Last July I posted on Hacker News about an experiment to start a Japanese candy subscription service. I live in Japan, so the idea was to send surprise candy stuffed into envelopes twice a month to subscribers directly from here and charge around $24 / month for that. How did the experiment turn out?

Well, in 2011 during six months we sold over 6000 packs of candy, stuffed into about 3000 envelopes (one fits 1-3 depending on the type of candy). The revenue from these was about $36000 and gross profit was about $6000 (biggest cost is shipping).

How things started

I am from Finland, but this idea started in Thailand. I was on holiday with a friend, partly inspired by the idea of working online while traveling. Things were going really well for me, I was running a MySpace app (yes, they have a platform) that was generating some revenue and working on that for a few hours each day and enjoying the beach and sun the rest of the time.

We didn't really have the time to start something new, but just for fun we were throwing around site / service ideas. There were many, but one thing I wanted to experiment with was some kind of a subscription service. Originally I thought about traveling around the world and keeping a blog of the places I go, then try to support that by offering to send subscribers souvenirs from each place I visit.

First steps

I never started doing exactly that, but that idea morphed into something new after I settled in Japan. As MySpace died I suddenly had free time and a need to start something new. So now was the time to finally try my hand at a subscription service. I needed to find something local here that I could keep sending. Something consumable, so that unnecessary items wouldn't pile up for the recipient. I enjoy trying out local soft drinks and food, but as I couldn't really send those, I chose candy instead.

To get the service started and to be sure someone would actually pay for it, I just emailed a few people asking if they would pay for such a service. A few said they would, so I created PayPal subscription buttons and sent it to them. I did no API integration, just used the "website payments standard" button generators to get a link that would let the interested people start a subscription by just clicking over from the email they received.

For the first few shipments I had only a handful of subscribers. After the subscriptions seemed to be working properly, I posted about the service on Hacker News. That really kickstarted things and resulted in great initial growth. Some bloggers discovered the service through HN, mentioned it on their sites and that fueled the growth even more. Since those were Japan-related blogs, the traffic from them was very targeted and lead to many subscribers.

Really getting going

The subscriber count was now in the hundreds and we were really scrambling to fulfill all of the orders. I enlisted my wife and some friends to help with the packing efforts and together we managed to do it. Preparing a shipment was an undertaking that took all day from morning to late at night. There is a lot of manual labor involved.

After each shipment things were getting better however. I bought some equipment to print out labels automatically, then later figured out further ways to cut down the time spent packing by hours. The amount of packages was felt even at the local post office, which hardly had any international packages sent, then suddenly they were seeing hundreds. We started to clog up their service, so at one point the postal office boss introduced me to a service which picks up the packages directly from home.

So now we no longer had to lug the packages to the post office, which saved a ton of effort and waiting in line. But still we were moving boxes of candy from the supermarket to our 3rd floor apartment without an elevator. Since I had been buying a lot of candy very regularly from the supermarket (I represent about 50% of their candy sales), my relationship with the manager had become good enough that I could ask him for help. He agreed to try if they could just do the packaging inside the supermarket, so that we wouldn't need to move the boxes home.

Since I now knew very well the effort involved in making a package, I knew how much time it would take them to do it for me. We agreed on a flat per package packing fee. The initial trial run went well, and they have been making packages for me ever since. I just show up twice a month there with the address labels and other materials I have prepared and they take care of the rest. Post office picks up the packages directly from the supermarket. This has almost turned into a drop-shipping operation.

Decline and uncertain future

The subscriber count peaked at 300, but started to go down after that. The reason? There is always churn in a subscriber business, and unless you can continue to bring in traffic to make up for the churn, there will be a decline.

In my case I enjoyed an immense boost of high quality initial traffic. Those initial subscribers are now churning out and I haven't yet found a way to make up for the lost customers. The only thing helping is great Google search result positioning for "japanese candy" and "candy japan" that is still bringing in a trickle of good quality traffic. 

That alone has not been enough though. The subscriber count is now at 277 and still slowly declining. I briefly experimented with paid advertising, trying Reddit ads etc., but traffic seems to be just too expensive to buy for a service with such a low profit margin as this (it cost about $60 to "buy a customer" through the channels I tried).

I really hope to find new sources of traffic and to find ways to improve the experience for my existing customers to reduce churn and reverse the trend. The service seems to be something that many people enjoy, and the process of sending the candy is now quite well thought out, so I hope to be able to continue doing this for a long time. 

Thanks for reading. Comments are welcome here or on Hacker News. The website for the service is http://www.candyjapan.com. Email me bemmu@candyjapan.com if you have any questions. 

While doing split testing for Candy Japan I started thinking if there could be a better way to decide which page variation to show for each visit. The way A/B testing is most commonly done is to run a test for a while, showing one variation to half of the users and another variation to the rest, don't look at the results while the test is running, after some pre-decided time stop the test and then start always using the best variation.

After I started buying advertising and actually paying for each visit, it started to interest me whether this is really the best way to do things. The way I started thinking about it was imagining being at the races with two horses, one of which I could enter in the race and my only decision being which to pick for the next round, with a lot of money at stake. In that situation I would very carefully think each time which one to use. I wouldn't just arbitrarily give each a chance at a thousand races and then pick the better one.

This part is about horses

This imaginary horse racing is one where both horses have a predetermined winning ratio, but I can only know it by experimenting. In the beginning I would have no reason to prefer one horse over the other, so I would let both race once and might then have the following situation.

Horse A: Win

Horse B: Win

Hmm... they both won and have a 100% winning ratio. I didn't really learn anything there. Let's let both race once more and add that result to the end.

Horse A: Win, Lose (50% wins)

Horse B: Win, Win (100% wins)

Now even though I don't have a lot of data, surely this means there is a slightly better chance that Horse B would actually be the better choice for all my future horsing needs. I should still give Horse A the benefit of the doubt, it might have just happened to be unlucky. To reflect that, perhaps from now on I will still use Horse A as well, but will start using Horse B a bit more often. 

If I did start using only Horse B from now on, what would need to happen for me to change my mind? Well, if Horse B lost twice in a row, then its winning ratio would also drop to 50% and I would no longer prefer it over Horse A. Now comes the meat of this post.

What is the chance that Horse B would lose twice in a row? If I knew that, then I could start using that to indicate how often I should use that horse. I would need to know what the winning ratios for these horses are to know that, which of course at this point I can't really know, but I can guess based on the horses I have owned in the past. They have all been superstars and have won 50% of the time, so I will suppose that 50% is a good guess for a winning ratio.

For Horse B the chance that it would lose once is then 50% and the chance that it would lose twice is 50% * 50% = 25%. So there is a quarter chance that just with random fluctuation Horse A would catch up. My wild guess: maybe it would make sense to start using Horse A just 25% of the time from now on to reflect the chance it has for catching up? I could then continue adjusting that as more wins and losses come in, always using the losing horse as often as its chance of catching up indicates.

Would this work? Not wanting to think too hard, I did what any programmer would do. I wrote a simulator. 

Split testing split testing engines

At this point I ran out of my allotment for the word "horse" and returned to reality. My simulator isn't about horses, it's about an imaginary website for a startup company. The website gets visits and has a roughly known conversion ratio. The website owner has thought of some split tests, but has to decide when to turn each on or off. For example the site owner could show customer testimonials on the site, which would boost or hurt the conversion ratio by x%. 

In my simulation the initial conversion ratio is 5% and the value of each conversion is $39.90. The time span for my simulation is always 10000 visits, so you might expect the total revenue to be around $19950.

The simulator has modules for each split testing algorithm, which are used to decide which split tests to use for each visits. They don't have access to any information that I wouldn't have in reality, they just get a visit and return which split tests to use. The main loop of the sim then decides whether this time there happened to be a conversion or not.

At first I wanted to just try the simplest possible case as a sanity check: not using any of the split tests at all. I ran the sim 5000 times and took the average revenue over all of the runs. The result was $19939.70, so things seemed to be working as expected. I also tried just serving with random split tests turned on or off, and that also performed similarly.

Next I wanted to try the algo I had been using up to this point. Run the split test for a while, then decide the winner and only use that one in the future. Running the split tests for 500 visits and then choosing the better one resulted in avg. revenue of $23358.48 (I also tried running the tests for 1000 or 2000 visits before deciding, but those did not perform as well).

Horse.

I saved the most interesting test for last. How would my horse algo do? The average after 5000 runs was... $24383.06. Because the bad A/B tests were abandoned earlier and the good ones were used more often earlier, in this little simulated world this way of running tests made an avg. of $1024.58 more revenue.

If you would like to try running it yourself, you can find the Python code for the sim here.

A year ago I moved to Japan. I am working from home, hacking full time on my projects (Candy Japan, Fan of the Week and some future ones). Many people have been curious about what it is like to live here, some having the dream of living in Japan themselves one day. The #1 question I get is "what does it cost?". To answer that I have maintained a spreadsheet with an estimate of every expense I could think of, which I have continued to adjust over the year.

My current estimate for all of my personal expenses here is about 1400 eur ($1870) / month. I live with my wife in a small city called Tokushima, so things tend to be a bit cheaper here compared to Tokyo. All of these expenses are just what I pay. For now we are splitting everything, so as I get into the details, keep in mind these costs are just what I personally pay.

Before moving here I was hoping to save a bit compared to Finland, but in the end because of how expensive the yen has gotten recently, the cost ended up being pretty similar. The change in exchange rate has really been crazy, yen getting 60% more expensive compared to 2008.

Our place

My part of the rent is 360 eur ($480) / month. The rent we are paying here gets us a 70 square meter (750 square feet) place with shiny new floors, a tatami mat room and a shower that talks. For the properties on offer here, this was on the nicer side. For us this is quite spacious, even a bit more than we need, so sometimes we accept couchsurfers.

Back as an exchange student when I lived 30 minutes away from central Tokyo the rent was about the same, but for a cockroach-infested place with half as much space. We also had a singing neighbor and air conditioning that didn't really work. 

Other housing related expenses are gas for cooking, electricity mostly for running air conditioning, water and home insurance. These together are about 73 euro ($98).

Oh yeah, we did have to pay several months of extra "key money" to even get this apartment. I recall we paid something in the order of 2000 eur initially to move in. I included that in the monthly estimate too, figuring we might move every 3 years and end up paying yet another chunk of key money to some other landlord. Theoretically we could get some back when we move out, but based on our Tokyo experience I don't really believe we will. 

Travel

Fuel costs 1.36 eur / liter which I suppose would be $6.88 / gallon.

For the longest time I tried to use only public transport, but many of the interesting places just cannot be reached without a car here. So eventually I relented and shelled some 6000 euro ($8000) on a "kei"-type small car. If a car meets the kei definition, you get certain tax breaks. Basically the engine has to be 660cc and dimensions need to be under 1.48 x 3.4 meters (4.9 x 11.2 ft). 

Many streets are extremely narrow here and so far we have never regretted this choice. I still use public transport when available. 

Flying home to Finland for Christmas is becoming a bigger expense than I had thought at first. I had never considered that buying a return ticket from Japan to Finland can cost almost twice as much as a return ticket from Finland to Japan. Now I am looking at possibly having to pay 1100 eur ($1460) for this flight. Had I realized this I would have just kept buying return tickets from Finland and fly twice as often, but I already made the mistake of getting a one-way ticket.

Food

For food I have not kept really close tabs, but my supermarket bill tends to come to about 1000 yen per day, so that would be about 265 euro ($350) per month. This could be lowered if I didn't have a taste for comfort foods. Müesli / cereals are particularly expensive, costing twice as much as I was used to. 

For eating out I spend about 150 eur ($200). Lunch food like ramen noodles or curry tend to cost around 6 eur ($8) a meal. Most splurgy meal I have ever had here was 40 eur ($53). It was a multi-course dinner in the most central hotel on the top floor. Cheapest thing is Udon noodles, 3.5 eur ($4.6) for a delicious (but not very filling) lunch, pictured below.

Communications

For our Internet connection we have fiber to the home. I pay the whole cost which is 46 eur ($62), as I am the one mostly using it.

I also pay monthly for some services like Dropbox and tend to spend money on Steam. My phone bill is about 15 eur ($20). It cost about 80 eur ($106) to open the contract and get the cheapest available Docomo phone initially.

Health

Three months ago I started a Japanese candy subscription service called Candy Japan. It is growing well from word of mouth alone, but I was curious to see if it could grow even more through ads. My friend Nick who runs the site Meme Stickers suggested experimenting with Reddit as a possible source of traffic that could convert for me. In this post I will show how I set up ads there and what the results were.

Reddit Self-Serve Ads

The Reddit self-serve ad system is a bit different from Google AdSense. Instead of bidding for clicks or conversions, you decide on a bid for a certain dayspan in the future. If there happen to be multiple bidders on those days, you get your share of ad views based on how much you bid. There is a minimum bid which depends on whether you target all of Reddit ($20/day) or a certain subreddit ($30/day) to show your ads to people with specific interests.

I wanted to target the "snackexchange" and "japan" subreddits. The minimum bid is $30 per day for subreddit targeting, which seemed very high to me considering that the two subreddits I wanted to experiment with were quite small. Still I decided to go ahead as discovering a profitable ad channel could be worth risking some money on (another part of me fears that the whole of online advertising relies on naive people like me).

Setting up

I went ahead with setting up the ads. After confirming my email address it was straightforward. Here is a screenshot of basically the only screen you need to interact with when setting up the ads.

I did run into a problem though, which was that I am a Finnish guy living in Japan and Reddit only allows paying with a US / UK / Canadian credit card. I went to complain about this on the IRC channel #startups on Freenode. User EvRide graciously stepped up to help me. I sent him the money over PayPal and he then set up the ads for me. Thanks a lot EvRide!

Results

The ads cost me $240 to run. I had 63148 pageviews, 419 clicks and 4 subscriptions = $60 / gained customer.

The cost per conversion was too high to continue advertising on Reddit for the current service. I need to improve the ad or get my landing page to convert better before another attempt. Still, it was encouraging that some customers did find the service through Reddit and it would be an interesting channel if the minimum bids were lifted and international credit cards were accepted.

More to read about Reddit ads

http://www.winningtheweb.com/reddit-homepage-advertising-results.php

http://unethicalblogger.com/2010/11/08/experimenting-with-reddits-self-serve-ads.html

http://swappa.blogspot.com/2011/01/reddit-advertising-results-first.html

http://blog.kissmetrics.com/reddit-marketing-guide/

http://www.gabrielweinberg.com/blog/2010/03/my-duck-duck-go-reddit-ad-by-the-numbers.html

As you may already know, Candy Japan is a subscription service for random Japanese sweets that we run from our living room in Tokushima, Japan. This is a brief report and numbers for August 2011.

Growth

The real growth line is the middle one, it shows the number of subscriptions that were active each day during the month. The top blue line is how many subscriptions had been started and the red line is the number of cancelled subscriptions.

Although it makes this chart a bit harder to look at, I decided to include the cancellations here to make sure that I have an eye on members churning out. If the red and blue lines ever meet, it would mean I had lost all of my subscribers. So far things are looking OK, as the majority of cancellations are because people just wanted to try the service for a month, not because they were disappointed with it.

Unlike Kreci's reports, I'm not mentioning straight revenue numbers here. I feel that would be quite misleading, as it would look much higher than reality because many members have already paid for things that I haven't sent them yet. But my estimated profit per subscriber is 3 euro / month, so you can figure it out from there.

Now onto stuff I learned this month.

Canadians are super nice, but their customs are strict

When you ship a package and there is something wrong with the address or labeling, how serious is it? That package will need to be re-shipped. If your margin is say 20%, that means you need to sell 4 items to get back to where you were supposed to be in terms of profit, just because you made one mistake.

And that brings me to another thing I learned, that when you ship things to Canada, the return address cannot be only in Japanese or they just send them back. There are now members from all around the world, including Saudi Arabia, but no other country has been this strict about the sender address. Positively, another thing I learned is that Canadians are incredibly forgiving and understanding. Everyone I emailed about it forgave me for my mistake.

To make sure everyone got what they paid for, I reshipped the past two shipments to all 18 Canadian members.

Paperwork can be automated

But only if you live in a big city. Every single package needs a customs declaration sticker attached to it, along with my signature, date and description of contents. It gets a bit dull after you have written the same thing 300 times. I applied for permission to print the form directly on the envelope. Denied. Apparently they can only accept such pre-printed forms in Osaka or Tokyo.

Editing videos is easy

But doing voiceovers is hard when you are not a native speaker. We shipped candy which resembled the Japanese food "takoyaki", so we made a video to explain what takoyaki is.

Making the linked video only took about 3 hours to shoot and edit, which is a bit more work but comparable to writing a blog post like this. Still these videos are a nice way to explain to the members what the shipped candy is about. Since some assembly is required in many of them, without a video it would just be too hard to explain.

Although the videos are getting some views, those do not seem to be bringing new converting traffic to the website yet.

Advertising is hard

Getting mentioned on blogs is the best source of traffic I know of, but not very dependable. In order to find more predictable sources of traffic, I looked into advertising. Currently I am trying StumbleUpon, Reddit Self-Serve Ads, AdWords, Facebook Ads and Project Wonderful. So far none of them are turning visitors into customers well enough to make it clear that they would be worth continuing. 

Reddit looks promising and will be the topic of my next post. See you then and as always I welcome all comments.

I recently listed my first item just to see how difficult the process is. About 2 hours of learning about the service and 2 weeks of waiting for shipping & receiving later, I have my test product up.

You probably know about Amazon Marketplace, which is a place for individuals to list their used or new copies of Amazon items for sale. But did you know that listing an item for sale on the "main side" of Amazon is not that difficult either, even if that product is not even listed by Amazon yet? This way when a user presses the big shiny "add to cart" button on Amazon, you could to be the default provider of that item.

Two paths to Amazon

What I learned is that you have two options. You can either let Amazon accept the orders and then notify you with the buyer's address for you to ship to when a sale is made, or you can let Amazon handle the shipping as well, using a service is called "Fulfillment by Amazon" or FBA.

If you have ever handled shipping small amounts of items, you can imagine how liberating FBA could be. You could send thousands of products for Amazon to store and be lying on a beach while your items are bought and shipped, without you having to do anything more. From your point of view, this virtualizes your physical inventory. They even have an API so you can dispatch items programmatically. It might not even be that different in cost, as Amazon has massive scale benefits. Lured by this idea, I decided to investigate using FBA.

Signing up

To sign up I only needed to provide my credit card number (there are some handling and storage fees), address and confirm my account by entering a pin code over an automated phone system. After that I was surprised to already find myself in the "seller central" where all the action involving listing products and shipping happens. To actually receive my proceeds, I will need a US bank account number, but I decided to worry about that later if I actually start making some sales.

Barcodes

One big hurdle for many might be that the products need to have a specific kind of barcode called an EAN / UPC code. If you make small amounts of items yourself, for example I have a friend who makes Meme Stickers, this might be a show stopper for him as getting the code might cost more than the profit he can make. Such a code seems to cost $750 + §150 / year to get several batches of your own codes, or $100 to buy just a single code for one product.

Of course you would need a way to print and attach these barcodes too. However if you are reselling a product made by a bigger manufacturer like I am doing, they should already have such a barcode. Note I am not absolutely 100% sure that no item could be listed without such a code, but did not investigate fully as my item happened to have that lucky code already printed on it.

Sending your items to Amazon

To get your items into FBA, you create a shipment in seller central. You need to list each item that will be inside the shipment and then print a shipping label and a packing slip for the boxes you send so that Amazon can identify the items when they receive them. Additionally is some cases even each item can require a label, unless it belongs to the mysterious class of items called stickerless commingled, in which case they can be put into the box without any labels.

Completing these steps actually did not take long, and soon I had my item ready for sending to Amazon. I sent my item on Aug 10th. As I was sending from Japan, the shipping itself took a bit over a week. After that I started getting notification emails from Amazon. The first one to break the tension was August 18th at 8:36 AM and had the subject "FBA Inbound Shipment Checked-in". I thought that now the item would be up for sale, but it took a few more days of waiting before that actually happened. The next event was same day at 3:32 PM "FBA Inbound Shipment Receiving".

On Aug 19th 1:32 AM I got the message "FBA Inbound Shipment Received In-Full". I thought this would be the end, but checking in seller central I could see my item was now in a "reserved" state. Reading their help I found this can mean many things, such as a customer holding on to the item as their order is about to go through, but in my case it probably meant that Amazon was doing further checks on my item.

Arrival at promised land

Then finally, on Aug 22nd I could see that my item was now up for sale and listed as taking 0.02 cubic feet of space in their shipping center. Now I am waiting to see what happens when someone actually purchases it and already making plans to start using this as my way to export more things from Japan.

Thanks for reading and please comment if you have any of your own experiences to share!

 

As you might already know, I run a service called Candy Japan which mails subscribers Japanese sweets twice a month. It has been mentioned in several blogs and traffic from those blogs has converted into paying customers at roughly 1% conversion rate. I suspected that blog mentions would probably work better than ads, but wanted to find out for sure.

Project Wonderful

Wanting to try something new instead of the same old AdSense, I gave Project Wonderful a try. It is an ad network popular especially among web comic authors and is more transparent in pricing than most. Instead of paying per click or per conversion, you pay "per day". What this means is that you can buy an ad slot on a site and no other ads are shown there while you hold it.

There is an auction system in place to decide the price of each slot. The prices vary from zero to almost a hundred dollars per day. You can search for slots based on several criteria. I decided to go with a mix of sites that had "japan" in the tags and then just some really popular ones to see if my service would have any appeal to a wider audience.

To get started I transferred money to the ad network and created several ads since almost all sites required a differently sized box. 

Tracking conversions by channel

Initially I wanted to use Google Analytics conversion tracking, but found that many people do not click the "return to merchant" link after buying from PayPal, causing many conversions to go unreported. I discovered that rolling your own system is not at all difficult.

To know which ad resulted in a conversion, I set a cookie when a user comes in after clicking an ad. If the user just came in from an ad or has such a cookie, I pass it to PayPal so I can associate the conversion with that ad when I get an instant payment notification.

I learned from a talk given by Daniel James that when buying ads, you should not just track them as one lump but instead split by source of traffic. Each such source is called a "channel". In hindsight this is very obvious. Without knowing which channels work and which do not, you would not know what to keep doing and what to stop.

The results

Stop everything.

The rightmost column is named "visits", but really means landing page views. The "convs" column is the conversions. Leftmost column indicates the source of the traffic. For example c_mspaint refers to MS Paint Adventures.

I realized these sites would probably not convert well, but over 1000 visits and 0 conversions is still disappointing. Granted MS Paint Adventures and Pokéfarm are probably terribly converting sites, but still over 3 million ad impressions with 1000 people deciding that the service is interesting enough to click on, I would expect a conversion.

Conclusion

These ads only cost me $50 to run and might have been profitable if I had just two people sign up and remain signed up for a full year. There are thousands of possible traffic channels. This experiment really only tells me that these particular sites do not convert well for me.

My Japanese candy subscription service Candy Japan has been steadily growing. While the club is still small and sending the envelopes to subscribers does not take more than 2 days per month, it is taking a lot of mental space. I have a bit of anxiety about how to take it forward.

I had been thinking about starting a gift club already for some time. My first spreadsheet with "back of the envelope" -style calculations is from 2008. Back then the idea was "A gift-of-the-month subscription service delivering neatly packaged items from Asia, with a clearly written description of the significance of each month's item".

Back then I was coasting on my MySpace app which was doing well, so I didn't actually start working on the club until the app platform completely collapsed around end of last year, right after I had moved from Finland to Japan again. It was the right time to try something with Japanese products, as I have easy access to them now. 

I had some doubts about going into physical goods again.

There are many repetitive tasks and annoying details such as VAT / customs paperwork to deal with that you cannot really assign to anyone else until you get bigger volume. With my previous online store dealing with Japanese books I was never able to achieve that volume. Plateauing at a just below life sustaining profit was very frustrating. It took a long time to recognize that the bookstore was going nowhere and shutting it down, which turned out to be a great decision as it freed up my time to write the MySpace app, which did vastly better.

This time things look brighter. I already have almost the same amount of customers in two months as I had for the bookstore after two years.

What has been happening lately with the club then, is it all roses? Not completely, here are some things that are causing me anxiety.

1) I worry about getting shut down by PayPal because of the lack of package tracking

PayPal requires you to keep documentation of every package sent. At some random point they can shut you down and then demand to see this documentation. Am I collecting this tracking information in anticipation then? No.

Why not?

To get this tracking information, I would need to pay Japan Post $5 / package. Since my profit per package is only $2, this is impossible. That $5 does not even buy tracking that works in all countries. For assured tracking, the next level is sending by EMS which costs about $20, completely impossible with the current size of envelopes.

2) Shipping directly from Japan feels wrong

I have some curiosity about setting up shipping better to make sure that items arrive as they should. Currently I have only the feedback of subscribers to go by to discover what really happened with the packages I sent. So far I have not received any negative comments and the feedback I did receive were confirmations that packages had arrived safely and intact.

What I dream of is having local hubs where I could send larger packages, with customs cleared.

At this point in time the extra costs from this will almost certainly not be worth it, but out of curiosity I have been looking into it. It seems like a useful thing to know in case I want to start exporting something else too.

So the idea would be to first export the candy to US, then send it forward from there. Amazon now provides a service called Fulfillment by Amazon. You send Amazon your items, they put it in their warehouse and you can then later dispatch it using API calls. Seems great.

The downside is that package branding will be Amazon branding and customers might feel odd about subscribing to an exclusive Japanese club, only to get packages from Amazon instead. But really that would be better for everyone and seems like "the right way" to do things. As an additional bonus, I could list my items for sale on Amazon.com, too. 

I have sent FBA my first test item to see if I can get it to appear in their system.

3) Worry about trouble with FDA because of lack of direct manufacturer connection

While USA is less than half of my subscribers, playing nice with Food & Drug Administration still concerns me. As it is I am sending the envelopes as "gift candy assortments". There is an exception in FDA rules which says that an assorted gift package from an individual to another individual should be let into the country without problems.

If I do not indicate that it is a "gift", then I have to show that the food is safe for consumption in the US. Of course it is, as it is factory sealed and made by one of the largest candy manufacturers in Japan, but I still need to prove that to be true.

I can agree with the idea of checks like these, as they keep food safe and give consumers confidence that they can trust the food they buy. All I need to comply is to send a prior notice to the FDA upon importing food to the US and include the "food facility code" of the factory that made the food. But this is where I am stuck. These facility codes are not available online. To start with I wanted to send candy manufactured by a big company called Meiji. I know this food is safe, as Amazon is already selling Meiji products in the US.

But where can I find the facility code? There is no online directory of food factory FDA codes. I have no personal contacts at Meiji. I have twice attempted to contact them through their web form. Both times I did get a reply, which was "sorry, we can't help you" (「アメリカ食品医薬品局の登録番号につきましてはご回答できませんことをお詫び申し上げます」). 

On the FDA form it seems that this code is optional, but reading other parts of their site it seems that not having this code is a no-go. I have sent email to them to ask if they have any suggestions on what to do. One thing I could do to easily solve this is to only send candy which has already been imported to the US by someone else, if I could find suitable partners. My volume might be too low now to get anyone seriously interested, though.

Until next time

Well, these are the things I have been thinking a lot about lately. To end on a positive note, I was able to negotiate around a 7% discount with the local supermarket for buying candy in bulk. I also managed to find someone to print envelopes for me that already have my address on them, which saves me time and money on address labels. Thanks for reading and please do share if you have ideas on how to solve my anxiety points for Candy Japan.

This is just a small update to show that Candy Japan is alive and well. There are now 180 subscribers. My ramen-profitability line of 300 subscribers is fast approaching.

In my previous posts I revealed the initial price I came up with, 16.50 EUR. That is about 23.95 USD / month for this club. For this price the subscribers get two envelopes of candy each month. Why this price?

Of course I realize that my costs have almost nothing at all to do with what the right price is, but just to test the viability of the idea I settled on starting with cost plus pricing.

It is based on the following estimated costs:

• 6.84 EUR for shipping, 400 yen twice a month.
• 3.42 EUR for the actual candy. Yes, it disappoints me that this is not a larger part. But on the other hand more spent on this would mean it could not fit in the envelopes.
• 0.91 EUR for PayPal fee.
• 0.80 EUR for packaging materials, including some leeway to allow for fancier custom packages in the future.
• 0.74 EUR for hiring part-time help to make the packages. I guessed it would take 2 minutes to create each bi-monthly package. It would cost about this much to hire a starving student at a typical 1000 JPY / hour to do it.
• 0.40 EUR similarly for the time spent responding to customer support emails.

Total estimated costs 13.11 EUR / month. This leaves a pre-tax profit of 3.39 EUR / month per subscriber if I calculate it Groupon-style, totally ignoring marketing costs. Later on I plan on starting to test different price points. I already started A/B testing the landing page for layout modifications, the price will be a similar test.

The marketing costs are nebulous. They might turn out to eat up all the profit.

I am not tracking this accurately yet, but with 180 conversions from 15800 visits the conversion rate is about 1.13%. All of this traffic is from various blogs that already explain the idea of the club, so probably most of the people visiting were already considering to buy. This means some other channels might do a lot worse.

As a starting point with 88 visits required for a conversion, at 0.20 cents per click I could get a customer for 17.60 euro. If they subscribe for at least 6 months I would be at break-even. This is pure fiction of course since I have no idea what the conversion rate for AdWords or other paid channels would be, what a click would end up costing or even what my average subscription length will be.

It might be that reaching out to bloggers to cover the service is a better way to grow, but can that be sustained over a long time?

Candy Japan is a subscription service for Japanese sweets. In this blog I have been writing openly about the business side of it.

I thought the subscriber growth was nice the last time I posted, but now it is exceeding my expectations. Some bloggers graciously mentioned the service and the story is spreading from blog to blog. Here is the current chart of subscribers.

Where are all these subscribers coming from?

That big spike in the end is mostly thanks to crackajack.de and The Daily What. More and more blogs are mentioning the site and there are also a lot of people sharing it on Facebook. In my previous post I annotated the mentions I got before. Once you get the process going, it is not necessary to contact each author separately, they will read each other's publications and report the same story. I have had this experience before and have heard others like James Hong of HOTorNOT report on this spreading pattern.

As the story about the club is moving directly between blogs, it has even mutated a bit. Some stories are saying that I have moved from Japan, which is not true, I still live in Tokushima. Not that it matters, but it is interesting to think what happens to a message as it is passed on and slightly modified each time.

So far things have proceeded pretty smoothly. I have reports from several subscribers that their packages have arrived intact and without problems. I did have a small problem with an address being printed wrong, because my script was ignoring the second address line. I made that mistake up to the subscriber by sending them a bigger package of candy using a tracked quick shipping method (EMS) as an apology.

Will I be able to handle these orders? Yes, I believe I would be able to handle almost any amount, as I have reserved a sufficient margin to pay for packing help if necessary. It took only 2 hours to mail the ~50 orders I sent out last time. This time it looks like I will be sending out perhaps 150, which should be possible to do in one day even just by myself. To make the task a bit easier, I ordered 1000 pre-printed envelopes from a company in Osaka.

I am incredibly grateful to everyone who has mentioned the service on their sites and at the same time curious to see what happens next. Will I get unlucky and the story will die and be forgotten before being passed on to the next place, or will it continue to spread even further?