Young businessman reveals rivers of success bridged by enthusiasm

In Photo: Gifmo founder Carlos Korten

CARLOS Korten is a confident man. So confident that Korten, a Filipino-American executive from New York, believed he can make a big difference in the thriving digital commerce in the Philippines.

Thus, he put up Pasig & Hudson Pvt. Ltd., the parent firm of online-shopping portal Gifmo. The BusinessMirror sent Korten an e-mail asking about his journey to Philippine business.

BusinessMirror: How did everything start?

Carlos Korten: When I decided to leave my comfortable executive job in New York to start a new company, it was with the idea to bring everything I had learned—over 25 years working in the payments industry—to the Philippines where my mother was born and raised before immigrating to the US as a young woman in the 1970s.

The Philippines is blooming. Evidence of growth is everywhere. The Internet Age favors the country, by drawing employers to its enormous, young, hardworking, English-speaking and digitally ready labor force. Well-paying jobs are abundant. Disposable income is on the rise. New products and services are appearing to support a new emerging middle class.

But with regard to payments technology, the Philippines is still lagging and catching up: cash dominates the market, the credit-card penetration in the country is very low, consumer engagement with retail banking is poor and fees for domestic remittances are very high.

This is a promising market for the type of business my company is chartered to do.

So although many of my friends and family were surprised and astonished, in late-2014 I moved from New York to Manila with the idea to launch a business in the Philippines, for the Philippines.

What’s with the company name Pasig & Hudson?

Our parent company is called Pasig & Hudson, combining the names of the two rivers that anchor Manila and New York City. We use the rivers as old world analogies for commerce and trade in the digital era.

Pasig & Hudson combines decades of practical experience building world-class systems for major banks and credit-card companies around the world with handpicked entrepreneurs from Manila who bring deep local market knowledge of the Philippines.

Our charter is to bring world-class payment technology, and tried and true business practices to markets that have been chronically underserved by the major multinationals. The Philippines is our first market.

Why did you decide to focus on gift cards?

In the retail sector of the Philippines, a few megaretailers offer modern, reloadable gift cards. Starbucks has an incredibly popular and successful gift-card product that is especially strong with young, aspirational Filipinos.

But, beyond that, for most businesses in the country, paper gift certificates still remain “state of the art”.

When my cofounders and I considered the landscape, we knew right away this is a place where we wanted to compete. We did not invent the private label gift card. That is a tried and true business practice that has withstood the test of time in markets around the world.

Our core product is not a fad or a gimmick—gift cards work. They create sales.

What makes Gifmo a bellwether in gift cards?

Most merchants around the world don’t have the resources or payments acumen to launch a gift-card program on their own, because the programs are technically, operationally and fiscally complex. It takes special expertise to operate a modern gift card.

Gifmo makes it simple by deploying a world-class gift-card platform and sharing the cost across a large portfolio of clients. We are able to reduce costs to a point where even a small business with a single store can run their own profitable gift-card program.

Gifmo combines our proprietary card-processing software, dedicated back-office operations and business consulting services to help businesses in the Philippines launch their own gift card and digital loyalty programs. Gifmo is the invisible infrastructure that powers our clients’ cards.

Our goal is quite simple: to drive profitable growth for our clients.

We create top-line sales by attracting new customers to our clients’ brand and by bringing their existing customers back for more.

Gifmo is designed to be the digital marketing engine that powers businesses all across the Philippines. We will replace all the paper gift certificates where they still exist in the country. We will shift consumer marketing in the Philippines away from paper coupons and printed loyalty punch cards, into mobile phones and the Internet.

How did you launch Gifmo?

In May 2015 I made an important phone call to a guy I had worked with at American Express (Amex).

Years before, Cory Moreira and I had spent time illuminating together on a project in India for Amex, chartered to find an innovative way to bring digital payments to the rural unbanked population there.

The India efforts struggled to build momentum. But in the course of the evaluation, Cory and I found that we are very like-minded about technology and innovation.

Cory was formerly the chief technology officer of a start-up that Amex had acquired for about $300 million. The system he built for them became the global processing platform for gift cards at Amex. By 2015, he had left Amex to return to the start-up community.

Meanwhile, I was in Manila toying with ideas around operating a stored-value, private-label gift-card business. We had both left Amex to find new ways to bring innovation to market, without the overhead of a big corporation.

On that phone call last year, I told Cory, “Hey man, want to build a stored-value platform? We’re going to run gift cards in the Philippines.”

I pitched Gifmo to him, premised on a Bring-Your-Own-Device model to reduce setup costs, and to power a carefully crafted user experience over a proprietary closed loop. And I stepped him through the four API [application programming interface] services we would need to ship a minimum viable product [MVP].

To which he said: “Sounds exciting. Count me in.” The entire conversation probably took 20 minutes.

Thanks to Cory, the bones of our proprietary technology are best in class. Secure and encrypted, high performing, payment card industry-compliant, built-in failover and digital-optimized, our technology platform was designed from the very start using the high standards of software development that we had at Amex for our baseline.

Pasig & Hudson was incorporated in June. The first Gifmo cards went on sale August 22 last year.

How was the beta launch?

Marmalade Kitchen is a bistro in Bonifacio Global City, owned and run by Chef Aileen Anastacio and our beta partner.

In October last year, two months after we went live with her gift-card program, when I saw “the light go on” for Chef Aileen.

We laugh about it now but I know Aileen agreed to be our beta partner mostly out of friendship, plus a kind and willing spirit. At the time when she agreed to be our beta partner, there wasn’t a lot of reason to believe that we were going to be a roaring success. My core team consisted of myself, plus two displaced Americans wandering Manila, discovering things, like ampalaya and calamansi, for the first time, and two Manila locals, a family friend who was eager to participate in a start-up, and a gifted creative designer recommended to me. A bag of mixed nuts—this was the early core of Pasig & Hudson, our launch team.

I showed up at Aileen’s bistro one afternoon, that day in October, to have a coffee and spend some time with her staff. The restaurant was full, overflowing with people. Over the many months my team had spent at Marmalade Kitchen to launch the beta, I had never seen so many customers there at one time.

I made eye contact with one of the servers, who was one of our Gifmo trainees, and gave him a look as if to say, “What is going on here?”

The server smiled at me, and rushing to the kitchen to pick up an order, he said over his shoulder, “Sir, the bank gave out the gift cards today.”

I knew that a few days earlier a local business had called Aileen to ask if she would offer them a discount if they purchased thirty of her gift cards. They planned to give the gift cards to attendees at a banking seminar that they were hosting. So, connecting the dots, I realized these people were the attendees from the seminar—and, from the looks of it; they brought a number of their friends with them.

Since it was too crowded for me to enjoy my coffee, I went instead into the back office to share a moment of celebration with Aileen. When I found her there, she had an astonished look on her face, startled and dumbfounded, as if the idea had never occurred to her, that the beautiful and appealing gift cards we had launched for her business would change its core economics.

There was a period in late-2015, before Christmas, when gift-card sales at Marmalade Kitchen exceeded their organic sales. Like I said, gift cards are not just a pretty gimmick.

We’ll always be grateful to Chef Aileen and the staff at Marmalade for being our product incubator.

How is Gifmo doing these days?

Today we operate gift cards for dozens of strong brands in Metro Manila: Wildflour Bakery and Café, Yoga Plus, Shi Lin, Brothers Burger and Kuppa Coffee.

We are constantly adding more services: a client-branded mobile app for consumers, to extend the gift card into Loyalty Services—the app will especially appeal to millennials who live on their phones.

We added third-party distribution agents, to increase offsite sales. We added an affiliate sales distribution network and an e-commerce experience to drive sales.

We know we’re on the right track, because our clients are happy.

One of our earliest clients recently asked us to add new cards to their portfolio, with higher initial load values, at the request of their customers.

So far, Gifmo has been growing quickly just through word-of-mouth. Many of our newest clients are referrals from existing clients, or other friends in the industry who admire our product. There is nothing more demonstrative of support than when a client actively recommends your service to a friend.

Some of our new clients spotted one of our cards at a favorite restaurant or coffee shop, and called to ask if we can do a card for them, too.

They say it is easy to sell a great product. In May, of the in-person meetings we had with prospective clients to discuss Gifmo, 82 percent resulted in a sale. With that kind of engagement and enthusiasm, we really haven’t had to pursue any elaborate marketing campaigns to promote our business.

New business continues to come to us through organic channels and that’s always the best. In Manila, especially, the business community is very tightly knit. Nothing here stays a secret for very long.

In our first full year of operation, we have launched 50 custom-designed, premium gift cards on our platform. For Christmas, our cards will be for sale at over 80 retail locations across Metro Manila and via our online distributor.

That is a great start for a young, small company. But we’re just beginning.

What’s your growth plan?

Our 2016 strategy was to target the “boutique” business segment—small businesses with strong brand appeal. We were most interested in businesses with no more than three to five locations, to keep operations simple while we worked on high-quality deployment. The cards we created for these businesses are beautiful, custom-designed collectables that will appeal to a premium, brand-conscious and aspirational customer base.

On the strength of our success in this space, we have a few important growth goals for 2017.

First, we are expanding our businesses to support the needs of larger clients that we call “middle market”—companies with 20 to 50 store locations. We are adding more professional, operational and technical services to our product offering to meet the special needs for larger clients.

Second, we are expanding our service offering to better penetrate consumers in the mass market demographic. In doing so, we will also expand our sales and operations beyond Manila, to Davao, Cebu and other key cities across the country, to establish a truly national footprint.

Eventually, we will also develop an “enterprise” product and compete for business from the major recognized Philippine consumer brands. Some of the most sophisticated companies already have entire divisions of their organization devoted to operating their digital marketing infrastructure. We know we can provide those services with a higher level of quality than they get today, at a fraction of the cost.

Are you also looking outside of the Philippines?

Starting in 2017, and over the next few years, we will start marketing Gifmo in additional regional markets: Singapore, Hong Kong, Malaysia, Taiwan, Thailand and Indonesia.

Because our core service is technology and operations, it can be virtualized and delivered to additional countries with superior margins. Work is already begun to make this achievable.

What is your outlook on Gifmo?

The company is still less than two years old but already we know we have a winner. The skills and expertise of the team are rare in combination, globally and domestically.

Our ability to execute is already proven. Our clients are enthusiastic, and the economics of the business are excellent for all parties. Our end-consumers love the cards, and are showing strong adoption.

Since inception, we have raised $1 million in capital from multiple private investors. In 2017 we will raise a new round of funding to capitalize our growth plans, in the range of $3 million to $6 million.

We are open to speaking with new investors who are interested in learning more about our business.

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