When your business is totally reliant on the products of others, strategy becomes more important than ever, as Adina Jacobs of STM Goods knows only too well.
As an accessories maker for personal technologies, STM Goods continually plays catch-up to the technology makers, balancing the need to have products available with the risk of investing in a new product that may be a massive flop.
“We started off as a laptop bag brand, because when we started, there were no iPhones, no iPads, no other tablets – it was all about the laptop,” recalls Adina.
Times have definitely changed, and so too has STM Goods’ range of products to keep up with the many devices rolled out.
Adina shares with My Business her experiences of the delicacies of forecasting consumer demand, manufacturing for a global audience, insights into what makes a good product design, and why her business only joined the world of online sales in 2016. Plus loads more.
Enjoy the show!
Phil Tarrant: G'day everyone, welcome to My Business Podcast, thanks for tuning in, it's Phil Tarrant here, the host of the podcast. I'm joined by my regular co-host Adam Zuchetti. Adam, how you going?
Adam Zuchetti: I'm good, Phil, and yourself?
Phil Tarrant: Good, my phone just started ringing, and that's the way a student runs a podcast, but you should always be prepared. How've you been, mate? What's been going on? I didn't see you last week.
Adam Zuchetti: No, no, I don't think we've been as busy as you have, though.
Phil Tarrant: Yeah, I've been running around ... For our listeners, I wear a couple of hats here. One of them is that we recently acquired a big platform in the defence sector, and I've been down in Avalon for the last week looking at all the latest and greatest military gear that we have. Mainly fighter jets and stuff, the arrival of the F-35, long awaited, everyone's talking about it. It's pretty good. There's an expo down there, and out of, say, 500 companies presenting, I reckon 400 of them would have been SMEs trying to connect with the defence space.
Adam Zuchetti: It's a really big sector for SMEs.
Phil Tarrant: It's huge. But then there's about 3,000 SMEs that work in defence and it's growing and growing. So it's a growing part of our audience on the My Business Podcast. So we transition over into the world of SME. Our guest today, quite interested to have a chat with her about stuff you're probably using, you don't know where it comes from, or you aren't too aware of how it all ends up in your hands. Adina Jacobs from STM Goods. How are you going Adina? Thanks for joining us.
Adina Jacobs: Well thank you, thanks for having me.
Phil Tarrant: I asked you this off air, but I'll ask you again. What's STM Goods do?
Adina Jacobs: We're a lifestyle brand of accessories for tech devices. So we make laptop bags, iPad cases, phone cases, cables, portable power, and other related accessories.
Phil Tarrant: So stuff like my phone here, this thing around it and how I charge it and stuff would be you guys?
Adina Jacobs: Yes, exactly.
Phil Tarrant: Okay, how long have you been going for?
Adina Jacobs: This is our 19th year, so coming up to our 20 year anniversary or 20 year birthday rather.
Phil Tarrant: Did you used to sell the chargers for those Nokia 5150s or something like that?
Adina Jacobs: No, we did not do that. We only got into the electronic side of things quite recently. We started off as a laptop bag brand, because when we started there were no iPhones, no iPads, no other tablets. It was all about the laptop. My business partner and co-founder, Ethan Nyholm, bought a laptop and he couldn't find a bag that suited his lifestyle. So the only thing that was around back then were those black briefcases, you know the ones that come free with-
Phil Tarrant: I've still got one.
Adina Jacobs: Yeah, do you carry it?
Phil Tarrant: It's so cheap looking.
Adina Jacobs: We'll have to sort you out. I know somebody who can sort you out. So yeah, that was the only type of bag that was around back then. They're not particularly protective, they don't really suit a person's sense of style, they were just the cheap option that came free with a laptop. We were both working for a fast fashion company, I was the accessories buyer and he was the IT manager.
Instead of using one of those black, free bags, he put his laptop inside a padded envelope that he bought from the post office, then he put that inside his backpack and he cycled to and from work. That was his solution for a while. As he looked around and as people saw what he was doing, they asked him, "What are you doing with your laptop putting it straight inside your bag?" And he realised that there was a market out there that wasn't being catered to. So he came to me and we spent a few months just chatting about what we could do with this, and was it really viable, and do people just leave their jobs that pay okay and go out there and do their own thing because they have a crazy idea? We decided that were going to do it so we did.
Phil Tarrant: The answer's yes. Most of our listeners are those people.
Adina Jacobs: Back then, it wasn't as common. There were definitely people that did it, but it wasn't that startup, entrepreneurial culture that you see now.
Phil Tarrant: No, it was very different back then, and it's really only the last few years that there's been this real glamorous thing put around-
Adam Zuchetti: That everyone's talking about it, yeah. Entrepreneurial innovation.
Phil Tarrant: That's what it's all about. So lifestyle brand for accessories, so you want your laptop or your electrical devices to suit what you do and that's what you do?
Adina Jacobs: Well, they're expressions of yourself. They're the way you communicate, they're the way you tap into your communities, they're the way you build your profile, and they've become a huge part of our lifestyles. So our product makes it easier to use those devices.
Phil Tarrant: So do you sell a backpack for cyclists?
Adina Jacobs: It depends. Yes, the short answer is yes.
Phil Tarrant: There's something that would...
Adina Jacobs: Yes, we do have a number of backpacks, and we started in backpacks, and it's always been something we've been really strong in. Depending on what your needs are as a cyclist, that's why I hesitated, but we do do a number of great backpacks.
Phil Tarrant: You do. So let's have a chat about the business, how many people in the company now?
Adina Jacobs: It's around 40 globally.
Phil Tarrant: Okay. So globally, so you manufacture elsewhere and bring them into Australia?
Adina Jacobs: Yeah, so the head office is in Australia. We manufacture in China and Vietnam, and we have a sales and marketing office in San Diego in the US. We have a sales office in the UK, one in Malaysia, and then we have some other people scattered around wherever it is that they live and they work from.
Phil Tarrant: So what percentage of your product would you see domestically or globally now?
Adina Jacobs: I was explaining to Adam earlier that the US office deals with North America, Canada, Central and South America, and Australian office deals with the rest of the world. So between the sales of the US office and the Australian office, it's around 50/50.
Phil Tarrant: How many products would you sell per year now?
Adina Jacobs: That's a really good question. I wish I knew the answer to it. It's a lot. We sell a lot. It's in the hundreds of thousands.
Phil Tarrant: In the hundreds of thousands?
Adina Jacobs: Yes.
Phil Tarrant: How are those product sales weighted? Are they primarily on your largest SKUs or a handful of things?
Adina Jacobs: The majority of the product is done through the education channels that we work with. So it's mainly iPad cases and laptop bags to a lesser extent, but predominantly iPad cases into education markets. So for example, you're a school district, you want to implement an iPad or another tablet programme, and you go to your local IT reseller or company that works to put your programme together and then they bundle an iPad case, an iPad, any apps that you need, any protection that you need, and they put that all together and then that gets delivered to a student as a full package.
Adam Zuchetti: So you effectively wholesale to these suppliers?
Adina Jacobs: Yes. And sometimes directly to the schools depending on their relationships.
Adam Zuchetti: Okay.
Adina Jacobs: So a lot of business is done through there. We've got a growing retail presence, so the STM Goods brand is a retail brand that we sell through a lot of stores in Australia, growing in the US, quite a few in the UK as well. Then we're starting to do a bit more corporate work now as well.
Phil Tarrant: Whenever I think of laptop bags and iPad cases and all that sort of stuff, I just picture if you've ever travelled through Asia, there's just like a million different sort of products. How do you differentiate this market, because if I looked at something I wouldn't be able to tell what it was and who made it, I'll just think, "Oh, it's another laptop bag."
Adina Jacobs: That's a challenge in this sector as well and that's why we're becoming more of a lifestyle brand, because people care about brands in the lifestyle space and not so much in the consumer electronics space, unless it's your devices. So they care about the Samsungs and the Apples and all the rest of it, but in terms of their peripheral accessories, they don't really know brands that well. But when you go into the surf culture or other lifestyle cultures, then people know their brands.
So for us quality's always been number one, so a lot of people who use our STM bags talk about the quality and talk about the thoughtfulness of design. We do a lot of work looking at how people use their products and then how we can enhance the use of their devices through our products. So protection's really super, super important to us. The quality, things like a place to put your sunglasses, a place to put your iPad, a place to put your portable power, and then a grommet that you can thread your cables through so that you don't have cables running all the way through your bag.
So thoughtful design's a huge, huge thing for us. When we first started, brand was very important to us and still is, but the way we used to sell the product meant that brand was first and foremost in the retail space as well, but as we've grown and grown more into the education side of things, our retail presence and our brand presence hasn't been as strong. So we've recently rebranded to jump on that and really make ourselves more of a lifestyle that people understand.
Phil Tarrant: When did that moment where you said, "Let's not just be a seller of accessories, but let's become a lifestyle brand." That transition from the two mindsets, how did that happen?
Adina Jacobs: It wasn't really a transition, we've always seen ourselves as a lifestyle brand, but the market's changed so much that the perception of STM as a brand changed and then we took a little while to kind of catch up and rejig things to put ourselves back in the forefront again. So because our bags never looked like those black briefcases, they were always like cool, streetwear backpacks, we always saw ourselves as a lifestyle brand.
We started in Australia, so the way that it worked when we first started was we were really strong in the Mac market, and the way that Apple used to sell their products in Australia was through a very strong Apple reseller network, which was a lot of independent retail stores that sold Apple products. That was in the day before Apple had retail stores anywhere. Then as Apple changed their model and those resellers weren't as important anymore and they relied more on their own retail stores and more on big box retailers, our product followed suit. So we went from being in these cool little niche IT stores to being in the majors, and in the majors it's kind of harder to make a place for yourself unless you're a big brand like Apple.
We've done a decent job at it, but we made a decision a couple of years ago that although we were very, very strong in the education space, and in that Mac space people knew who we were, there wasn't a broad, consumer knowledge of our brand. So it was time for us to go back to our roots, examine our story again, really tell the story of where we came from and get people to connect with us on that level.
Phil Tarrant: You mentioned before that a lot of thought goes into the usability of your products, so they're practical ... They look good, but they're practical. Our AV technician guy, I don't know if that's the right word for him, Sam said, "Oh yeah, I've had one of your products for five years." So I guess a testament to the quality of your products. How do you get people to keep buying stuff off you if you're creating stuff which is really good and really practical? What's the driver?
Adina Jacobs: Well I think people like to make changes. And they're not upgrading their hardware as often as they can upgrade something like a bag, so it's a very big investment to buy a new laptop, and if you can keep going with the one that you've got for a while it's much easier to just change your look or freshen things up by buying a new accessory. That's the same for phone cases as well. We find, especially with the hand-me-down devices that we call them, like the parent gets a new laptop or a new phone or a new tablet. They hand down their device to the next person who's in line in the family and then everybody goes out and buys a new accessory.
Phil Tarrant: Make it their own.
Adina Jacobs: Yeah, exactly. So you can personalise it that way.
Adam Zuchetti: How much of your products are dependent on the actual technology that's going to be put into them and the changes there versus changing fashion trends?
Adina Jacobs: That's a really good question. A lot has to do with the technology. I mean, at the end of the day, when we talk about seasons, we're talking about launching in time for device launches. Seasons for us are not like summer, winter, autumn, spring. The other thing is that in this space, in the consumer electronics space, people aren't at the very edge of fashion, so you can't be too fashion forward and scare people off. Then you've got to remember where we're selling the product. Places like JB Hi-Fi and other major department stores and other consumer electronics retailers, where people are not necessarily going to buy their fashion products. So you need to smartly combine a measure of conservatism with something that's a little bit different and unique.
So I think we do a good job at that. We look at what the needs of the consumers are and then we kind of inject our own look into it, our own materials, and our own way of doing things, while at the same time taking into consideration very heavily what the device is designed to do. So for example, with our phone cases, it can't just be a very thin slip-on case, it has to be protective, it's got to be something that's actually useful to people.
When it comes to the laptop bags, it can't just be a piece of fabric that you slip your laptop into, it has to be padded, we've got special corners that we use. The laptop section's lifted up off the bottom of the bag. There's a lot of little, unique and different differentiating factors that we use that set the product apart from a quality perspective, and then also take into consideration how you use the device. Like the iPad cases are a very good example of that as well. They all cover but they also stand and view and they also protect inside a bag and there's a lot of ways that we ... A lot of little details that we put into it that make them user friendly.
Phil Tarrant: I must admit I've never really thought that much about-
Adina Jacobs: That's our job.
Phil Tarrant: ...how I protect my-
Adam Zuchetti: I was just thinking though, do you actually get the measurements and things off these new products? I mean when Apple launched the iPad, that was a completely different sized machine to anything that was on the market. Do they tell you in advance, "Look these are our measurements, this is what it's going to be like," so that you've got some kind of indication of how to take the new products?
Adina Jacobs: That would be lovely, but no that doesn't happen.
Phil Tarrant: You wait for the nerds to leak it online so they can see it.
Adina Jacobs: We don't even do that. You can't trust those sources. You need to just makes sure that you've got the actual device and then follow that. So the iPad's a good example. We didn't launch any new product with iPad 1. I mean, you hear about it and you read about it and we read too. But you can't take a risk like that. So we waited. We saw iPad 1, we saw how people were using the device. You hear rumours about iPad 2. We really spent a lot of time examining how people use their devices. Then we developed something for iPad 1, kept it in our back pocket. Like, we designed everything around the previous device, kept it in our back pocket. Then once the legitimate specs were available for the iPad 2, then we pulled out our draw plans and designed it and then 8-10 weeks later we've got product on shelf that suits the new device.
Phil Tarrant: What's the next big thing in the electronics market that you guys will be creating something for?
Adina Jacobs: Well we spend a lot of time just looking out for what's going on. I think we're in a really good spot right now with our balance between our tablet cases and our iPad cases. Sorry, our tablet cases and our laptop bags, and also we have a new brand that we just purchased at the end of 2015 called Element Case that just focuses on iPhones.
So we spend a lot of time looking at what's going on around those spaces. We get people coming to us every week with ideas of, "Can you do a drone bag for me? What about a mother's bag?" I'm like, I'm a mother, but I don't have a market to sell mother's bags into, and I can do a good bag, but we're just focusing on what we do well and sticking with the channels that we know at the moment. You've just got to keep your eyes and ears open and be ready to act quickly.
Phil Tarrant: When you see a guy like me that comes in with his ... I don't know if it's an iPhone something with a cracked screen and stuff. Do you just shake your head and say, "That's not a good look."
Adina Jacobs: A little, but whatever works for you is okay for me. I also know somebody who can upgrade your phone case.
Phil Tarrant: How does it work with just I guess observational, how you've been doing this now for well over ... Was it 19 years, was it? Quite some time, so you're highly connected and engaged with the way in which people are working. So you've seen people probably go down a journey of fax machines 19 years ago through to Blackberries and Nokias, or big clunky laptops which were really big and then they went really small, now they're big and small again. Wide screen, this, that and the other. Just business people and how they communicate these days, just from what you're creating, are most guys or girls tablet people or are they laptop people or are they phone people? Have you got any observations on that?
Adina Jacobs: It's no secret that a lot of content's consumed on phones, and any website that's not changeable so that you can view it on a phone easily, it's almost death to it. People bring it up on their phone and then they just walk away because they can't be bothered zooming in on everything. So a lot of content is consumed on phones.
We're still seeing strong sales in laptop bags, and I think it's because we are really becoming better known as a lifestyle brand that everybody carries bags, and most people have a laptop section in their bags, but it's not necessarily a good laptop section. So we come from the perspective of being the experts in that space. It has changed over the years. I mean we had an entire business for more than 10 years that was just about bags, and we really did have to change to catch up and work with the new devices that were coming onboard.
I do still see a lot of people working on laptops, a lot of people are then on top of that having their iPads or their other tablets as well. I know in my family, we've all got laptops, we've all got iPads, and we've got phones. So everybody has three devices, I've got a Kindle as well. So I'm sure that a lot of people are moving away from traditional desktops and laptops, but you still see a lot of it around. I mean, there's no replacing your big, beautiful screens. Even if it's plugging your tablet into a big screen, people still want to do the majority of their work on a nice, big screen.
Phil Tarrant: Just in terms of sales, then, you mentioned that a lot of your sales come through the educational market and is packaged up as part of ... Which is probably really good business to have, because as kids start school every year, etc., etc., they're always in the latest technology. Who manages the account or who manages those particular types of revenue sources to make sure that you've got products going in there and it's sustainable and you can grow them, versus going out and winning new businesses? Whose job is that?
Adina Jacobs: It's a joint effort. Ethan, my business partner, is our CEO, and so he's really across exactly what's going on in that space. My focus is more on the product side of the business, with a little bit of focus on marketing. But Ethan really works with the people in each area to make sure that they've got access to the information and the product that they need when they need it.
Phil Tarrant: How many products do you sell now?
Adina Jacobs: In terms of SKU count?
Phil Tarrant: Yeah. What's the breadth of the products?
Adina Jacobs: On the bag side of things we've got close to 70 products. On the phone case side, we stopped doing STM phone cases when we bought the Element Case brand because STM phone cases were really focused around the entry to mid level phone case market at $25-40, whereas Element Case products are very high end, machined, beautiful materials, and we just launched an Element Case product a couple of weeks ago that's 350 US dollars. So we decided to focus on that end of the market instead of sticking with STM as well.
So there are ... I want to say eight different styles of Element Case phone cases and then we break it out by sizes. Then on the iPad case side of things, we've got four styles. Then we've got multiple colours and multiple sizes as well. Then we do get some work with Microsoft too. So we've got some cases for Microsoft Surface.
Phil Tarrant: Do you warehouse all this stuff somewhere, or is it very JIT type process?
Adina Jacobs: It's all over the show. We do have to do a lot of planning, it would be nice if it was just JIT, but the issue is that all your materials and accessories that go into making the product have fairly long lead times, and so you need to allow quite a bit of time to get all that together and produce properly. So we have a warehouse in Hong Kong, we have two warehouses in Australia, two in the US, one in the UK, and then there are hubs and we ship out from those depending on where product's going.
Phil Tarrant: What gets you most excited about your business? You've been at it for almost two decades, but you're still cracking away. What is it that gets you up in the morning?
Adina Jacobs: I love being on the cutting edge of technology without having to be responsible for the technology. I know that's a little bit scary as well because we're just following what the technology does, but it is really interesting and exciting to see what's happening and then be responsive to that. I love the people that we work with. We've got amazing teams of people together. At my core I'm really a product person. I love developing product, I love looking at new ways of doing things, I love building the relationships with the factories and the people that we work with there. So there's a few different aspects to what we do that I'm still really passionate about.
Phil Tarrant: And do you like the tactility of a new product where you get it and go, "Actually this is what we envisaged"?
Adina Jacobs: Yeah, I love it. It's quite a process to get there because it's very rare that you get your first sample right. I would say that your first sample is probably about 30 per cent of the way there and you need to have the vision to be able to see what it's going to become. If you don't have that vision you just drop it as soon as you saw the first sample. But it's really exciting to see it all come together and see the small tweaks really make a big difference.
Phil Tarrant: Remember the podcast we did with, I can't remember his name, industrial designer. Do you remember that?
Adam Zuchetti: Robert Tiller.
Phil Tarrant: Robert Tiller. It was intriguing, so industrial design. That's, they just make products and it's pretty much what you're talking about there, right? The practicality of this goes here and this does this and this is how this works and this is why it works and this is why you need it. I don't think a lot of people often understand the work that goes into creating I would say just a bag, but it's a pretty complicated, sophisticated piece of equipment in terms of how it all sits together and works together.
Adam Zuchetti: Particularly when you are going for quality rather than just whacking something together to put out there.
Adina Jacobs: Well, it's the mark of a good designer to have a product that you don't really think that much about. If it was a terrible product and it didn't work very well, you'd know about it straight away, because it really wouldn't fit in with what you're doing and it wouldn't make things easier for you. If it's really simple and easy, it's almost like you forget about it because it just integrates into what you do every day.
Phil Tarrant: What is it with your business that worries you the most at the moment?
Adina Jacobs: That's a good question. It's going to be the technology again because we're not in control of it and we don't know what's happening with it and we're following it, and so you don't know what's going to happen. So you can do all the research you want, but at the end of the day when companies launch things behind closed doors, well they do their work behind closed doors, then they come out with it and you just have to be responsive to what they're doing, you have to be ready to jump.
Phil Tarrant: So it's a race to the market, is it? When new tech comes out and people are going to need it, so you need to get your products on shelves as quickly as possible?
Adina Jacobs: It is. We try-
Phil Tarrant: Balance with the quality of it.
Adina Jacobs: That's the thing. You can get cheap product out there very, very quickly, and you can get some decent product out there very quickly as well, but in order to really understand how the device works, you need to have a little bit of time with it. It is a race to the market. It's absolutely true that the people who were there early are the ones who get the very first sales, but often they're just kind of, they're products that they work well but they don't have any special features in them. Then you see later other products come out where they have more features because they've had more time with the device. We do the same thing. To get something out as quickly as we can, we do something fairly simple to start with, and then as we go on we introduce product that's a little more complicated.
Phil Tarrant: You've made me realise I need to invest in some good travel things, because I think when I travel I've got like a backpack, which is for surfing, I can put my wetsuit in if it's wet and stuff, and it's just a big bulky thing. Probably need something a little bit more-
Adina Jacobs: A bit more refined?
Phil Tarrant: A little bit more refined.
Adina Jacobs: And more purpose built?
Phil Tarrant: More purpose built. Anyway, you've got a question there Adam I can see.
Adam Zuchetti: No.
Phil Tarrant: No, just smiling and smirking.
Adina Jacobs: You're both wondering how quickly you can jump on the website to do it today.
Phil Tarrant: So you guys are selling online now, right?
Adina Jacobs: Yes, we are.
Phil Tarrant: So talk us through the evolution to being a provider of people so they can sell online to selling online yourself?
Adina Jacobs: We started the business at the very beginning stages of the commercial internet. So at the time there was no selling online, there was no Facebook, there was no social media or anything like that, and our path to market was really just through the resellers that we developed relationships with. Then as selling online became something that was more popular and common and accessible, we made a conscious decision not to do that, because we really wanted to support our resellers who were selling online, and we didn't want to go in there was the brand expert and then undercut them. Not from price, because we wouldn't have done that, but just in terms of-
Phil Tarrant: Perspective.
Adina Jacobs: Exactly, exactly. We did that for a really long time. But it became ... It just got to the point where there was no point in not having our own online store anymore and nobody saw it as competition, everybody just saw it as you just had to do it. It was something that you had to be involved in. But by the time we got to the point of doing it, we were too big to just throw together a simple little website, so we had to spend a lot of time and energy getting it right. So we launched in January of 2016. It's been going pretty well.
Phil Tarrant: So what percentage of sales now via direct, via digital?
Adina Jacobs: It's not very high considering the fact that we do a lot of volume through the education space. But it's growing, it's growing.
Adam Zuchetti: That's good. Do you find there's any problem with channel conflict with those resellers versus your online store?
Adina Jacobs: Not really, no. We haven't really had any major issues like that. We're very, very big on relationships and service, so we provide an extra level to our resellers. So they don't really ... I mean I'm sure there are some people that are buying from us rather than from the resellers, but the resellers get great service from us and we do whatever we can to keep them happy, and so they're happy to still deal with us as well.
Phil Tarrant: That's good. We've run out of time, Adina. So I've really enjoyed the chat.
Adina Jacobs: Thank you, me too.
Phil Tarrant: Yeah, a couple of things I pick up. It's about, from this chat, is attention to quality is absolutely critical no matter what you're doing. If you're selling a bag, if you're getting, as we said with Sam here, five years out of a bag. That's pretty good. But you'll have to try and find a way to make him put his hand in his pocket and buy another one, but he shrugs his...
Adina Jacobs: I'm sure we could convince him.
Phil Tarrant: What comes through is the passion for you guys in the product you create, and the belief in how it can be a real asset to people's lives in terms of how they can be better organised with the usability, with the stuff that they're using. I really enjoyed the chat. Adam, anything to finish up with?
Adam Zuchetti: No, I think you've pretty much answered all our questions.
Adina Jacobs: Great, thank you.
Phil Tarrant: No, thank you. Let's get you back on in another 20 years' time, see where you guys are at.
Adina Jacobs: Sounds good. That sounds great.
Episode 43: Natasha Chadwick, Synovum Care Group
Episode 42: Steve Hughes, Mood Media Australia
Episode 41: Finding a partnership between digital and physical
Episode 40: SumoSalad CEO shares the secret to corporate social responsibility
Episode 39: Evolving innovation to suit your business needs
Episode 38: Lessons from a serial entrepreneur
Episode 36: How exporting is driving growth for ambitious SMEs
Episode 35: Trumped or pumped? SME sentiments revealed
Episode 34: Anytime Fitness Australia founder talks expansion and competitive markets
Episode 33: Are you a leader, a manager or both?