Luke Pharaoh: Delivering clear value key to eCommerce success

Tech Watch: Luke Pharaoh, Kiwiplay

Computer: Macbook Air
Phone: iPhone 5

Successful eCommerce startups are few and far between. The market is saturated, which is making it increasingly difficult to stand out, and most online retail business owners turn to marketing and advertising as a way of generating sales. But Hamilton-based entrepreneur Luke Pharaoh, the founder of popular New Zealand online startups Deadstock and Kiwiplay, says that delivering clear value above the retail price is the key to attracting many valuable customers.

The idea behind Deadstock was conceived when Luke returned from a trip to the USA, where he noticed that everyone was wearing caps. The company originally started out selling ‘deadstock’ hats from Canada, which were made in the 80’s and 90’s to surplus and never worn. It became evident to Luke  fairly quickly that, to continue growing, they would need to expand their offering.

Deadstock went on to sell trending designer clothing at affordable prices, expanding their target market and gaining repeat customers along the way.

“I think with Deadstock we really had a good clean look that attracted brands online and allowed us to get a good portfolio,” Luke says about why this aspect of the business worked well. “We were prudent with the customer service and delivery expectations and created back-end systems that did a lot of the manual work for us. In the end though we ultimately needed a lot more capital and volume to make the site really scale up.”

Luke and his brother exited Deadstock in late 2013 when it was purchased by the skate shop Underground. The business now exists in a physical store in Orewa.

Kiwiplay, a retailer and distributor of high quality cedar playgrounds, is operating using a similar concept but with different margins and a different market. Deadstock was all about selling a large volume of low-cost items, whereas Kiwiplay aims to sell fewer units for a higher margin.

“I have always looked for opportunities to import product and make a margin on it in NZ,” Luke says. “Having been doing many low price point items over and over again with Deadstock with just two of us, I started looking around for high price point items with a low number of SKUS in the range that I only had to write one description for, take one set of photos and so on.

“The product was launched into the market just before Christmas last year to a great reception and we’ve now sold hundreds of units nationwide.”

Kiwiplay has had a lot of time put into the framework and order management procedures, so that Luke only needs to spend 5-8 hours a month on it to keep up with current volumes.

“I’ve taken a lot of time and care in getting all of the back-end systems ship shape so that I can be hands off with the product,” he explains. “All of it is stored in a third-party warehouse and is automatically shipped out each time a customer orders. All of the systems are cloud based too which really helps in being able to run the business from anywhere – currently I’m using Shopify, TradeGecko, StarshipIT, and Xero.”

Although Luke’s entrepreneurial career has become much more stable in recent years, he has faced some challenges in business, particularly in the emotional attachment that he feels to his companies. He enjoyed the work, autonomy, and freedom to act as he saw fit for the business’s wellbeing, but the downside of that was a loss of the social interaction that Luke experienced when he was working at his day job.

He’s solved this by working out of an office, which boosts his mood and has allowed him to grow his mindset.

Another aspect of business that Luke has found difficult to deal with is the pressure of bank debt that he has to deal with, while also doing all the accounts, customer service, dispatch, marketing, sales and shows.

“For me it has been a little scarier than I anticipated having no solid platform to fall back on it everything goes belly up,” Luke says, adding that exercising regularly and doing activities that consciously take his mind off of his problems has helped him handle the stress.

“Learning to adapt to change has been one of the biggest skills I have tried to improve on in recent times too,” Luke says. “I genuinely subscribe to the idea that the only constant is change – which is even more prominent in a fast paced business environment.”

Luke’s biggest piece of advice to anyone who is starting an entrepreneurial venture is simple: just start. Don’t be scared to make mistakes, because they’ll teach you lessons that you can’t learn in university.

“There are a lot of people who are quite happy to sit on the sideline and criticise, so I really do admire people getting out there and giving things a go – even if they don’t work out they way they thought.”

For established businesses, Luke says that providing distinct value to customers is the most important piece of advice that he has learned.

Any marketing activity that follows is like throwing fuel on the fire.

Bullet Points

  • Luke Pharaoh is the entrepreneur behind Deadstock and Kiwiplay
  • Deadstock is a menswear retailer that was sold to Underground in late 2013.
  • Kiwiplay is a cedar playground distributor, which currently ships hundreds of units and requires less than 10 hours of Luke’s time per month.
  • Luke says that the most important piece of advice he has is to make sure you’re providing clear value to clients.
  • Marketing will just further the momentum that you’ve created.
  • Luke deals with the pressure of debt by exercising and taking his mind off of it.

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