November 2009 Archive

Of Posts My Parents and In-Laws Really Shouldn't Read

Ok, I promised myself I was going to crosspost my stuff from TechCrunch from now on. This post is a tough call. I actually think it's a great business story and the entrepreneur in question is fascinating. But it's definitely, ahem, not my usual beat and may offend some people. Especially ones who gave birth to me or my husband. So let me be clear-- if you are likely to be shocked, don't read the following.

I’ve met a lot of expats in my time in China. Some decided to move during an Asian studies class in college. Others decided to move when they saw Mandarin-speaking colleagues getting a promotion over them at work. Still others may have promised a Chinese parent on his or her deathbed to return to the homeland.

For Chicago-native Brian Sloan, it was about the time he was being questioned by police for trafficking and dismembering human skulls.

Sloan seems normal. Even boring. I met him with some other Beijing entrepreneurs last week over hot pot and he refused to eat anything out of the spicy side of the pot. He has a slight build, non-descript features, and mousey brown hair. He even has a law degree from Penn State. But his life took a more interesting turn in 2004 or so when he started to scour antique shows and auctions for things he could sell for more money on eBay. What motivated him? “Making money,” he says. Not so much for the cash itself, but the chase, the deal and the challenge. Buying something undervalued—even weird— and figuring out who would highly value it.

Long story short: He starting to realize China was a treasure trove of things to buy low and sell high—among them, human skulls that he imported in a box marked “TOYS” and then boiled, cleaned, broken apart and screwed back together and detailed for medical students. A good skull would cost about $100 each and he could sell it for as high as $800. (What makes “a good skull”? Turns out it’s the number of teeth.)

It all went well until the day an eccentric Chicago puppeteer named JoJo Baby came by the house to buy some mannequins and saw some skulls boiling on the stove. He naturally assumed Sloan was a serial killer and called the cops. This YouTube video (also embedded below) pretty much says the rest. It bears noting, Sloan was never actually arrested or charged, although he still complains that he never got his “inventory” back from the mustachioed, gum-smacking Chicago brass who spent days trying to work him over Law-and-Order-style while TV satellite trucks camped out in front of his apartment.

Sloan moved to China soon after. It was considerably closer access to the things he was selling and, let’s just say after the skull incident, filled with more open-minded people. “In China, people respect what I do as a business,” he says. Which would be a boon in his next career move… making latex fetish-wear. (Link very NSFW.) And that’s where the Chinese supply chain magic came in. He was able to tailor nearly any outfit in any size and ship it at a healthy mark-up. Some outfits go as high as $800.

But even that pales next to his new business. How should I put this and still be a lady? The product is called “AutoBlow” and it has nothing to do with cars. Here’s the site. Warning: It’s very, very Not Safe For Work. (Yes, I’m spelling the letters out this time, just in case.)

Like a lot of entrepreneurs in China, Sloan is cagey about what I can and can’t say about how the operation works. That’s not because it’s illicit—it’s because it’s so incredibly lean, flexible and outsourced that he doesn’t benefit if competitors realize exactly what he’s pulled off business-wise. But suffice to say with a small army of employees peppered around the globe, Sloan—aka the “Kinky King of Beijing”—is looking at an incredibly profitable business that’s already generating more than $1 million in revenue and growing quickly. He’s exploited what each region does best: Romanians are his programmers and SEO, Indians and Brazilians do his Web design, and China does the manufacturing and fulfillment. He hired his whole staff without leaving his living room. His next act? Finding new products and following the same playbook.

My point here isn’t to write a salacious post about skulls and sex toys—as much as I enjoy watching Michael Arrington squirm. My point is that for all the talk about how much harder it is for a Westerner to do business in China, in a lot of industries there are far fewer barriers to entry than anywhere else I’ve seen in the world. And – huge 1.3 billion person domestic market aside—that’s what is making China such a Mecca for scrappy, pioneering entrepreneurs right now. You may find Sloan’s ventures distasteful, indeed he says his mother still changes the subject when friends ask what her son does for a living. But change the nature of what he’s selling and Sloan thinks just like any good entrepreneur pushing the boundaries in any pioneering market.

We like to think that outsourcing manufacturing to China or call centers to India revolutionized American business. But America hasn’t seen anything like the truly flattened, profitable, deconstructed and then ingeniously reconstructed businesses I’ve seen in China in the last few weeks.

People who say China is all about outsourcing the supply chain and not innovation have it backwards—the deconstructed supply chain is precisely what’s opened China up to a world of innovation. Imagine the way the Web democratized media and content and now apply the same ability to break a staid practice into Lego-like pieces to any physical hard goods industry whether its sex toys or iPods or pharmaceuticals.

We’ve only seen the first few innings of what this means for global business and smart entrepreneurs in China – whether expats or locals—have the advantage.