Jay: This week’s show guest is Wai Hong Fong, co-founder of StoreHub. StoreHub is a cloud-based store management system for SMEs. StoreHub combines iPad point of sales, inventory, and customer-relationship management with enterprise features in a beautiful and simple user interface with the goal of making businesses awesome. Wai Hong, welcome to the show.

Wai Hong: Thanks for having me, Jay.

Jay: Why don’t you give the audience a little bit of background first? I like to ask all entrepreneurs a little bit about themselves — their background, what they studied, and how they came up to becoming an entrepreneur.

Wai Hong: Absolutely. There are two things about me growing up. Firstly, that I was very geeky when I was a kid. I remember telling my mom when I was 11…or my mom telling me, anyways, that I told her that I wanted to marry a computer and be the world’s greatest hacker when I grew up. So that was pretty much my childhood ambition. So I was very, very geeky. I was always playing around with computer, tinkering, got into a lot of trouble hacking into the computer in high school because they were charging us like $5 an hour to use the computers. And when we were playing StarCraft back then, we were playing hours on end, and it was a lot of money for students to pay. So we broke the cash card system to do that.

But that was my early childhood, and then I ended up not getting my first preference at university. I wanted to do law and computer science as a double degree, but I didn’t make the grade for law, and I decided that I didn’t want to just be a programmer for the rest of my life. So I didn’t do computer science. I ended up doing a Bachelor of Arts in media and communications and history and philosophy of science. So very, very different from, I guess, what I had anticipated.

So they trained me to be a journalist and a philosopher. That was essentially how I started out in the early days.

Jay: Wow. Interesting. Those are all good skills. First of all, law is a difficult one. I think it was… I went to business undergraduate school, and I think it was my worst grade of my entire college career was law. So I knew I wasn’t going to be a lawyer. So I can empathize with you there.

But media and journalism, media is very important. In the era that we’re living in now, basically if you’re in a startup or even your own company or your own brand or maybe your own podcast, media is very important, and it has a big impact. So I’m sure you have some relevant takeaways from your studies there.

After university, what did you set out to do?

Wai Hong: Fresh out of university, I always thought I was going to go work or do some marketing work or PR work in a digital or IT company, we used to call it back then. But in the end, what happened was my uncle was running a retail business, and he was like “Why don’t you just come out and help me put a few things up on eBay?” So that’s actually what I did. One thing led to another, and we ended up forming a business, just selling stuff online. This was in Melbourne. So I studied at Melbourne University, and I ended up running an ecommerce for the next five years after that. So I didn’t apply for any other jobs or never even sent out a resume or went for an interview. Just straight out of uni into an ecommerce business. And we grew that from about $20,000 of stock to about $5 million of revenue in about four years. So that was actually what I did as my first business.

Jay: That’s incredible. And it was basically built off of an eBay store, an online store?

Wai Hong: Yeah. We started out on eBay, but we eventually grew that into 12 different ecommerce sites. What we found was that selling stuff on eBay back then, at least the brand new and expensive stuff was really hard because of the brand connotation of eBay being secondhand and old and used and also good quality. But we dominated.

The way we did it was we dominated the search results with our own websites. So we would rank number one for telescopes and binoculars and Swiss army knives and dancing shoes and all kinds of random stuff. They used to call us the niche ecommerce king of Australia. So that was essentially what we built the entire business upon.

Jay: That’s incredible. Can I ask what year this was?

Wai Hong: This was from 2007 up to 2012.

Jay: Wow. This is interesting, actually because you’re basically hitting Web 2.0 right around then, but I guess… I hear about stories like yours a lot, about people that were somewhat early adopters into the ecommerce and online space and eBay and this sort of thing. It’s something that I think a lot of people kind of just did if you had some old stuff that you wanted to get rid of and try to get some money off of it, so you post it on eBay.

But then I hear about a few stories like yours where you can actually scale a business quite successfully by tinkering around with that sort of thing. I guess, at the time, to dominate the ad space — sorry — the Google AdWords and that sort of thing, I guess it wasn’t as expensive back then as it is now. Right?

Wai Hong: Yeah. Ecommerce goes through a bunch of different cycles, and when a particular medium or, I guess, channel is inefficient — I guess is the way we would describe it — the cost of acquiring a customer versus the lifetime value or how much it costs to…how much revenue you get from them is relatively low, if you know how to run ads or optimize Google. We did most of these things in-house ourselves because marketing agencies were charging a lot of money for doing something that they didn’t really know what they were doing as well. They were kind of learning on the fly. And we realized that, hey, actually this thing is not that hard to learn. And I guess that’s where the geekiness and that media training — we were trained to write tremendously — that really became very helpful back then to optimize and gamify those platforms.

Jay: Right. So writing your own copy and marketing scripts and stuff like that. I kind of wish that I was in that game or even just dabbled in it back then because right now, it’s extremely sophisticated. You can’t just… I kind of miss those days where you hear about “I just threw up a website, and all of sudden I’m doing all this traffic and all this stuff.”

Wai Hong: The reality of it though is that, back then, doing what we did was kind of wacky. My family was like “Oh, it’s kind of cute that Wai Hong is doing that.” In the first year, we did something like $300,000 of revenue, and everyone is like “Oh, that’s kind of cute that they’re able to turn around some revenue.” And then the next year we did 1.8 million. We 6Xed the growth. And then people were like “Whoa. What’s going on here?” And the reality is that people didn’t really understand what was going on and what were the possibilities of eBay.

We were talking about the days when shopping carts were like a Zen Cart or OsCommerce, and those things looked really, really bad. We adopted Magento, which was, at the time, really kick ass in terms of its looks, but it took, un-optimized, out of the box, 30 seconds to add a product to cart. And so the kind of work that we needed to do…

I managed to optimize it down to three seconds which, by today’s standards are still abysmal. But back then, it was awesome.

I think in every phase, every five, six, seven years, you enter a time where we push the boundaries of technology. It always seems kind of scary. It always seems kind of weird. But it rewards the people who try. I think that’s essentially what we see anyway.

Jay: Absolutely. It’s insane. You say 30 seconds, and I was chuckling because there was a time when that wasn’t a long amount of wait to get something done online, and now it’s like an eternity. You could go through five different pages. U’d just close windows and be on to the next website, Google search, and find the next one that comes up quicker.

Thanks for the introduction, Wai Hong. Let’s move into your entrepreneurial phase. You obviously started off entrepreneurial, working with your uncle there, doing very good business on eBay. How did you progress from there? What was the next thing that you worked on?

Wai Hong: I exited that company in 2012 and decided I was going to go learn Mandarin in China, in Shanghai, to be specific, just because I am natively Chinese but I could not speak Mandarin. And so it was really embarrassing, so I decided to fix that. At age of 26, I moved to Shanghai, and I studied Mandarin and did some work for the Chinese government, traveled China. That was really awesome.

In my travels, I actually met a friend who was running a chain of lingerie retail stores, and he had just implemented a point of sale. At the time, I was really passionate about ecommerce. I had all my experience there, and we dabbled a little bit in offline-online play. We had a physical outlet as well in Melbourne. But here in Shanghai, I was seeing this guy who was trying to run a retail business, trying to use systems to manage it better, but it was really, really bad.

So I said, “Hey, dude, you need to fix this.” I spoke to the developers, and the developers were telling me to go and train the staff to use it better instead. So I was really frustrated with it. Systems are built for people, not people for systems.

That was when the idea and the philosophizing about what the future of retail will look like started happening. And I was thinking about one day it would not be ecommerce and bricks and mortar. It will be just commerce. Where do we start? Where do we help? How do we help people like my friend, offline retailers, actually digitize, systemize, manage, and grow their business through the kind of insights, analytics, and data that we were used to as an online retailer. And that’s where we started Store Hub.

I told everybody my idea, and eventually I met my co-founder in Shanghai. She had just left Microsoft at that time. She’s a bit of a genius. She won two national programming competitions in China, chairperson of the Women@Microsoft, one of the star employees. I think her testimonial was on the website and everything. And she just left Microsoft trying to figure out what was the next thing, and we met. I literally just talked about philosophy, our values, and why I imagined what it was going to be, and she bought into it. And that’s where we started StoreHub, out of my apartment initially.

Jay: Oh, wow. That’s awesome. Let’s dig in. Tell us about your philosophy. Give us the overview of exactly what StoreHub does. Has the concept evolved since you guys first implemented it? Have you guys changed strategies or anything? Or is it the exact same concept from what you were philosophizing with your co-founder back in the day?  

Wai Hong: Well, I think maybe 70 or 80% of the things we talked about still seem very relevant today. The strategies and the markets that we’re serving, the pace at which we’re growing — all of those were definitely not as we imagined it would be. It definitely took a longer for it to really get off the ground, and that has to lot to do with the startup ecosystem and startup climate here in Southeast Asia and with funding not being so easily available.

Essentially, the philosophy was about the future of retail and what is the role of bricks and mortar in a world where ecommerce is growing double digits year on year and taking headlines everywhere. In a world where we experience in China that today like 70 to 80% of commerce happens online. Here in Southeast Asia, we’re still talking about 1%.

What happens as ecommerce gets to be more prevalent? What happens when digital is not a separate world anymore, but it is completely part of everyone’s world where everyone has a mobile phone? So that’s all the conversation around what happens to consumer behavior, what happens to the mindset of running a business.

And for us, fundamentally, the main thing was that we wanted to help bricks-and-mortar retailers to engage this new world, and that was what StoreHub is about. By being the hub of the store, we’re able to connect retailers — whether it’s to their consumers in a more meaningful way or whether it’s to get suppliers by making their whole supply chain better and easier. But the core essence of StoreHub is that we want to be the hub of the store, and we want to help make those businesses, in our words, awesome.

The way we go about doing that is really to help them succeed in utilizing all the tools and all the channels, to connect, to engage, to buy better, to sell better. But at the same time, we also wanted to bring the whole core Apple-store effect into stores. How do we enable experiences — whether that’s through payments or through being able to buy stuff that’s not actually physically in the store — like buying online, picking up offline, or buying in store and having it delivered to you? There’s just all that stuff, all these experiences that we have a vision to create for a small bricks-and-mortar retailer.

Jay: Wow. That’s interesting. So StoreHub is now a solution for both the backend of the store, including the frontend, the user side of things? Or is it just the backend of the store?

Wai Hong: We started out with the iPad point of sale. At that time when this idea was forming, we saw that there was this trend in the US where iPad and point of sales were taking off. And we recognized that a point of sale is the most basic thing that every retailer stats with or needs before they get involved with CRM or complex inventory management or even an ecommerce site. They all start with a point of sale.

So for us, the point of sale was an entry point. And that’s where we start layering on all these other things. Once we solved the fact that they have now a system in place instead of just pen and paper, we can start helping them with inventory management, with managing their customers, and with ecommerce. But the point of sale was the starting point.

All our customers would use our point of sale, and we’ll continue to help them to get more advanced and to utilize more and more all of these other things that enable them to create these experiences.

Jay: I see. So the starting point is… Say a brick-and-mortar store comes to you and says, “StoreHub, I need your help.” So the first thing that you would do would be to basically integrate these iPad point-of-sale type stations into their store?

Wai Hong: Pretty much. We built it ourselves, and we coded it up from scratch. I coded one-third of the original MVP. None of my code still remains, rest assured, because it’s not very good. But I did do a bit of it. And that’s where we started. We literally help them set up their iPad point it sale, and then we connect them with all the other things from there.

Jay: So the iPad point of sale, that’s the first connecting point. And then, of course, on the backend, you’re collecting all the data and this sort of thing.

The type of store customers you get, what is your average, typical retail or brick-and-mortar store that would come to you and say, “I want to work together”?

Wai Hong: A good chunk of our customers are fashion boutiques. At least on the retail front, we have some grocery stores, even pharmacies. I guess retail, in general, is all over the place. You’ve got a whole bunch of different types of retailers out there. And on the F&B front, we’re pretty much dominating the cafe scene, and we have a lot of quick service or bubble tea shops or guys that basically have the whole order at the counter, pick up somewhere else kind of a workflow. So those are the two main customers that we focus on.

Coming again from the retail background, we chose to focus on building features that were very deeply useful for retailerS specifically. So anything to do with stock management, inventory management, that’s what we’re really, really good at.

Jay: I’m playing devil’s advocate here for a second. If I’m a mom-and-pop, brick-and-mortar store, and I have my retail space and my products on the shelf here, let’s say you were to come and say, “Look Jay, you could improve everything if you just start with this iPad point of sale.”

My pushback would be, “I have a retail store. The customer experience is they come in, and they want to touch and feel the product. And why would they go to this iPad thing to buy it instead of just picking it up or go trying it on in the fitting room?” What would you say to that counter argument?

Wai Hong: Perhaps I just need to clarify again how our product works. It’s essentially… It’s not a customer-facing product in store. It’s more like a device that the store owner or the store person would use to manage all that’s happening. Would that change in the future? Possibly. But essentially, that’s why it’s geared towards…

But I guess the question people might ask would be “I’m a retail store. Why would I need an online presence?” Maybe that would be an interesting question. But right now, no one is really asking that question. Everyone is really excited about going online, but they just don’t know how, and that’s the main problem of a very underserved market like Southeast Asia.

Jay: Let me try to understand this fully. The actual iPad point of sale, the hardware, that is basically sitting next to the cash register or whatever for the store owner to keep track of their inventory and this sort of thing.

Wai Hong: Absolutely.

Jay: I got you. My apologies. I was confused to begin with. So let’s talk a little bit about StoreHub’s revenue model — what do you charge and this sort of thing? And then what ancillary services do you provide in addition to just the basic inventory management?

Wai Hong: We have a monthly subscription model — that’s very standard these days — ranging anywhere from 39 USD a month up to 149 USD a month. Essentially, the differences would be in the depth of features, so having more advanced inventory management or more sophisticated promotions management. That would be how we differentiate which people pay what, as well as the size of the store. So how many products they have would typically correlate very well with the volume of transactions and therefore the size of the store.

So a typical cafe with less than 100 products would typically be paying $39 a month, and a larger retail outlet with a 1,000 or 2,000 SKUs would be paying maybe $79 a month. That’s generally how we would charge.

Jay: And then what… How long is the onboarding process if someone wants to onboard your StoreHub and implement it into their system? And what are the metrics that, perhaps, a customer can use to validate the fact that this is actually worth the $39 a month that I’m paying?

Wai Hong: It takes anywhere from… Once you go to hardware, that usually takes… Most of it gets delivered out to customers or people come and buy it from us, pick it up, whatever it is. It’s fairly generic. They don’t really need to come to us specifically. But once they have the hardware, it takes anywhere from a couple of hours for a cafe to set up, just to enter in all the products — the coffee and food and all that stuff. Or if it’s a larger retailer with 2,000 products, they might have import that via CSV files, and that might take a day or two or three days. And it depends on how much massaging of the data they need to do. A month is generally the time frame that’s required for them to get started with us.

As far as the key metrics, I think in general, most people are pretty much going from a zero to one kind of experience. A lot of these guys have not had a system before and now they do. And so the metrics are very qualitative in this sense. They feel “Oh my god, I actually have this…” We had customers in the early days, even if they had a system, the experience would be like this. They would be like “I need to know the sales from today,” and they would call a guy at the store, and the guy at the store would take about half an hour to key in that data and send out a Whatsapp message to the store owner. And that’s essentially the experience that they had before, whereas now, with StoreHub, they would be like “Pull out my phone, click, click, boom. Here’s the sales report.”

So that whole going-to-the-cloud experience… Perhaps it’s a little bit harder to understand in the US where things are all so progressive and modern. But here in Malaysia, in Southeast Asia, we’re talking about a market where anywhere between 50 to 90% of retailers don’t have a point of sale, don’t have a system to begin with. It’s all pen and paper.

So that’s essentially where the majority of our customers would find their key metrics. The being said, most sophisticated retailers would find things like changing pricing of the products or just a general awareness of stock or what’s selling best and what’s not selling best has helped them to stock the right things better and therefore see their sales grow in that sense because they actually know and have a— literally — a finger-on-the-pulse understanding of what’s going on with their store. But that’s generally, for the slightly more sophisticated retailers.

Jay: Cool. That actually makes it much clearer, and thanks for explaining that to the audience as well. A lot of people… I live in Hong Kong, so it’s a little bit more modern… I grew up in the States, so the retail experience there is a little bit different, I would think, than probably the initial target market that you were trying to tackle. But Southeast Asia, definitely there is a lot of growth there. And like you said, 80 to 90% is still very old school, like pen-and-paper-type inventory.

Which countries are you in now? Obviously Malaysia, and you’re trying to expand into Southeast Asia?

Wai Hong: Yeah. Our customers are in 15 different countries. But in terms of our office presence, we have offices in Malaysia, in the Philippines, in Thailand, and we also have an office in Shanghai. We don’t have a sales office there. Our technology team is based out of Shanghai. But in Bangkok, in Manila, in Kuala Lumpur, we have sales offices and a whole bunch of others — the marketing and the finance and the rest of the core operations are based out of Malaysia.

Jay: Interesting. Last question on what you do there. As someone that has been in retail for a long time — sorry, not retail but more like ecommerce and this sort of thing for a while — what trends do you see taking place in the next five to ten years specific to — I want to say — Southeast Asia. Do you see a rapid, catching-up that Southeast Asia is going to have where, let’s say, StoreHub can go in and basically turn that 80 to 90% number down to 20, 30, 40% where much more retailer are online and inventory management is streamlined? How long do you think that’s going to take for Southeast Asia to catch up?

Wai Hong: I think there are two main trends that we’re seeing here. Essentially, what we’re seeing is a huge push for payments to be a lot more efficient. So we’re seeing, whether that’s mobile, that’s being pushed in a huge area. This year alone, there’s 15 to 20 wallets in the market trying to be the number one player. And hundreds of millions of dollars are being pumped into the market to achieve that.

Similarly, we’re seeing patterns across the region — whether that’s in Thailand where the banks have all rallied together to do mobile payments via bank-to-bank transfers and scanning QR codes at stores themselves, and we’re seeing similar moves in the Philippines, Indonesia, and a whole bunch of places.

So there’s definitely going to be revolution of payments in the next couple of years. A big part of that is Alibaba… Well, AliPay, which is, I guess Alibaba’s finance arm is really investing heavily. They’ve dumped anywhere from 50 to hundreds of millions of dollars into each and every country in Southeast Asia specifically on the payments front. So this is something that we’re seeing as a massive shift. Credit card penetration outside of Singapore and Malaysia is very, very, very small. We’re talking about single-digit percentage of the population actually have a credit card. And so as a result, there is a massive opportunity for mobile wallets to really take a clear part in the shifts and upgrade how we actually do payments. So that’s something that we’re really excited to see.

A big part of that push is also for wallets and payment players to work with people like us who already have very advanced systems in place in retailers. Because when you work with us, instead of having to onboard merchants in providing them devices, we literally just push out software update, and it actually enables mobile payments within the store.

So there is definitely a trend, and there’s a wave that we’re seeing that we’re happy to ride over there.

The second thing that we’re seeing as a trend in this part of the world is the huge push for ecommerce and commerce. There’s a big question mark, what does the future of commerce look like. There is a very strong mall culture in Southeast Asia — whether it’s Malaysia, Philippines, Thailand, Indonesia — everyone goes to the mall on the weekend. And malls are still growing. Malls are still doing well in this part of the world.

And so what does it look like? Do malls still have a part of the play as ecommerce grows? How is the rate of growth of ecommerce? All of these are very big question marks out there. That being said, Alibaba has invested $4 billion into Lazada. It was just recently announced they moved one of the original 18 founders who was one of the top leaders at Alibaba into the region. They are very, very aggressively pushing the ecommerce agenda.

So are there opportunities for us to think about and philosophize about what does it look like for this push, these resources to impact the way we understand retail and the experiences that people are demanding? I think another consideration is that people don’t necessarily have as much spending power. And that’s not necessarily changing too dramatically yet. So a lot of the first-world experiences that startups are trying to pursue in more developed economies, they don’t necessarily apply here. I think there is still a lot of groundwork, of foundations, and infrastructure work that is needed to be done. And I think that’s where, as a point-of-sale player that’s trying to understand where-to next — whether that’s payments, ecommerce, or whatever — we recognize that our role, fundamentally, is to start by connecting these stores to whatever needs to be connected in the future by placing the iPad in store. We are setting these stores up for success as the world of commerce evolves. So that’s how we’re seeing it play out. Hopefully in the next couple of years, we’ll see more of this cool stuff materialize.

Jay: Absolutely. It’s such an exciting time. You mentioned Alibaba several times. Before we wrap up, I want to talk to you very quickly about the Alibaba eFounders Program. You, obviously, are one of the 500 Startups investments. And through our mutual friends, I was introduced to you, and I want to just ask you a little bit about the eFounders Program. Were there any key takeaways that you learned? What was the experience like? Anything that you might want to share with the audience based on your experience through that program?

Wai Hong: Hooo… We’ve done panels. We talked for like an hour on this specifically. But the key takeaways for me… Alibaba is intense. We’re talking about a company, 60,000 people, massive footprint — 60,000 employees is what I mean — massive footprint across China, really trying to go out into the world, stacks and stacks and stacks of cash. But most importantly, we saw how a single company, over the period of just under 20 years, managed to kind of really change the entire landscape of how commerce is done in China and the methodology and the way they follow…

We talked a philosophy quite a bit today, but one of the comments I heard from a senior executive at Alibaba when I was there — and this is like an ex-consultant guy, he’s gone and worked in a lot of different American companies and multinational conglomerates, a lot of them — he said this is the only company — referring to Alibaba — that is managed by philosophy. And that was such a weird statement to make. What does that even mean?

As we understood more about Alibaba’s culture and how tai chi is a big part of their culture and how Jack spends hours — like he will go and talk to his team for three or four hours at a time — the approach where they talk about how we will build a company that has a healthy — again, the whole yin and yang of tai chi — a balance of Western management principles but Eastern philosophies combined. That’s how we’re going to be. That’s our management philosophy.

It’s such a fascinating insight into the way that Alibaba has transformed an entire country through a methodology that is fairly unorthodox. You don’t often hear things like that said. And at the same time, to be kind of a little bit — I’m not sure what is the right word to use here — a little bit scared.

This company is now huge and ambitious, and one of Jack Ma’s plans was literally globalization in the next year, and what does that look like? He openly said that one of Alibaba’s… Globalization is top three on Alibaba’s agenda for the next year. And one of the things that’s really, really important to us is we need to succeed in Southeast Asia. We need to show the world that we can influence this region in a positive way, bring commerce, make doing business easier in Southeast Asia. And he’s done a lot of work with all the different governments. Both in the private and public sector, we’re seeing Alibaba investing heavily. So there’s just so much that’s going on there that they are not content just being a company that’s super relevant in China. They are, obviously, very, very focused on expanding and figuring out what it means to have an influence in the world.

So that is something that is somewhat new to me. Before going there, it was like, we thought Alibaba was kind of king of China, but I didn’t really know or understand much about their foreign policy. But this is definitely a very, very insightful in that sense.

Jay: Very interesting, very insightful. Thank you for sharing. Wai Hong, it’s been such a pleasure, man. Thanks for coming on and sharing your experience and sharing with us about the exciting things that you’re doing at StoreHub. We’re definitely going to keep an eye out on you and look forward to hearing the great progress that you make. And we wish you the best of luck, so thanks again.

Wai Hong: Thanks, Jay, for having me.

Jay: Alright. Take care.

Wai Hong: Alright. See you.