Only Connect Podcast: Retail & ecommerce in a recession • Ep 6
by Bradley Elliott (@BradElliottSA) Market pundits are forecasting a recession and South Africa, with its almost junk status and socio-political problems, is not expected to fare well. Yet it’s not all doom and gloom; some entrepreneurial types are making the best of it, creating products in SA for export to the rest of the world. One such success story is Veldskoen, a startup that attracted Mark Cuban and Ashton Kutcher as investors. We speak to Veldskoen co-founder, Nic Latouf, about ecommerce and going global.
Full podcast transcript
Bradley Elliott: Welcome to Episode Six of Only Connect, a MarkLives.com podcast. I’m your host, Bradley Elliott, founder of Platinum seed and Continuon. This month I’m chatting to Nic Latouf, co-founder of Veldskoen. Veldskoen is fast becoming one of SA’s most globally recognised brands, which is actually Veldskoen’s north star [personal mission statement]. I chat to Nic about retail, how they built and scaled the brand from SA and the power of community enabling them to do that. Enjoy this month’s episode.
So, for those who don’t know Veldskoen, can you just give me a bit of background about how you guys started? I’ve been watching your journey quite closely [and you’ve had] some really big successes in the last year or two — Ashton Kutcher, I think was one of those pivotal moments. And now having gone into Woolworths, which is where I’d really like to focus a bit on, given that our topic is retail and recessions.
Nic Latouf: 100%, and there’s a couple of other exciting things that have happened as well that I’ll tell you about. So, I also come from the digital online space, [and] a friend of mine and I used to have an agency in Joburg — it was a little PPC agency and I saw that the trends, probably about two-and-a-half years ago, were really moving into video so I decided to pack up and move to Cape Town with my family. For a variety of reasons but also one specifically, because a lot of the creative talent sits in Cape Town and I thought it would be a great space to build out an agency focused on video at that time. I landed in Cape Town and two old mates from school, literally within the first month, get hold of me and tell me that they’ve come up with this idea for a shoe.
Their story is just absolutely fascinating as to how they came up about this. They were both driving, two separate sides of the country, and having a conversation — literally a four-hour conversation — about how terrible the South African team looked when they walked out of the tunnel at the Olympics. Nick [Dreyer] said to Ross [Zondagh], “But you know there’s nothing that’s truly South Africans that they could be wearing.” And the other one said, “But there is; there’s veldskoen.”
And he said, “But veldskoen is really ugly.”
And the other one said, “Well why don’t we make it, like, not ugly?” And literally what they did was they phoned the designer, while they were chatting about this, and got them to pull a picture of a pair of veldskoen online and literally colour in the soles, and send it to them to them in a bunch of colours. By the end of that journey, they had a whole bunch of designs and they put in the trademark for the word “veldskoen”. So when I landed in Cape Town, Ross got hold of me on LinkedIn and said to me, “Listen here, we’ve got this shoe that we’d love to chat to you about,” etc. Apparently, everybody up until then, they’d been laughing at them about this shoe — wives, friends, like everybody. What is interesting to me was the way I felt when I saw it, ’cos you mention veldskoen to me and I’m white, English, liberal background. I’m not interested. I mean, that’s not something that I’d ever wear. Until I saw how, whether they knew what they were doing or not, whether it was by accident or whether it was well thought-out, they had reimagined the shoe that was so close to our heritage — and we all know the veldskoen, we all have a specific lens that we look at veldskoen through — and the way I felt when I saw the shoe fascinated me and I thought, you know, if I feel this way, others must as well. And I loved that idea of how I felt and I thought, I want to get involved with this. We formed a partnership. We started an ecommerce space, we started building it out and we started doing really well.
Now I come from a big storytelling background. Really key to the success of the business is how we positioned the story, how we told the story, how we collaborated with people to tell the story, how we built audiences, etc. And it wasn’t long after that that Brian Joffe of Bidvest fame — I don’t know if you know that part of our story?
BE: No, I don’t.
NL: So, Mark Cuban and Ashton Kutcher weren’t our first investors. What happened was Brian Joffe’s team knocked on our door — and Brian Joffe’s out of Bidvest now, he started up a new company called Long4Life and they own Sportsman’s Warehouse, they own Outdoor Warehouse, they own Sorbet Group, they own a whole bunch of really exciting businesses here in South Africa — and they got hold of us and they really loved what we were doing. They bought a big chunk of our business, which was really interesting because it position[ed] us in an interesting space where we were able to then talk to the Sportsman’s Warehouse [people], talk to the Outdoor Warehouse [people] and start looking at that retail aspect, which we would never have thought of in the beginning,
BE: Yeah. Because it gives you access to retail.
NL: Yeah, 100%. So that gave us access to retail locally. The brand just did really well, and people continued to get excited about it; people continued to purchase; we moved into Outdoor Warehouse; over a period of time it became the best-selling shoe. We always set out to build and it’s still very much our vision and our north star within this business to build South Africa’s most-recognisable brand globally. ’Cos there really isn’t one. There’s Nando’s, there’s Mrs Ball’s Chutney. There’s a couple but not truly recognisable globally. Wfeel like we’ve got the opportunity to really do that and for everybody to be a part of that story. We always say that we’re not the owners of Veldskoen; we’re just the custodians of this great, this great brand.
We were sitting in our boardroom and we were literally discussing how we’re going to tackle America. We’re already live in the UK, doing pretty well in the UK. We were sitting there and, all of a sudden, we got an email from somebody who is this ex-surfer guy called Steve Watts— ex-Durban surfer who had moved to California and started a little surf brand over there and done pretty well. He came to visit his family and everywhere he went he saw people wearing shoes, and got hold of us and said, “Is any opportunity to have a discussion about America?” We said, “Absolutely,” and flew down and met him and later found out that he’s got a company called Slyde Handboards. What he had done, or he and his wife, who is American, [they’d] actually gotten themselves onto Shark Tank America and [gotten] funded by Mark Cuban and Ashton Kutcher. So, when we started doing the business deal with them, they obviously had to do due diligence etc. They had to disclose to Mark Cuban and Ashton Kutcher, because they were in business with them, that they were getting involved with us. Mark and Ashton were quite interested as to what it was. We sent them a pair of shoes each and they absolutely loved [them], and asked if they could get involved. We said, “Absolutely.” Ashton is interesting, because he’s not allowed to just wear any brand. [People] pay up to like US$500 000 for him to wear something or tweet something or whatnot. But he absolutely fell in love with the shoes. And we just saw, for weeks and weeks on end, every time he was in the news, he was wearing our shoes, so that definitely helped the American side of the business.
BE: Did that actually help with driving an effect on sales and the bottom line — did you see up-tick?
NL: Here’s the interesting thing: the story of us building the brand out globally is what people love here. In the States, it’s a very different world right now. I’ll give you an example. Steve and I were having [a] discussion the other day that he was at a wedding in San Francisco. He was talking to a bunch of people a little bit younger than us and was talking about how Ashton Kutcher was invested in the company, etc. They all looked at him and said, “Ashton who?” So. I think that that landscape with that type of celebrity is changing, when you talk about the influencers, etc. We go back to this discussion that we have often at the office: there was a study that was done in the UK not too long ago, where they asked all these 14-year-olds: what is it that you want to be when you grow up? 80% of them came back and said I want to be a YouTuber or an influencer.
BE: Amazing. What an awesome world we live in!
NL: The guy who wins Fortnite is way more popular than Kanye West. In America, it doesn’t have as much weight; locally, it does. Because I think people find it really exciting. I think if you want to tell a really good brand story, it all boils down to how you tap into people’s inner narratives. I think a lot of what’s happening in the country is [that] there’s a lot of uncertainty, people are worried, people are scared. A lot of why we tell our story that way is because we really believe and we’ve proven that anybody can do it. We started the business with no money and we built it into a really, really, really successful brand that is 100% going global and becoming very recognisable around the world. Digital and the internet has changed that. This wasn’t possible 10–15 years ago, but it is very possible now. That wasn’t the only story that had a huge effect locally. Another one was our Prince Harry story. I don’t know if you’ve heard that one?
NL: So, a couple of months ago, with my partners in London at the time, I get an email from the editor of The Times of London who says to me, “I was at a dinner party last night and I saw Prince Harry wearing a pair of your Red Pinotage Veldskoen.” He says, “Do you have a picture?”
“I was about to ask you the same thing — do you have a picture? You know, because we don’t.”
He says, “No problem.” [He] and Nick had a couple of discussions and he says he’s seen it and that’s good enough to run a story. The first week he runs a little story about Veldskoen in general and about the history of the shoe, etc. Then the following Saturday he runs a little piece in the lifestyle section that has a picture of our Red Pinotage shoe, and it has the words, “Prince Harry is a fan.” If you want to talk about influence having a direct impact on sales, we did in about three hours about R400 000 turnover. But it carried on like that for days, and the impact it had was unbelievable. If you’ve got the Shopify app, you get a little ding-ding every time there’s a sale, and we woke up and our phone was literally going, “Ding-ding, ding-ding, ding-ding, ding-ding,” and it carried on like that for days. With that tiny, tiny, tiny little piece with the words “Prince Harry is a fan”.
BE: OK, let’s touch on ecommerce quickly because that’s always an interesting one. [It’s a] really small ecommerce environment in South Africa. This year, I believe — just so you know, last year we did an online retail or the biggest ecommerce report with Arthur Goldstuck and this year we’re doing that again and we just surveyed all the retailers. Not that we weren’t interested but we weren’t looking at consumers; we were looking at retailers, what sort of revenues and profits they do out of online and ecommerce etc. It was still a relatively small market. This year, I think we’re going to hit that magic, like 2% of total retail will be from online, which is a really critical number, because that’s when —
NL: Still small compared, but great.
BE: But when you you hit over that 2% mark, we’ve seen it globally, that’s when the magic starts to happen. I’ll give you an example. Some of the biggest, let’s call them daily-deal sites, because I’m not sure you can put two and two together, they’ve actually just become really, really profitable this year. For the last nine years, they haven’t been turning a profit and, this year, they’re turning a mega profit, so I think there’s great growth in the space. You said you grew through ecommerce originally; can you just tell me a little bit more around that strategy and whether it was local or global? Evidently, you still sell a lot through ecommerce by the sounds of things.
NL: We still do incredibly well with ecommerce. I come from an interesting ecommerce background and I’m really concerned about the space. We never actually wanted to get into retail, into physical brick-and-mortar retail; we wanted to continue to grow our business through ecommerce and we were doing it successfully until the time we got investment from a listed partner, and they opened those doors for us. It became very exciting. We saw a whole new avenue to grow the brand. Part of our north star was that we wanted to get the shoes on as many South Africans as possible. So that allows us to do that. We’re not just in Woolies [Woolworths]; we’re in Outdoor Warehouse; we’re in about 17 smaller retailers; and we’re also in Tekkie Town. All those partnerships have allowed us to really reach areas around South Africa that aren’t as online or ecommerce savvy. But, back to the ecommerce side, our strategy has been simple; our strategy has been we still live in an age where, at the moment, Facebook ads are incredibly, incredibly, incredibly effective. It has changed over the last two years a lot; I think it was a lot easier two years ago with the way that you could set up ads and target and build audiences etc — it is getting harder. The space is becoming crowded and there’s less ability from the actual platform to run as-effective ads. But we spend no money on Google; we spend all our money on Facebook and Instagram. We do that very, very, very well. That side of the business still accounts for a huge portion of our turnover in South Africa and continues to grow.
BE: I think you can dominate —Google doesn’t necessarily make sense for a branded term like “veldskoen” because you would dominate that anyway through natural sort of organic ranking. That’s the thing that I heard many years ago, in London in 2012, when ecommerce was really blowing up there, [a] guy said to do well in ecommerce you either need to be super, super niche, have a really super niche product, or be absolutely generalist. If you’re sitting in between, you don’t win, and I think that that may be part of your success, that it is just so niche. You don’t have a huge range, but you’re selling one thing; you’re the only [people] that do it. You do it well and I think that’s why it’s working. So, just in terms of your international strategy, and thinking about that, do you have distributors in other countries now for physical retail?
NL: We always considered ourselves a media and storytelling company first and a shoe company second — that’s how we like to think of ourselves, it’s always story first. Part of the story that we’re telling is how we’re building this brand out globally with South Africans around the world. In all our travels, everywhere we go, we meet the most-incredible South Africans doing the most-incredible things in the strangest places around the world. No matter where you go, you’re always going to find a South African doing something really, really amazing in some town or country around the world. So, what we set out to do is to partner with South Africans around the world to build out this brand. We got an old school friend, who’s done really well in Canada, who reached out to us recently and said that he’d love to handle Canada for us; we’re in discussions with a distribution agreement over there. We’ve got Jeremy out in Asia, who’s a South African from Durban as well, who’s well-known in Asia for taking rooibos tea and being very successful with rooibos tea there. What he did was he positioned it as the drink to drink when you’re pregnant and has absolutely killed it over there, so he’s our partner in Asia. In America, it’s a little bit different. We were a 50% shareholder in an entity over there, because it’s a really, really, really big play and it also allows us to drive more product into the space. We don’t only own Veldskoen; we also own a really cool flip-flop brand that we’re building out, which we’re going to take a little bit more time with, called Plakkie. The same thing in Australia and the same thing throughout Europe is we have distribution over there. The tricky thing is — which we’re also trying to figure out — how do you tell the story globally? The things that people care about in Asia are very different to the things people care about in the States, are very different to things people care about in Australia. So, those are the things we’re trying to figure out. Do we have one Instagram account globally? Or do we have one Instagram account for each region? It’s a little bit of trial and error at the moment but I think we’ve started to figure it out. In a year from now, if we had this conversation, I’ll have a lot more insight into how, from a platform perspective and from a social media perspective, to build out a global brand.
BE: My instinct or gut tells me that you’d probably need to have separate accounts for each of them.
NL: I agree. That is the way that it’s currently going.
BE: But you do have a great really single narrative and that is your story. Everyone loves a story of success and it’s really great to hear that not only are you telling the story but you’re actually living it. What I mean by that is you choose South African expats living overseas to go do your distribution; you don’t just partner with the biggest distribution company. You actually are authentic in your story — authenticity, trust, success are all great threads for a good story
NL: You know, to make the shoe here in South Africa, is not cheap.
BE: Especially clothing and shoes, it’s not competitive because of labour laws.
NL: 100%. It’s easy for us to go to China and do this, but we’ll never. That’s where we’ve positioned our company, and we’ll 100% always stay true to that, and will only work with South Africans around the world in building out this brand.
BE: Now, having gone into the sort of traditional retail space like Woolworths and those sorts of things, we understand that all of these [companies] are under massive pressure, globally, right? Retail is changing; I don’t think brick and mortar will ever die. But it’s definitely changing and shifting.
NL: No, it’s not going to die; it’s evolving.
BE: In terms of the volumes of sales coming out of traditional vs ecommerce retail, in different countries — you did build your brand on ecommerce in South Africa but now having gone into Woolworths and in Tekkie Town — what sort of volumes are you starting to see? I’m assuming the volumes are going to be massive, compared to your ecommerce play, but maybe I’m wrong?
NL: I’m not gonna go into specific numbers but, from an ecommerce perspective, like I said earlier, we do very, very, very well. From a retail perspective, we also do very well but there’s three sides to our business. There’s online retail; there’s brick and mortar retail; and then there’s B2B, which is also a massive side to the business: Investec, for example, who want to do a collaboration with a thousand or 2000 pairs of shoes. That’s also a massive business for us, so that side of the business also does really well. Getting back to Outdoor Warehouse, we are their best-selling shoes, and they’re a big retailer around the country. We’ve only been in Woolworths for the last round about three weeks [at the time of the interview in late September 2019], and you know, they’ve placed their second, I think, up to their third order already. Looking [at] international, there’s no reason for us to even think about brick and mortar retail in the States. The online play is big enough and so that conversation’s not going to happen. We are entertaining the idea in the UK, because it’s a very, very, very different landscape to the States, and we’ll be entertaining that idea in Australia. Let’s have another conversation in a couple of months’ time, and I’ll let you know how all of that plays out.
BE: Just two more things from my side, Nic. The one is what you mentioned is the importance of community. You strike me as the type of person who’s probably read the book called The Tipping Point by Malcolm Gladwell and you might remember early, early on in that book, it talks about Hush Puppies, which I’m sure you’ll know as a brand, and how Hush Puppies was dying in the early ’90s. All of a sudden, there’s just a small sort of community of — I think in those days they didn’t term [them] as such — but hipsters in New York effectively started wearing Hush Puppies again. Then it just blew up. It sounds kind of similar to what you’re telling me here. Like you’ve got these communities that are so invested in the brand, and so invested in the story, and they’re just influencing the bigger market? And is that a purposeful strategy that someone can do? Or is that just by luck? You talk about your mate in San Fran—
NL: Let me tell you what the secret is: it’s 100% thought out, and the secret is openness. We’ve never ever turned down a collaboration — we probably won’t post every collaboration on our pages or talk about every collaboration — but we’ve never ever turned down a collaboration. We’ve never turned down a meeting. We’ve built out a story lab, which you’re welcome to come and visit out in Paarden Island, where it’s literally open to the public, and we have people working there for free, as long as everybody collaborates with each other. So, a real key to this is openness. I think that brands and people and companies still need to learn that; when people approach us, we’re always available and, as a brand, the same thing. So, everybody who’s reached out to us to collaborate or to do something, we always said, “100%, sounds amazing.” This would be men’s shoes, this is all about shoes, and let’s do it. And that’s 100% the reason why we’ve been able to build such community and become so influential.
BE: When you talk about openness, I’ll tie that through to authenticity, values of honesty, trust, all those sorts of things. Because that’s what big brands are struggling with, right? They just want to push message and then they try and create these authentic stories about sustainability. People will see through it, but they also just don’t practice it.
NL: We live in a society now that is so exposed because of social media, whether it’s a good thing or not; [it] is what it is. You need to use it to your advantage, in the sense that people are so protective, over their brands, so protective over their ideas, so protective over their IP; we decided a long time ago to not be like that at all. We’re not protective over our ideas. We’re not particular over our IP etc. I mean, the amount of veldskoen brands that have popped up that have coloured soles and coloured laces, even though we trademarked it — there’s new ones popping up all the time. That excites us and we’re never going to go after them maliciously. It’s never about that. We really, really, really believe and want everybody to be successful and everybody to be a part of the story and us to be part of other people’s stories. As an example, we got this guy [who] started working out of our space recently, and he started this really cool little cork-sneaker company. He also, very much like us knew nothing about shoes all the shoe world or whatnot, and it started to do really, really, really well — just kind of like being around the people that we’re around. And that really excites us and that really makes us happy and it’s not easy, so kinda counterintuitive to a lot of people, but that’s the new world. We’re all exposed and we’re all open and, yeah, you either be with it or not.
BE: People can copy what you’re doing but that’s flattery, right? That actually does your brand better at the end of the day. It ‘haloes’ the Veldskoen brand. Nic, I’m not gonna take any more of your time; I really appreciate you chatting to me on a public holiday. Although, having been an entrepreneur, there’s no such thing as a public holiday. I appreciate it. anyway. Yeah, I’m definitely gonna pop into Paarden Island — our offices are in Zonnebloem — so I’m just around the corner.
NL: Fantastic, please do. Just pop me a message and pop around.
BE: I really appreciate your time and have a lekker day. Thanks for listening to Episode Six of Only Connect, a MarkLives.com podcast. Once again, I’m your host, Bradley Elliott, founder of Platinum Seed and Continuon… Until next time, keep connecting!
Transcribed using otter.ai and then edited lightly.
The founder of Continuon and Platinum Seed, Bradley Elliott (@BradElliottSA) has created a number of businesses in the digital and technology sectors. He believes that marketing needs to be reinvented so that it becomes more useful to humans and brands. He’s also a collector of fine whisky. Bradley contributes “Only Connect”, exclusively to MarkLives.com. In this podcast, he chats to custodians of the world’s top brands about what matters most to them.