Many people find the struggles of Vacanza Accessory founder and president Hsu Yi-chih incredible and inspiring.

When he first started out, he would source his products wholesale from behind the Taipei train station before heading to the Shihda, Gongguan, or Dunhua Eslite sections of Taipei to set up a sidewalk shop. The long nights were frequently punctuated with the excitement and tension of scooping everything up in his drop cloth and running from the police to avoid fines. Today, he oversees an accessories empire with five outlets in Taipei and Taichung and annual sales exceeding NT$100 million. In fact, the company has never operated at a loss, and has established a presence in Hong Kong.

Last year, Hsu started operations in Malaysia and Vietnam. Still just 34 years of age, with 13 years as an entrepreneur under his belt, Hsu exudes the seasoning and poise of a veteran. Befitting that poise, he also thinks well into the future.

“The company’s main clientele is comprised of twentysomethings. Taiwan is a small island with a little more than 20 million people, an aging population and low fertility, and does not attract as many tourists as other countries. A decade from now, who will buy my products? When I think of this, I have little choice but to seek out overseas markets,” he relates.

Yet making inroads in completely new big markets is a much bumpier road for small- and medium-sized enterprises (SMEs) than one might imagine.

First is feeling things out, constantly making refinements and improvements. “They started out as street vendors whose best attribute is their ability to adjust,” observes Sharon Peng, president of women’s shopping platform Shopping 99, discussing Vacanza Accessory’s advantages in its efforts to make forays into the international market.

Flexibility Second Nature to Veteran Street Vendors

During its first six months in Malaysia, the company received almost zero orders. Spending from NT$100,000 to $120,000 per month just to operate, many unanticipated issues only surfaced once they entered the market, necessitating re-focusing, including website language, logistics, and cash flow.

For instance, at first the website was set up in both Chinese and English. But after speaking with local friends, they found that even if their key target consumers were ethnic Chinese, it was better to just put everything in English.

Payment methods were also an issue. Since consumers in Taiwan are accustomed to paying online with a credit card, the company at first only made credit card, convenience store payments, and cash on delivery available.

However, they subsequently learned that Malaysian consumers are accustomed to using bank transfers, and are especially sensitive about service fees. Accordingly, they surveyed which banks locals used the most, and then progressively increased cooperative arrangements with banks.

Image: Chien-Ying Chiu

Committed to Taiwanese Quality

Second is getting back to the essence of the products, and insisting on the need for differentiation.

Prior to venturing into Southeast Asia, Hsu sought out Sharon Peng, who brings extensive experience in Southeast Asian markets to the table. Among others, Peng shared her observation that the Malaysian population is somewhat diffuse, relating that some favor the Japanese and Korean style, and that there are few high-end accessory shops in the country. She advised Vacanza that this would be a potential advantage.

However, Malaysian customers prefer larger, more prominent accessories, and more American-style, extensive displays. Seen in this respect, Vacanza’s offerings did not seem to fit the local clientele at first. Accordingly, “a long-term operations strategy, and identifying people willing to spend money, are the keys going forward,” remarks Peng.

In the face of such circumstances, Hsu decided to get back to basics:

not trying to cater especially to local tastes, and not going up directly against the American-style market mainstream, but rather aiming at local consumers similarly influenced by Japanese and Korean culture by directly introducing items popular in Taiwan, taking advantage of an obvious market gap in Malaysia by capturing their hearts and minds through Taiwan’s characteristic quality goods and services.

Vacanza sells four or five thousand items in stores and around 800 online in Taiwan, but for Malaysia it only sells around 250 of its star products.

Stressing Taiwan’s quality, Vacanza’s Malaysian website carries the banner: “Taiwan’s No. 1 Accessory Shop.” And images on the site maintain the same aesthetic quality as those from the home base in Taiwan.

The strategy they are looking to communicate to the market is that, even though the products are Japanese and Korean style, such details as the custom designs, attention to production materials, and hand inspection of all orders before shipping demonstrate the advantages of a Taiwanese brand’s quality control capabilities over other market competitors.

“Vacanza still lacks name recognition here, but the market is definitely there because of the styling,” relates Malaysian-Chinese consumer Hung Huei-hsien, 35. At the same time, she also observes that many locals go to Thailand to purchase similar accessory designs for a lot less money.

Cultivating Consumer Trust, Localizing

Finally, the products must maintain their uniqueness, while marketing must return to being localized. This is the final mile for Vacanza.

Online shopping has not entirely caught on locally, not to mention the difficulty of trusting a new overseas brand new to the market. This makes it even more crucial for them to constantly update their official Facebook page and Instagram account, and expend considerable manpower to answer private messages through social media in order to slowly but surely gain the trust of local consumers. (Read: E-Commerce Strategy for ASEAN Markets-Decoding the ‘Private Message’ Culture)

This is a slow, time-consuming process involving the cultivation of mutual trust. At first, in response to consumer enquiries about certain items via private messaging, they would just paste a link to the relevant product or give a canned response. “This totally killed us, resulting in a 99 percent no-response rate to messages read,” admits Hsu.

Malaysia is not like Taiwan, where people are accustomed to the consumer model of sharing, liking, tagging friends in posts, and ordering from links when they see something on Facebook.

In contrast, Malaysian consumers are used to using private messaging via social media channels to ask questions - from big to trivial - to build trust over the course of the process before eventually placing an order.

These days, project manager Ryder Hsu’s work each morning involves responding to around 30 Facebook private messages. Consumers send images of products directly, then wait for Vacanza to respond with prices and descriptions. Next, they ask questions about materials, shipping costs, and shipping methods, going back and forth five or six times in most cases.

Such interactive management is quite taxing, raising the cost of new customer acquisitions, as one or two out of every 30 potential customers requires step-by-step hand-holding before placing an order - in some cases even needing help to place an order on their behalf. Still, Ryder Hsu notes, 70 to 80 percent of the potential customers with whom intensive interaction occurs can be converted into sales.

Currently, Hsu Yi-chih is generating around NT$200,000 in sales per month in Malaysia, with less than NT$10,000 coming from the Vietnam market, where he also recently launched operations. Still, both markets are operating at a modest profit.

Window of Opportunity in Next One to Two Years

Nevertheless, Hsu believes that he has yet to find the key to exploding the Southeast Asian market. He feels he needs to pull out all the stops and devote his full concentration to get fully on top of more opportunities in the region as they develop.

In particular, he observes that this year and the next will present a prime window of opportunity for the development of the Southeast Asian market as ventures from countries around the world make major pushes to seize market territory.

His dilemma, however, is that securing his position in the Taiwanese market is not easy, and although he knows new market opportunities are clearly out there, he is unable to pour extensive resources into new markets. This has him looking around, contemplating his next move.

He has the flexibility and courage to learn as he goes along, and is moving in the right direction. Yet how much energy to expend to push forward, and how to balance the allocation of resources, are likely the greatest struggles and challenges that he as well as many Taiwanese SMEs with limited resources face as they seek to break through.

Translated from the Chinese article by David Toman

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