My parents have always been incredibly supportive
How did you start your business?
I started when I was 17 and still in school. That was 13 years ago. I started ordering smaller things like mobile phone cases and selling them on eBay. Those were the first steps. I set up two shelves in my parents’ garage. I started my own business about 10 years ago because I was simply fascinated by trade. In addition to my job, I started buying and selling stuff – mostly from China – on eBay. The whole thing continued to grow. At some point, Amazon came along. I then looked for a warehouse and soon found a property. I eventually needed more employees and things started to grow by themselves – especially with and through Amazon.
Your parents supported you?
Yes. That was a small but notable advantage. My parents have always been incredibly supportive. They made it possible for me to finance a property. I then bought another one. I already had good contact with my bank because I had to deal with the issue of financing anyway because of my real estate independent of my trade business. When I met my wife, we moved into a small terraced house. I continued operations in the cellar and expanded my goods. At one point, the entire cellar was full of items.
So your interest concerns trade in general – not specific goods or products?
Exactly. We have our own brands under which we have our products manufactured and distributed. For me, the best thing is that we don’t do one single thing but rather take on everything from A to Z. It is thus quite extensive. We visit trade fairs, where we check out new products and keep ourselves informed of the latest developments. We are also interested in the products we sell. We don’t sell just anything. We strongly identify with our products. We sometimes even develop them ourselves – something we truly enjoy. It is quite extensive, and there are always new tasks. This is something I personally find quite attractive.
What do you like best about the work process? What gives you particular pleasure?
You don’t relinquish certain routine tasks. As a rule, my staff (three full-time employees and one temporary employee) take care of this. I take care of everything else. Our business is quite fast-moving – although perhaps this is the wrong way to put it. It just develops rather quickly. On Amazon alone, there is something new every month. At Otto, there are also new things all the time. I think that most things that takes place online develop rather quickly. There are always new opportunities, and I find that rather appealing. If you are the first to seize these opportunities and are able to move with the times, you usually have an advantage. For small companies like us, this is an opportunity to remain competitive with large companies. Huge companies life Tefal – a manufacturer of frying pans, knives, and the like – are quite rigid. Small traders like us are much more flexible and adaptive. We are a young team and are open to many things.
Amazon is not trader-friendly
What typical problems do you currently have to deal with?
Even before Corona, I had to pay for the goods before I had them produced. Just like the subsequent dispatch, this often takes time. As with most other trading companies, liquidity is the biggest challenge. We usually have to pay two or three months in advance. When we receive the goods, we don’t get our money back yet. We must sell them within three or four months and then once again buy new goods. This growth is also dangerous because we are selling increasingly more. As a result, we need more goods. And for that, we need more money. Corona has made everything even more difficult because supply chains were often disrupted by the lock downs. If a factory sources packaging from another factory and can’t deliver, everything is delayed. The goods may be ready, but suddenly there are no more containers.
How did you deal with this problem?
Fortunately, we can top up at the bank and are thus able to make advance payments. We now have a second warehouse. I had previously rented one in Bremen, but that was not particularly profitable. Things also weren’t going fast enough. If I needed goods from this warehouse, I had to wait until they had time for me there. Now we have another 500 m² of space in Dannstadt – only 3 km from our headquarters – where we store our goods. This means we are no longer dependent on external service providers. This allows us to reduce costs and is also faster and more flexible. We can thus react directly. My employees or I can quickly drive to the warehouse. I don’t have to write an email and wait for a reply. And we have a larger area. We will also get a new office there because there is not enough space in the current one. During the Corona pandemic, we stared running a post office where my warehouse and office are. Because we send a lot with Deutsche Post anyway, this brings certain advantages. This saves us money, and we have reliable pick-ups as a result. We had been unable to reach an agreement with Deutsche Post with regard to remuneration. Then came Corona. They closed two branches – but then had much more work. Deutsche Post approached me, and we found a solution that suited everyone financially. But this has reduced the size of our office because the space is needed for other purposes. In the new office near our new warehouse, we will have an office space of around 70–80 m². It is large and bright and will thus create a pleasant working environment.
What influence does the war in Ukraine have on your business?
Corona has still remained the bigger problem so far. There are still lock downs in China; these continue to delay transport. This is our biggest problem. But fuel prices are now becoming more expensive because of the war in Ukraine. This also has increased our transport costs.
By how much have your transport costs increased?
With DHL, there have not yet been any price increases. You can’t say that so easily about forwarding agencies because they calculate prices on an individual basis. So far, I have hardly noticed anything. I notice it most in the packaging material – the boxes or the paper we put in the boxes. These things have become 30 to 40% more expensive probably because a lot of gas and heat is needed to press the paper into cardboard form. I don’t know that much about it. Commodity prices had already risen sharply before the war. The manufacturers are also afraid of this. They don’t know whether energy costs will continue to rise and whether they will still be able to obtain oil and gas. Gas, in particular, is obviously relevant for production. Some companies have been faced with price increases for gas and electricity. And this is reflected in the production prices. I sometimes have the feeling that the prices have been increased prematurely. After all, we continue to get most of our raw materials from Russia. Prices should therefore remain stable. But they have nevertheless increased.
What other typical industrial problems are there apart from the Corona and Ukraine crises?
A general problem is Amazon. Here’s the thing: you are almost forced to sell on Amazon because half of all customers purchase goods from Amazon. There is no way around it. But Amazon is certainly not trader-friendly. It’s a huge system. When something doesn’t work, you can’t just say: “Hey, it’s not working! Can you help me out?” Instead, you have to deal with emails and people who don’t really speak German and don’t really know what’s happening. All this makes it difficult to solve problems on Amazon. This causes us difficulties on a daily basis. And it always takes a relatively long time to deal with them. You sometimes have a lot of unnecessary work because you have to explain things several times and then have to wait. However, in order to improve communication, we were assigned an account manager about two months ago. It’s funny that you have to pay extra for an account manager in order to get premium support from Germany and not from Sri Lanka or India. And this from a company that is already making a lot of money. But what can you do? In the end, Amazon always wins.
Do you now have extra costs as a result?
This service should be self-evident at this scale. When I buy an expensive car somewhere, I also get free service on that car. Perhaps that’s not the best example. But with Amazon, I generate high sales, and they get at least 15% of that as commission. But you still have to pay extra if you want to get good support. Although that would also be in Amazon’s interest. But because Amazon effectively has a monopoly, they can afford to do so.
Commodity financing is not a long-term solution
How do you actually solve financing problems?
Either I solve them with the help of the banks or I resort to equity. I do this mainly with a traditional bank – partly by means of commodity financing. However, this can be quite expensive. But it is still quite convenient because of the long delivery and shipping times. I then pay when I have received the goods. I then cover this longer period – where my money would already be gone – through commodity financing. However, because of the expense, commodity financing is not a permanent solution. It’s similar to the warehouse I rented in Bremen. It’s good for the short term. But in the long run, it’s too small and too expensive.
Commodity financing depends a bit on the conditions of the providers – usually between 1 and 2%. You can get money at much better rates from a traditional bank. But it takes longer, and there is less flexibility. You have to consider repayment periods and other things.
How long does it take at the banks?
It depends. But it usually takes three to five weeks. It also depends on your credit rating and your relationship with the bank. I have my house bank through which I have also privately financed real estate. On one hand, I have security there. On the other hand, I am on close terms with my banker with whom I often work. Of course, it’s easier if you have a contact person with a higher rank within the bank. They are able to make decisions without having to go through other people. With commodity financing, this often takes only two to three days. It’s pretty fast.
Decrease our reliance on Amazon as much as possible
What is actually your main business goal?
Our goal is to be able to continue our growth without losing all other aspects. Growth is actually the most difficult thing because we always need money to grow. New products ideally do well. This means we have to reorder more. The longer this works, the easier everything becomes. With each additional positive annual statement, all other things become easier as well. The longer you exist, the easier everything becomes. Large trading companies usually have financing partners. They probably have certain lines and agreements with them. I had a conversation with a trading company at a trade fair. They also supply Edeka. And that is something different altogether. They have a completely different financial structure. Achieving something like this is our long-term goal. We first want to decrease our reliance on Amazon as much as possible. Of course, we want to continue to increase our Amazon turnover. But we also want to increase our turnover outside of that in order to become more independent. There is always a certain dependence on business partners, especially with Amazon. There may well be a problem, and this business partner will bow out. That would not be good for us. We therefore want to position ourselves as broadly as possible and still use all opportunities in parallel. In this way, we hope to establish a solid B2B structure over time.