Building a New Niche Brand from New Hampshire: Yogibo CEO Eyal Levy (Part 4)

Sramana Mitra: Why Japan?

Eyal Levy: Through the years and since 2012, people would see our brand if they came to the US and tried it or they’d just read articles online. Some approached us to see if they can start the brand in their own country. With most of them, it just wasn’t the right fit because we really believe in the model that we created, which is the synergy with the brick-and-mortar and online. Some of those leads wanted just online or just stores and didn’t want to have the entire model.

The first person who we really believed could do it was a person from Japan. He read about Yogibo and approached me. He ordered and paid $800 to ship one and wrote me an email that it’s the best purchase he’s ever made. We met a few weeks later in Asia. There was great chemistry. Three months after, we signed the contract. In October 2014, we launched the product in Japan. The success was huge. Their online sales boomed and they opened one store after another. In two years, they opened 30 stores there.

Sramana Mitra: Where was the manufacturing for the Japanese market? Were you doing manufacturing in Japan?

Eyal Levy: By this point, we had established operations in Asia. Our smaller products are shipped when complete. For the bean bags, since they’re bulky, we ship the covers, and they are filled and assembled in Japan.

Sramana Mitra: Is that the model also for US? Everything is manufactured in Asia and shipped to the US.

Eyal Levy: Yes. Most of the cost of the product is still made in the US. The fabrics are made overseas.

Sramana Mitra: What did this do to your business? You talked about a bunch of different things. You talked about a whole online marketing initiative. You talked about this Japanese initiative. You talked about, in general, the regular business in the US scaling with more stores. How does each of these levers of growth impact your business during this period? What was the split between these businesses?

Eyal Levy: The growth of the business in our model depended on opening retail stores. The problem with this model is that our stores are in upscale malls. In the early days, we were doing more temporary stores. The capital required for them wasn’t that high. Once we grew, then we needed to have more established and permanent stores. This is where we were required to invest more capital. All of our profit from every year went into just building those stores.

We made the strategic decision to base our growth on less capital-intensive activities. One of them was the international move where we don’t have any capital. The margins are much smaller, but it doesn’t require any capital. It’s exponential. It grows, every year, tremendously, with not much investment. We also decided to invest more in the online business. We do invest a lot in video marketing materials. We improve our websites and technology every year where the percentage of capital investment versus opening a store is much lower.

This segment is part 4 in the series : Building a New Niche Brand from New Hampshire: Yogibo CEO Eyal Levy
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