Expanding internationally is a big decision for any type of company, coming to North America can be a big challenge for most small and medium businesses. Lipsio Carvalho, CEO of Beatnik & Sons identified an opportunity to go for this big step, along with his partner in Brazil, Lipsio took the decision to expand business starting in Canada and he got it right! after starting a process in September 2018 in Toronto, Beatnik & Sons finally launched the North American company in spring this year.
Currently Beatnik & Sons is not just a company growing in Canada and USA, they are part of the most important program for fashion companies in Canada (Fashion Zone at Ryerson University) and also, recently Beatnik & Sons was accepted as part of the Startup Visa Program at LatAm Startups.
We’re presenting a special interview with Lipsio Carvalho, CEO at Beatnik & Sons.
How was Beatnik & Sons created?
My partner and I, we were both advertising creatives, working at agencies as directors and designers. We were trying to find a way that would combine our love for travelling and something creative. Suddenly, we found out that designing backpacks would do both. We were able to find someone who could manufacture the backpacks. We then designed the first backpack and put it online to sell. Suddenly, we had more and more orders and the backpacks started to sell. Up to this point, it was just a hobby; a job on the side, just to say that we own a fashion brand, and that was the main intention. Things started to escalate fast in 2016. I used to spend the weekends with my wife, putting backpacks in boxes and bringing them with my car to the post office to be delivered. All the inventory we had was in the guest room in my condo. It was fun at the beginning. However, by Christmas of 2016, we received 50 orders of backpacks in a week! My wife and I got into this huge fight because it was not funny anymore – our backs and knees were hurting from boxing all the backpacks. We knew that we had to do something about this situation: Either we slow down, or actually start to pay attention to this business. Slowly, we dedicated more time to Beatnik & Sons, and taking this company’s potential more seriously. We started selling in June 2016, and was just incorporated in Brazil on January 2017. It took 6 months of selling to really believe in the company and the idea of it. Fast forward 3 years later, we sold more than 9,000 backpacks online in Brazil, receiving more than $1.2 million dollars in revenue, was invited to LatAm Startups’ accelerator program, now accepted into the Startup Visa Program, as well as the Ryerson University’s Fashion Zone.
Congratulations on being accepted into the Ryerson University’s Fashion Zone! Can you tell me more about the program?
The program started with a strict selection process. First off, we had to submit a business plan. Our company must already be incorporated in Canada, and have a solid immigration and financial status in Canada as well. It was then they consider to invite you for a screening. I had to pitch my company to advisors and directors of the program for 5 minutes, with a 30-minute question and answer session, which felt much longer than that! They asked many questions about traction, production, etc.… It was very tough! About 2 weeks later, I received the green light that I was part of the Fashion Zone family, as they call it. I was super excited when I saw the email, and I started the program earlier this month.
There are a few requirements we have to follow in the program. For example, you are strongly recommended to be the Fashion Zone location at least 20 hours per week. This is to make sure that the companies in their program are in line with their expectations. When they can see that the company is making progress, they will keep throwing new things at you for you to accelerate faster, and they can only observe this when we are actually present. It is a mature relationship between the Fashion Zone and the companies – They provide us with everything in the infrastructure aspect, such as 3D prototype lab, as well as their vast connections, coaches, public relations support an advice for our business. They also perform checkups every 15 days for the milestones set for our companies. Since we are past the prototype stage, our current milestone is to sell. I think that the lessons the company can learn from sales are very important, and we will react depending on how the market reacts to our products.
Why did you decide to expand to Canada?
Our first idea in early 2017 was to expand into the United States. We planned to open a shop in Miami and start distribution from there. We started doing some research and found out that the US market by itself, is almost 20 times bigger than the Canadian market, and almost 20x bigger than the Brazilian one. Our products are handcrafted, hence if business goes well in the US, we knew that we would have never be able to keep up with the demand there. Therefore, we backed out of US because of the market size, as this would bring trouble to our company.
We have always had the intention for Beatnik & Sons to go global. Since the US market will not work for us, we started looking into other markets. It was then that we found the Canadian backpack market – a market which is almost the same size as the Brazilian one, and also a market size that we were already used to. It will be easier to make a transition: Expand into Canada, understand and dominate the Canadian market, and cross the border and expanding into US then. We decided to use Canada as the first step in order to conquer the North American market since Canada is a much suitable market size for our business. Even though we have only launched in Canada, every four backpack we sell, three are going to the US.
Even though the Brazilian market and the Canadian market are similar in market size, what are their differences?
Market in Canada is very different. Canadians travel much more than Brazilians, and therefore Canadians use much more backpacks than Brazilians. Therefore, we think that the Canadian market is much more suitable to our brand. Our company is in a different stage of maturity here compared to our company in Brazil. If we are comparing the numbers, in Canada, we are selling 1 backpack every other day, while in Brazil we sell 30 backpacks in a single day. We are a very known, established brand in Brazil, which makes things easier. However, we really believe that since Canadians travel so much, they are using much more backpacks, and hence we will get a lot of traction here. We can see that in the global aspect of the company, Canada and US will represent more than half of our revenue in the future, and we are expecting this to happen by the end of next year.
The competition is probably the biggest difference between the markets. In Brazil, we do not have one single brand in the market dominating the market share. We have tons of brands all over the place, but none of them are established as “The Brazilian Backpack”, or “The Best Backpack”. This is where we come in; we want to position ourselves as “The Backpack” for us to grow in Brazil.
Meanwhile in Canada, there are lots of well-established brands, plenty of products with good design and good quality. This is why we are betting on, other than the quality of backpacks and their designs, the social impact that it can generate on our sustainable chain of manufacturing as well as the affordable price entry level. We are giving you the best quality leather, handcrafted materials at overseas manufacturing prices. This is the combination we are putting together to be competitive in this market.
What are your current plans?
What are your current plans?
We want to make more traction and just sell more backpacks. Fashion Zone will help us to establish connections but at the end of the day, it comes down to sales, and we have to do all the weightlifting ourselves. We are having double the amount of sales here than our first month in Brazil, so it is definitely looking positive for the Canadian market.
We are performing exceptionally well in Brazil. We have to be really strategic and cautious with the transitions from the Brazilian market to the Canadian market, and putting energy into the Canadian market without harming our operations in Brazil as it is still our main source of income. We would love to take off here in Canada as fast as we can and conquer the North American market.