How Active Hound survived an intellectual property scare
8 min read
06 September 2018
A dog is man’s best friend, so the saying goes, particularly when it comes to inspiring business ideas.
Zak Taylor first thought of setting up an online dog products company on a Devon beach in 2013 as he chased his dog Izzy through the sand.
“One of the toys Izzy loved was a product called Chuckit. It is simply a ball launcher. They are durable and the ball goes for miles,” he explains. “It is an American product. You can’t get it in the UK, so I thought I could import and sell them on eBay along with other similar dog toys.”
Taylor relocated from London with his wife Lucy. They both worked in the City, with Taylor a trader for a sports betting company and Lucy a support manager for London Underground.
“We gave up our jobs to move,” Taylor says. “Lucy went out temping whilst I launched the business. As a novice, initial growth was down to overspending on advertising to learn what worked.”
Now Plymouth-based, Taylor began selling only a few products a day, but he soon felt it was time to set up a dedicated website. “Demand grew because these were toys Brits hadn’t seen before. Soon I was importing £30,000 worth of product from the US to keep up with it.”
That’s when Zak’s first challenge came bounding over the Atlantic. He recalls: “Unbeknown to me, Chuckit was being bought out by US firm Petmate. Chuckit at the time would not supply me directly, presumably because they’d seen many like me come and go. I had called call my business ‘Chuckit! Dog Toys UK’ which was an obvious IP breach.
“It was intentional to grab their attention. I wanted to prove could sell a reasonable amount of their product and wanted to force them to speak with me.
“Petmate took over the reins of Chuckit and it was about a year into my business that I had a tap on the shoulder from their global sales director!”
Taylor explains that after some “constructive discussion”, Petmate’s new supplier for the UK, was to supply him with Chuckit.
He said: “It was at a good price too. Petmate agreed to buy my website for a small fee and in return, the new supplier opened up other brands that concentrated on treats and canine apparel in addition to Chuckit dog toys.”
Renamed Active Hound, the company continued to add new products such as body warmers, dog beds and grooming shampoos. Within a year it grew turnover to around £100,000.
“It was a big increase and it led PayPal to approach us,” he explains. “It was part of its Working Capital product and they offered a cash advance of £60,000 upfront based on a percentage of sales. You have to pay back a certain percentage of course and it meant that 100% of your payments have to be processed through PayPal. But it has been positive for my business.
“The funding, which I have subsequently added to, has enabled me to invest in more advertising and get more stock in.”
Taylor says he looked for funding “for a while” but as a sole trader found that banks were just not interested. “I find it amazing that they don’t want to even talk to you.”
There may be challenges with the PayPal option as well for businesses which are not built around stock and advertising as Active Hound is. “Maybe some firms who are looking to expand into very big markets would find the loan amounts quite limiting,” he says.
There weren’t many limits for ActiveHound as it bounded to a turnover of £500,000 around 2016.
“Being brutally honest, it took its toll on my finances,” he explained. “I was kamikaze-ing my way into various brands by being better, more informative, more modern and faster to supply goods. Often, I had to be the cheapest and spend the most on advertising.
“I didn’t know what I was doing but I knew I had a good set of products and the right idea. It paid off. I was the no1 UK stockist for Chuckit and outdoor dogs product brand Hurtta within 12 months and was becoming the number one or two for a brand called Ruffwear.”
Fast forward to today however and Taylor says turnover has diminished by 50%.
“Some of the brands I got into were being badly discounted and naively, I did add to that problem. Discounting is a terrible business model unless you have exceedingly deep pockets and an endless supply of backers such as Amazon have, to cripple competitors,” he explains.
“Discounting essentially means you have to stack it high and sell it cheap. The slightest blip in that fairytale can cause a profits nightmare – which it became for me. Ruffwear was pulling in the big bulk of turnover but there was absolutely no profit in it. I elected to get out of Ruffwear because it was saturated with discounters. I didn’t want to build a reputation as a discounter.
“My turnover dropped but I could now afford to reward customers with freebies and premium delivery services. This attracted the right customers.”
For now, Active Hound is concentrating on maintaining the brands that remain in strong demand and expanding into those it thinks will do well in the future.
“We are thinking about moving into a third party warehouse and even to begin manufacturing our own products,” he states. “Paring back and re-focusing rather than chasing those lost sales have helped us get in the right position to look at expansion.”
What is his advice to other entrepreneurs? “Do not reinvent the wheel. Just copy what someone else is doing and do it better. Expect to earn nothing for a few years and be prepared to work silly hours until you get there. If you do not believe in yourself right now, go and get a job as this lifestyle isn’t for you.”