American entrepreneur finds Vietnam the right place at the right time

The Golden Star Balm is a yesteryear product in Vietnam.

Called cao sao vang in Vietnamese, it was once the only balm used across Vietnam to treat headaches, cold, arthritis and other pains.

But, for many years now, it had all but disappeared under a deluge of imported substitutes that flooded the market in the mid to late nineties.

However, last year, this made-in-Vietnam product was selling like hotcakes in the US, and most people were buying it from retail titan Amazon.

This unusual revival made headlines, with the minute red tin with a yellow star in the middle commanding prices as much as 35 times higher than in the local market.

The manufacturer OPC Pharma then, with public praises ringing in its ears, frankly said that it was not the mastermind behind the rise of the balm. It was small distributors like New York City-born Erik Frankel that embraced online selling platforms to promote the product internationally.

“The balm is among thousands of made-in-Vietnam products that we have sold on global e-commerce sites,” Frankel told VnExpress at the workshop-cum-office in District 2.

Frankel’s marketing strategy is simple. Take as many ideas as possible and “throw them against the wall to see what sticks.” 

So far, the 42-year-old New Yorker, has done this with more than 20,000 items, ranging from country’s oldest instant noodle, Miliket and classic Vietnamese fish sauce to army helmets with camouflage nets, marketed as Vietnam War memorabilia. He says online retailing makes this feasible.

“We assume, for instance, that there is little demand for the stuff that isn’t carried by bricks and mortar retailers. If people wanted it, surely it will be sold,” Frankel said.

Stressing the advantages of online retailing, he said that with no shelf space to pay for and hardly any distribution fees, there was a lot of room for trial and error.

“Amazon charges 20 percent of an item sold, and I am willing to pay them up to 40 percent because the traffic there has no competition,” he said.

He has increased the business’ gross profit margin by hiking sales and lowering costs by using cheap materials and labor in Vietnam for products that command high prices in the international market.

“It is is possible to make a product for a dollar here and sell it for 10 dollars internationally,” so the profit margin justifies the shipping costs, Frankel said.

He has also managed to find a niche market where people will buy a product again and again. Fish sauce might be too strong for Americans, but it is stable in the family kitchens of Vietnamese Americans who, according to 2010 census, form 0.5 percent of total US population.

Cross-border retailing

Some Vietnamese products among more than 20,000 items that Erik Frankel has listed on Amazon. Photo by Amazon.

Frankel moved to Ho Chi Minh City in 2002 after divesting from a handmade gemstone jewelry business in Thailand. He was attracted by Vietnam’s labour costs which were much lower than those of its other neighbours. “Vietnamese people are willing to work harder and take fewer holidays than their peers in Thailand.”

He started off with a small handmade craft business located in the city’s central district which was fully staffed with handicapped people making metallic jewelry designs, doing custom T-shirt printing and knitting stuffed animals to sell on global marketplaces such as Amazon, Etsy and eBay.

The business was so lucrative that Frankel decided to grow revenues through selling more products. The first step was to create an online platform with an aim to drive external traffic to his listings on Amazon and other giant retailers. The website, which was at first named similar to American multinational e-commerce corporation eBay, later had to be changed after a trademark infringement notice.

Next he offered local manufacturers and private businesses the service of listing their products on his website which had been directly integrated with several global online marketplaces.

Third-party seller

“Erik did not create his own platform as a fully functional e-commerce site. It has rather helped him make more cross-border sales on Amazon as a third-party seller,” Doan Xuan Huy Minh, a senior official at Ho Chi Minh City-based Institute for Computational Science and Technology, said.

According to Amazon’s international seller services, cross-border sales on Amazon grew by 50 percent in 2017, and contributed 25 percent of the total sales by third-party sellers on Amazon globally. And half of all products sold through Amazon globally came from third-party sellers last year.

“You can buy products at retail price in Vietnam and sell wholesale in international market,” Erik said, adding that as the purchasing power of an American consumer is more than 30 times higher than that of a Vietnamese, local businesses selling globally through Amazon will see faster growth compared to domestic-only sellers.

In the past couple of years, marketplaces like Lazada, Tiki, Sendo and Shopee have made it easy for Vietnamese merchants to sell online to local consumers but didn’t give them the tool they needed to further expand around the world.

Erik Frankel has smartly seized the opportunity to capitalize an increasing number of small businesses who are turning to e-commerce to sell their products overseas, bypassing traditional export routes, said Dr. Huy Minh.

‘If you can’t beat them, join them’

After 15 years in Vietnam, Frankel has not only been able to correctly use Vietnamese idiomatic expressions in conversation, but also managed to build a channel to transport and distribute goods from Vietnam to the U.S. which, according to Huy Minh, “works smoothly as a small tube in the ocean of barriers between the two countries.”

Huyen, who has been selling coffee through Frankel’s listings on Amazon for the past two years, said she paid 10 percent of the product’s selling price to him plus the referral fee charged by Amazon on the total sales price.

Even though she is going to become an independent seller on Amazon, she plans to continue to turn to Frankel for shipping and delivery to American customers so that she can “focus on marketing her products.”

Grant Hawkins, who “was bored of his life in America”, moved to Vietnam in 2015. He is now a full-time English teacher in Ho Chi Minh City and an amateur maker of leather bags and wallets. “You could literally just drop off a huge box of products at Erik’s place and they’d be online within a couple days. He can handle with photos, packaging, listing, advertising, shipping, customer service and payment processing,” Hawkins said.

As shipping is one of the biggest challenges that face e-commerce, Hawkins has let Frankel’s company handle with all of the shipments back to the US.

“People ask if we are afraid about being copied but I don’t think there is someone crazy enough to copy everything we do. For example, at first there were like 12 sellers from Vietnam but now there is only us,” Frankel said.

When it comes to e-commerce, Frankel is confident that he has accumulated enough experience and expertise over the years.

“I have made every mistake possible in the field,” he said proudly, referring to description writing, photography, customs clearance and customer services. “All these are very important, and it is hard to do it all by yourself.”

The emerging markets of Southeast Asia have been seeing rapid online sales growth in recent years. But Frankel arrived here long before e-commerce exploded in the region.

Vietnam has great potential in e-commerce because of its strong manufacturing and agriculture history.

“The local businesses are able to produce goods that meet the demand of global consumers,” said Michael Rosen, board member of GTN Foods, which has heavily invested in the country’s largest exporter Vinatea and milk producer Moc Chau. “Frankel has the advantage of being in the right place and at the right time.”

“When you sell online, the more you can sell, basically the more exposure you will get,” Frankel said, adding that the more items you list, the more people will trust you, because it takes a certain number of listings to make a merchant seem dependable.

It is not easy for a local individual artisan or small business to compete against his store on Amazon which has received 86 percent positive ratings in the past 12 months. “If you can’t beat them, join them”, Frankel said, using the popular idiom as his business motto.

He also advised online merchants to stay away from heavy items, items with moving parts and those that are easy to break. “The longer you do it, the more you know what not to do, not necessarily know what to do.”

He said sellers have cited issues from difficulties in shipments to fulfilment centers overseas. “We have a logistics team for sending and receiving packages in New York”.

“You can open up an eBay or Amazon account and you can ship from Vietnam, but in fact when customers want to return the items, you need someone in the United States”.

Frankel’s business is rooted in his family’s shoe store which has been running in Brooklyn since 1890. “We were one of the first people to open up an eBay account in the late 90s”, Frankel said, recalling that he’d taught his father how to sell things online.

“People ask my father when he’s going to retire and he says he’s still trying to recover from his honeymoon, which was like 40 years ago. I think I get my work ethic from him. He loves what he does”.

His 72-year-old father now manages their 10,000 square feet warehouse in New York City to ship mostly Vietnamese products to other parts of the U.S. and to other countries.

Huy Minh finds an even simpler reason for Frankel’s success: “Erik is a Jewish American, and Jews have an aura of being successful in business. There is no need to ask him how he could turn a simple idea into money.”