10 years, I’ve always been looking at what are the possible opportunities around. 

We looked into Myanmar, we looked into the Philippines, we looked into Malaysia. I looked into South America, North America, Arabian countries, Europe. I looked at all sorts of possibilities around and how do we enter those markets? Are we entering those markets with our technology? Are we entering those markets with our platform? Is it with our brands? I always ask myself these kinds of questions. How are we entering a market with a different business? 

How did we come to the Philippines? We have been working with all these neighboring countries for a few years. With the Philippines, we started working in the Philippines with the partners we have had there for almost two to three years. 

What we found out is that the Philippines is the third-largest beauty market in Southeast Asia, where Indonesia is number one, Thailand is number two, and the Philippines is number three, and probably Vietnam is number four. 

If there is such a big market, and now we dig into it a little bit deeper, is it a good environment for business? Are there a lot of competitors? So we did a competitor landscape analysis as well. The competition there is actually quite low, compared to Thailand and Indonesia. We also looked into Indonesia, but the competitor landscape is very strong. 

A third perspective would be looking into the entry of barriers. The Philippines has a very high entry barrier for business, and that’s why competition is not as high as in Thailand, where Thailand is a very business-friendly environment, it takes very little for you to start a business here. 

With the Philippines, to start a business, there are a lot of registrations, a lot of fees that you have to pay, it’s hard to do taxations there, legalization is also hard there, FDA is also hard there. It makes it very hard for beauty players to go in. 

But we asked ourselves, the entry barrier is high, the opportunity is high. Can we [overcome] the entry barrier? That’s why this time when we officially entered the Philippines, [we did so] with the strategic investments coming from the Philippines, including Robinsons [through New Day Ventures].

We think that it’s hard to just start entering it yourself. That’s why we looked for local partners. And together we’re trying to capture this market opportunity.

Paulo J: I think it’s interesting how you guys are expanding into the Philippines. Are there any risks that you’re anticipating? What have you guys set in place, or what are you looking to do to overcome or de-risk this market entry?

Gui: We don’t look at the Philippines’ original expansion just as a story to tell. [VCs] always ask if there’s a potential to grow, there’s a regional story for me. 

I don’t really just for the sake of completing this story. We really find that the Philippines is a good country to go to. And it could be a second curve for the business. And it could potentially be bigger than Thailand, I would say.

That’s why we are making a huge commitment to make this market work in 2024. We’re building a whole team there, and we’ve been building the team for the last few months. Now we’re in the process of registering the business. 

We’re coming strong with resources from Thailand. We’re coming with resources from all around the world and capturing a different type of market there, through online and offline distribution.

Making a Bet on Branding

Paulo J: I wanted to get into our maker break corner. You have told your sort of life story in our last conversation. And you alluded to a lot of significant points in your journey so far in this conversation. 

I wanted to zoom into what has been the most significant “make or break” moment for Convy that you can share with our audience.

Gui: When I thought about this question as well — what are some of the biggest challenges or the hard decision-making that I have had to make during my past 12 years in Konvy? 

One of them that I would like to share is that during COVID, Konvy grew very well, and we received seed investments from some investors in Thailand. So we have some money to spend. 

[During] that time, it was in a period where I felt Konvy should make a big bet on investing in our branding because Konvy has been in Thailand for almost 12 years now today, but by that time was almost close to 10 years, and a lot of people still see Konvy as a website, the online business, where a lot of people are still scared to buy stuff online. 

So the decision I needed to make was to invest the money we have in one big campaign. So that was a big decision. I almost thought about these questions for one month. I was discussing it with our board. 

Should we go with not too big campaigns, a little bit safer, or should we go all in? And for me, that’s one part of my own understanding that is missing that I always wanted to try was to make a big branding campaign and see how that would impact our business. 

In the last 10 years, we’ve been very focused on performance marketing. Everything should be measured, the results should be measured. What is the ROI for this ad? Everything was by numbers. I’m a very logical person, a very data-driven person, but we never dared to put big bets on something that is unmeasurable.

So in 2021, we invested in a one-year campaign, hiring top celebrities as presenters. I would say that it paid off. In terms of sales, we did have a spike in sales, even though it’s not a continuous spiking. 

But because of that, people view Konvy completely differently. In the mass market, they already had confidence in Konvy. But what we were trying to do with this campaign was to kill the concerns for people that do not buy Konvy. 

Because we made that move, our commercials, our TVCs, our ads are everywhere in Thailand, you can see Konvy everywhere.That just concurs in people’s mind that Konvy is a small business and now they have jumped to become one of the biggest beauty businesses in Thailand.

Paulo J: If you’re gonna really aim for being the top sort of beauty platform, might as well go all out, and place all bets there. In hindsight, it’s easy to say that if you guys hadn’t done that, then nothing would have happened. 

But I’m pretty sure it was a pretty very tough decision to make. And something that you guys weren’t used to. And I think that’s pretty characteristic of your whole journey. Even from performance marketing to doing this whole brand campaign, from thinking about e-commerce to multiple channels now, thinking about from Thailand to multiple countries as well. There’s always going out of your comfort zone.

Working with a VC

Paulo J: Another instance of Konvy going out of its comfort zone has been raising money from investors as well, partnering with the likes of ourselves at Insignia for over a year now. Can you share a little bit about that relationship so far from your perspective here about how you viewed it, especially as a founder who hasn’t really partnered with VC previously, and how this kind of partnership has contributed to Konvy’s goal as a company as well?

Gui: As you mentioned, Paulo, I usually did not like to work with VCs that much in the past. Because they often interfere with the decision-making that you have in mind. 

From what I heard around before I took investment, there’s a lot of not too good stories from founders with VC. A lot of them have adjusted their viewpoints in a way that’s different from the founders of where they initially came from, and that’s what I’m scared to get into because there’s no path back. They become a part of your family. You’re going to accept that they are part of your family.

So for us, when we were thinking about getting VCs to come into our board, I was very selective. I talked to almost a hundred VCs before taking Insignia’s money, and what I like about Insignia is that I think there’s a lot of what I like about Insignia, so I would like to pinpoint a few points. Number one, at least with Yongcheng and Yinglan who are taking care of my portfolio, they really know about our business. 

So when we’re making decisions, they understand where this decision is coming from. When we compare it to some of the VCs that talked to us, they have no idea what e-commerce is about, what the metrics are really about, and how we want to make decisions. So that is one of the very crucial points. 

I want investors who know what they are voting for. They have to make a decision based on, is this a good move for the business right now, taking into account the external environments, taking into account down in five years, ten years plans, is this move going to help the business in the long run or not. So this is number one. 

Number two, Insignia is a very popular VC fund in the region, and they have very strong connections across the region. Because of that, Insignia has introduced me to multiple connections that I need. In the end, connections are not going to be there for you to exploit, but connections are there because you already have some thoughts. For example, if Konvy is interested in AI, and sometimes we have questions about cybersecurity, and we have those kinds of questions, and we need those kinds of connections to answer some of these questions, Insignia provides those connections for us. So whenever we need something, they are there to support, connect us with the right people to solve it. 

And third, Paulo, I think that’s something that is very different with other people is the PR capabilities, getting our names out there. I barely see this kind of resource from other VCs, especially friends that received VC funding before, but with you guys, I get to join the podcast. I get to meet a lot of other founders. I get my name out as well, that helps us and helps me a lot. A lot of VCs know us from you guys.

Paulo J: I’ve enjoyed having you on the show and being able to tell your story. I think it’s a great story to tell. Hopefully, we continue to share more of this story moving forward.