Hobbii was recently confirmed as the fastest-growing company in Denmark during the last four years. Since launching in 2015, the business has enjoyed consistent growth, doubling its gross profit in 2018, and expanding its workforce to 140 people. Its operations include two warehouses, a physical store and a market-leading B2C ecommerce enterprise with dedicated sales and marketing teams selling to 100 countries worldwide.
The product? …Yarn.
We caught up with Co-Founder and CEO, Jens Reimer Olesen, who explained how the business identified a gap in this unlikely market and developed a concept which met the needs of a growing yet overlooked consumer base.
The team behind Hobbii have enjoyed previous successes, including founding Graduateland, a career portal with one million users across 200 countries; and Ontame, a plug-and-play analytics suite for recruiters. A company targeting knitting and crocheting enthusiasts, selling physical goods rather than “bits and bytes,” couldn’t be further from their knowledge and experience – so, how did Hobbii come to be? Jens explains:
“I’d love to say it’s because we all enjoyed knitting in our spare time, but that wasn’t the case. Through our affiliate marketing business, Starfly Media, we’d previously sold subscriptions for a craft magazine. Advertising data confirmed a high volume of traffic and good engagement via social media for this publication. We considered partnering with other craft magazines, but with an integrated product offering e.g. yarn. It soon became clear that the market for selling yarn itself had lots of potential.
Jens et al.'s previous business ventures were based on determining what’s popular with consumers and then identifying potential gaps in the marketplace. Through researching the yarn industry, he says, it was obvious that there was a large and dynamic community of consumers passionate about quality and always seeking new and better products. Their needs, however, were largely served by a fragmented market consisting of several small shops, with no ambition to expand.
With very few players having managed to scale a business, it appeared a perfect prospect for a new endeavour. A trial period was necessary, though, and the team started by buying one pallet of yarn and selling it – then two, then four, then eight. The stock sold very quickly, says Jens. And more customers led to higher transaction volumes and better prices for goods and shipping.
“Hobbii is one of the first companies to identify the ‘race to scale’ opportunity in this sector,” he highlighted. “Larger industries like fashion have operated this way for years; we were lucky to spot the potential when we did and ambitious enough to expand the business.”
Foresight and ambition have certainly led to enormous success. And two other factors, in particular, have played a critical role in Hobbii’s rapid growth journey.
First, the operation is built around trading own-brand products. Most of Hobbii’s yarn is produced in Italy, India and Turkey and shipped to Denmark. There it's stored, packed and sent to the end customers. By investing in high-quality manufacturing and materials and cultivating a strong brand, the business has differentiated itself from retailers selling third party yarn. It also enjoys better margins.
The second factor has been Hobbii’s eagerness to launch internationally. Because of previous experience, the team had a competitive edge within online marketing and IT and used these skills to achieve the customer-reach they desired. “Online marketing is 80% the same for any type of product,” says Jens. And he explained how entering lots of different markets in a short space of time enabled the business to invest in product development, build cost-effective infrastructure and reduce prices.
Although Hobbii’s Founders had expanded companies overseas before and managed large customer databases, transaction volumes and revenues, Jens admitted the fulfilment and warehousing aspect of selling physical goods was a major departure, which caused “lots headaches” at first. “We’ve persevered, though, he says. “And we’re in a position where we can say we’ve perfected that aspect of the business.”
He added: “Hobbii now buys 100 pallets of yarn per day and has customers across Europe, the US and Canada, Australia, South Africa, Chile and Brazil. We aim to make the best yarn at affordable prices. By introducing lots of high-quality own-brand products across multiple territories, we’ve achieved scale fast.”
Customer engagement has also played a major role in Hobbii’s journey so far. Jens notes how knowing “absolutely nothing” about the market was advantageous, as it meant the business started by asking “obvious questions” which those already operating in the sector weren’t asking. This enabled the team to understand factors that are important to people when buying yarn, as well as what other accessories and services they could offer those interested in the world of knitting.
The engagement piece is clearly important within the industry and Hobbii continues to leverage digital marketing expertise to embed conversations and customer interaction within its day-to-day operations. Google, Facebook and Instagram remain its largest channels, and through a combination of paid advertising as well as content, affiliate and influencer marketing, it has gained widespread brand recognition in key territories.
Only 20% of Hobbii’s revenue comes from Denmark, Jens revealed, and the company’s biggest markets are Sweden, Germany and the USA. Thirteen countries overall have dedicated marketing support and most also have local web-stores with 24/7 customer service. Hobbii’s marketing team is currently 27 people – “crazy for a business that sells yarn” – and Jens admits there’s enough work to justify doubling its size, which they may do as the business goes from strength to strength.
So, where is future growth going to come from?
There are two elements to this, according to Jens. First, customer experience is a major focus moving forward. Although Hobbii has used social media to establish a lively and active community of knitting and crocheting enthusiasts, some of its large international competitors benefit from exclusive customer access through bespoke community platforms. Ravelry.com, in particular, is a leader in this respect and Hobbii intends to match its success by developing a community platform of its own: “We intend to replicate the customer activity we get via Facebook and Instagram where people share ideas, experiences and creations, via our own exclusive web-portal.”
The other factor which will facilitate Hobbii’s future success is complimenting its ecommerce operation with traditional brick and mortar assets. And rather than it being a brand building exercise, Jens highlighted how this where the real opportunity in the sector exists, as 75% of all yarn is still bought in physical stores.
Hobbii started rolling out its high-street retail strategy in August 2019, when the business opened its first store in Copenhagen 1,500 customers visited on opening day, with people travelling from all over Denmark and even Holland for the occasion. The queue outside was 400 meters long, says Jens, and with 20 employees manning tills and helping customers sample products, the atmosphere within the 350 square metre space could only be described as “yarn mania” for much of the day.
“Together Hobbii and its customers are building an omnichannel yarn universe,” says Jens. The business has already experienced increased online sales for particular product lines after people have held yarns in store. And Jens expects the experience of visiting a store and being able to touch products and see colours more vividly will also attract new customers, improve re-purchase rates from existing customers, and boost sales for higher-quality yarns moving forward.
Hobbii’s decision to open a store was also driven by customer demand for a permanent location where the business could host regular knitting and crocheting events. And while these events are a great way to bring the vibrancy of its online community to life, Jens notes how they’re another valuable opportunity to listen to customer needs: “At events, our customers discuss the colours and quality of our yarn and make suggestions for pattern guides they would like to see – we’re always eager to act on these suggestions and tailor products to meet customer expectations.”
Further store openings are planned across Denmark during the next 12 months. And Hobbii is considering launching shops in Germany and even the USA too, where there is lots of untapped potential for growth. “Until this year, Hobbii has only ever tried to capture 25% of the yarn market,” says Jens. “Within three years, we anticipate our retail operation to be equal in size to the online business.”
The recent appointment of former Maersk and Kopenhagen Fur executive, Jeppe Kallesøe, as COO brings necessary supply chain, warehousing and fulfilment expertise to Hobbii as the business expands its retail operation. While introducing processes are a “ necessary evil” to ensure the business remains competitive, Jens is certain that Hobbii will maintain the entrepreneurial flair which has brought it so much success.
Culture is about setting the right example, he says. Two employees are now focused on people initiatives. And with the Founders all actively involved in “driving culture from the top down” he’s certain Hobbii is the perfect working environment for entrepreneurial people to accomplish great things.
Jens et. al believe a key aspect of being entrepreneurial is trying new things and always remaining at the forefront of product development, technology and channels. When a business experiences extreme growth, he argues, it enters a period of managed chaos. To thrive in that kind of environment, it requires people who are always finding better and smarter ways to meet and exceed their objectives. In Jens’s words:
“A Hobbii person is creative, curious, open-minded and ambitious. They thrive on autonomy and responsibility, are comfortable calling the shots themselves and having a strong intuition of how to solve problems. We’ve recently been confirmed as the fastest-growing company in Denmark over the last four years – that’s only possible because of the brilliant people we have here and a culture that facilitates fast decision making at all levels.”
As the business enters its fifth year of trading, Jens shared his desire to see Hobbii become the world’s largest direct to consumer yarn brand:
“We’re on track to achieve great things,” he says. “As an entrepreneur, it's always exciting starting a new enterprise and see it take off. There’s excitement too, though, in being part of a growth journey. Hobbii has become too big to fail. We must dedicate all our time and energy to reach our goals. I don’t know how long it will take, but we absolutely intend to see this through to the end.”
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