[Startup Story] How did I lose $200k in my children’s clothing business and how did I get back on track?

[Startup Story] - Ethan Michael from Little Star store - US
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This is a story shared by K-Embroidery from real customer feedback. 

(By the way, thanks Ethan for letting us to share this story)

My Journey: From Struggle to Success 🌟 

Hey friends! I wanted to take a moment to share my story with you because I believe that sometimes the greatest lessons come from the toughest experiences. So here goes …

Facebook post of Ethan
Facebook post of Ethan

Couldn’t have been a better start

Honestly, I couldn’t have had a better start. First, you need to understand why I started a business by opening a children’s clothing store.

My friends all know that I have a very gorgeous and lovely daughter and her name is Donna. And everyone who is a parent understands that everyone wants the best for their children. And what is the most basic human need? Food and clothing, obviously.

But the food market in the US is too saturated. Everyone thinks of opening their first restaurant when they come up with the idea of starting a business. Furthermore, I’m 32 years old, I don’t know what the current food trends are and the investment in machinery is quite expensive.

That’s why I came up with the idea of starting a children’s clothing business. Another reason is simply that I like small things like that, haha. And I started a small clothing shop in January 2021 in Los Angeles – where I live – and I named the store “Little Star” and that’s why you see a little yellow star right in the beginning of my title.

My lovely store in Los Angeles
My lovely store in Los Angeles

The main products I choose are smocking clothes for children, especially for baby girls. In addition, there are other by-products like diapers, cute little things like bows, bracelets,…

And my business developed quite quickly at the beginning because the government in this state introduced policies to promote childbirth due to some concerns that I was still unclear about. I chose Smock Candy as our product supplier, because their wholesale product prices are relatively cheap and their headquarters are also in Los Angeles, so I saved quite a bit on shipping. And then it only took me about 5 months to break even, can you believe that?

This is our first smocking clothing supplier
This is our first smocking clothing supplier

And after 1 year and 6 months, thanks to the focus on our main products, developing marketing and improving services, we have grown very quickly. That’s why my wife and I made a very bold move – opening a store in Southeast Asia! And after some research, we decided to choose Vietnam as our target. Why? Simply because we see that Vietnam’s economy is growing very quickly and more specifically, they are “close friends” of the US, so importing and exporting goods will be simpler for us.

We failed here

We decided to continue selling children’s smocking clothes in Vietnam and spent some of the profits we earned to open a store in the capital of Vietnam – Hanoi. We chose Hai Ba Trung district because we thought this was the center of Hanoi.

Hai Ba Trung district is crowded
Hai Ba Trung district is crowded

March 2023 is when we opened the store and started business. And we have had some customers come in and out to visit the store, not many but we still had a belief in this lovely store of ours.

We continued to import goods from the previous wholesale vendor Smock Candy. And surprisingly, our products received a lot of love from American customers, but received some relatively negative feedback from customers in Vietnam. It’s not that the product is bad – they really love the clothes here! – but they reported that the clothing size did not fit their child.

That was the moment I realized I hadn’t considered that issue, which was careless and unprofessional. After that, we had to stop importing goods from Smock Candy and were forced to choose another supplier in Vietnam with equivalent quality and reasonable price.

My wife and I continued to have sleepless nights researching children’s clothing factories and suppliers (we didn’t want to change products because these clothes were the reason we started in the first place). And we found K-Embroidery – a factory that produces exactly the products we were looking for. Even better than Smock Candy because their prices are lower. Only $20 to $40/each compared to $40 – $55/each at Smock Candy, isn’t that great?

Child model wearing smocking dress from K-Embroidery
Child model wearing smocking dress from K-Embroidery

They not only provided us with good products but also gave us some advice about the children’s clothing market in Vietnam and we learned a lot from them, and I could hardly find such information on the Internet. Articles on Google are full of ads, I don’t like that very much.

That’s not all, we still had a lot of problems haha, and I save it for the next part.

Another deadly mistake

The first problem had been resolved, the number of positive feedback was also increasing and our store also had a more regular number of customers. However, after 3 months of operation, we only had a profit equal to 1/5 compared to costs ($150,000 – $160,000) and costs continue to increase gradually.

My wife and I spent exactly 3 nights finding out more about Vietnam’s economic situation. We went to many newspapers, social networks, forums, etc. and then we discovered the truth. Vietnam was experiencing a “hidden” economic recession recently. Consumer spending was down and parents are becoming more cautious with discretionary spending, including children’s clothing. We were very surprised because we were subjective, only reading “positive” news without really digging deeper into the economic situation in Southeast Asia in general and Vietnam in particular.

Vietnam economy is growing slower in 2023 - 2024
Vietnam economy is growing slower in 2023 – 2024

And when I discovered that, my wife and I could only sit in a daze. After a while, we both decided to go to sleep to regain strength for the next busy day.

Important turning point

We had invested heavily in the store and rising costs as well as rapidly falling sales were slowly depleting our cash reserves.

But we were much calmer and we decided to find a way to turn the situation around. And do you remember K-Embroidery I mentioned above? We continued to look to them for solutions.

And after an afternoon of sitting together to find a solution, my wife and I realized the main problem that was causing our business to decline. In addition to our failure to fully consider the economic situation, we also realized that our early success had led to complacency, causing me to neglect key areas of our business, e.g. like marketing and customer interaction. We’ve understood that building a loyal customer base requires a strong brand presence and personalized experiences.

Our talk with K-Embroidery went very well
Our talk with K-Embroidery went very well

And by the end of the discussion, we had come up with a comprehensive change plan. We borrowed a sum of money at a relatively low interest rate from a bank to reduce the financial burden. We temporarily closed the store for a period of time to cut losses and focus on online sales, providing a more cost-effective platform.

We were introduced to a famous e-commerce platform in Vietnam, Shopee, and we opened a shop on it (The procedure is quite complicated). In addition, we established additional media accounts on Facebook and TikTok. And we partnered with K-Embroidery for media support, and with their influence and reputation, it was not difficult for us to gain a large number of new followers and gradually gain customers.

We made it!

And after 3 months, then 6 months, from losses plus loans of over $200,000, we were down to losses of less than $50,000! And K-Embroidery advised us that we should reopen the store because Vietnam has Lunar New Year and people’s shopping needs will increase. We listened to them and decided to reopen the store at the same old location in early January 2024.

And as they said, twice as many people visited our store compared to when we first opened in March 2023. And this time, we focused on stronger personalization and launched a number of policies such as giving bows, hair bands, and scrunchies to each baby who walks into the store with their family. It wasn’t much, but this made a strong impression on parents and more people brought their children. Their children were both given gifts and advised on the right size – and they were very satisfied with Little Star 🌟!

People love Little Star!
People love Little Star!

It is now early March, even though the Vietnamese Lunar New Year holiday is over, people still came to the store in large numbers. And combined with sales from Shopee and Facebook and TikTok, we are now breaking even – what a relief!

Lessons learned

Currently, both stores in the US and in Vietnam are still bringing us profits – the US side is more profitable. But this is still a great lesson for us.

And here are some lessons I learned after 1 year of doing business in Vietnam that I don’t want you to make the same mistakes as us:

  1. The sizes of American children’s clothes and Vietnamese children’s clothes are different, so it’s best to find another reputable supplier where you do business.
  2. The second and most important advice: Always carefully research the economic situation and market needs in the country where you plan to do business. You can ask for advice from wholesale suppliers, they will have an understanding of the economic situation, the Vietnamese market and consumer needs.
  3. Final tip: Don’t just focus on in-store business – you should combine your online business (I recommend Shopee) and advertise on social media platforms that you think will attract the most target customers.

And that is our “horrifying” story when doing business in children’s clothing in Vietnam, hope you don’t make our mistakes haha.

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