Most people have at least one idea for a business they’d like to start. The challenge is turning that great idea into an actual product and getting that product to a customer.
Many entrepreneurs have bested that challenge and successfully navigated the twists and turns involved with getting their product to market. Among them are sisters Emily and Helena McHugh, who started Casauri (www.casauri.com), a Fort Pierce, Florida-based company that designs a line of fashionable laptop bags and other travel accessories. Emily, a former Columbia Business School student, and Helena, a Fashion Institute of Technology graduate, started selling their bags in 2001. Helena sewed a sample bag at home on her sewing machine and went door-to-door to boutiques in New York City’s Greenwich Village to find stores that would buy them. Today, the Casauri line is sold internationally through more than 100 venues, including Sam Flax, the MOMA Design Store, Fred Segal, Flight 001, and J&R Music and Computer World. Items retail for $50 to $150.
Like most entrepreneurs, the McHugh sisters initially identified all of the places their product could be sold. They thought big at first, considering large retailers, but then changed their angle. “As you figure out your marketing position, you realize that you don’t necessarily fit everywhere. So we narrowed it down to where our customer would most likely go to shop,” explains Emily. The sisters didn’t invest in complicated market research, either. They just used their keen observation skills to figure out how to reach hip, trendy dressers. “With that in mind, we approached local boutiques in New York,” says Emily.
In its first year of business, Casauri sold more than 4,000 laptop bags to four boutiques that agreed to carry them. “When you are starting out, you want to be in a place that you can handle,” says Emily. The company has managed to double its sales numbers each year since 2003, and now that revenues are growing steadily, the sisters are revisiting the idea of doing business with major department stores.
For every entrepreneur like the McHughs, there are hundreds who are unsuccessful at bringing their product to market. There are myriad reasons these ventures fail. Many entrepreneurs spend too much too early, rely too heavily on a major outlet to sell their product, or underestimate the importance of savvy marketing.
One resource entrepreneurs can tap to help them turn their idea into reality is the Black Retail Action Group (www.bragusa.org), a not-for-profit retail organization based in New York City that promotes the acceptance and participation of minorities at all levels of retail and related industries. BRAG President Gail Monroe-Perry says she sees a tremendous opportunity for black retailers to use their winning concepts to gain a greater market share of ethnic households: “As a result of fast growth, the buying power of people of color has been and will continue to be significant. The economic clout of our nation’s minorities will be one to be reckoned with and we should take full advantage.”
BRAG offers entrepreneurs six steps for bringing a product to market:
1. Plan the line or product. This is the first phase of the process, where you conduct market research and determine manufacturing costs. “Usually, the first place to start is with the success and/or failures of the previous year with the product,” explains Reneé Cooper vice president of planning for BRAG. “From there, research what is happening in that particular industry and utilize trend services to analyze the target market for your product.” Conduct both local and global research.
2. Create the design concept. Coming up with a winning design involves more than the product itself. It includes the presentation, packaging, sampling, and cost estimating. Ultimately, you will want to develop a prototype of your product. Consider hiring or seeking consultation from a patent attorney to protect your original product designs. While getting a patent can take years, having legal protection for your design through the patent- pending process definitely helps.
3. Finalize the details of the product. This is where technology, such as computer-aided design, can play an important part in your product’s development. At this stage, adjust your specifications and cost estimations to get a better idea of how much your manufacturing costs will be. A retail price can be estimated at this time as well. Make sure you settle on a price the target customer is willing to pay. The final retail price should have a decent margin for profit and recapture research and development costs. “Once I know my customer, my market, and my competition, I can sell the product at a price that will be whatever the market can bear. Of course, the margins for profit have to be built in beforehand,” says Cooper.
4. Plan the production. This means “sourcing” the product, or figuring out where it is going to be made. Domestic manufacturers aren’t your only options. In a global economy, the most cost-effective place to manufacture your product may be overseas. “Today, with global sourcing opportunities, the world really is open. In addition, companies are working electronically,” explains Cooper. “Many manufacturers are communicating with factories in real time using product data management information systems.” Before you decide to use a foreign producer, be sure to learn what overseas manufacturing entails, including logistical matters, importing regulations, and financial systems, such as letters of credit.
5. Manufacture the product. Find a manufacturer who will give you quality assurance. At this stage, all of the specifications for your
product must be met. The process usually involves working closely with an agent or manufacturer and completing a contract to guarantee quality assurance and on-time delivery. “To streamline the development process, manufacturers will actually bring the idea or the concept of the design to the retailer, the buyer, or the store, and then you develop it together,” says Cooper. “It really depends on the type of product and the company structure.”6. Distribute the product. Get to know the retail space where your product will be sold. Learn as much as you can about the store and about how you want your product to be displayed. This is part of the up-front negotiation with the retailer that will determine your product’s presentation and display location.
Negotiating the terms of your contract with a retailer may be easier with a smaller store. Larger stores don’t have the same flexibility as their smaller counterparts. However, Cooper says determining product placement in chain stores is tough because “the design of the selling floor is not up to each individual location.”
Be aware that technological requirements, such as radio frequency identification tags, may generate additional costs. In some cases, RFID tags are mandatory for vendors that do business with large retail companies such as Wal-Mart, Target, and CVS.
To Market
Many entrepreneurs depend on a deal with a major store to be the lifeline of their product. However, as some business owners have discovered, negotiating with large retailers can take several months to a year before the product ends up on the shelf. Melissa Perkins owns Columbus, Ohio-based Uzuri Kid Kidz (www.uzurikidkidz.com), a line of multiculturally themed party items that include napkins, plates, and favors. She’s currently in negotiations with Wal-Mart. Perkins points out that product placement can depend on the time of year since retail shelf space changes with the seasons and holidays. “As new seasons come, retailers will make changes by replacing slow-moving items on their shelves with new items,” she explains.
Perkins, 43, began formu
lating the idea for a line of party items in 1999 when her then 5-year-old niece came to live with her. Perkins saw that there were very few mass marketed African American characters with which to decorate a child’s room. She researched the bedding industry and found that the overhead and liabilities for infant bedding was too costly, so she decided to launch a line of party items instead. Perkins invested $50,000 and launched Uzuri Kid Kidz in July of last year.
It’s not impossible to get Wal-Mart to sell your product, says professor Cliff Schorer, director at the Eugene M. Lang Center for Entrepreneurship at Columbia Business School, but large retailers will want you to prove that your company is stable. This means
presenting adequate sums of cash and assets, he explains. Schorer recommends finding out what’s going on in the marketplace and how the marketplace works before you sell your wares to a particular retailer. That would let a business owner know, for example, that Wal-Mart does not allow walk-ins. Most major retailers require you to schedule a meeting with one of their buyers first. If the retailer decides to purchase your product, only then would you start to make distribution arrangements.In addition to Wal-Mart, Perkins is in negotiations with a Kroger grocery store chain in Columbus. She’s working with a category manager who is interested in selling her product line. As part of the deal, Perkins has to create her own display for her products. Dealing with several retailers simultaneously can be frustrating, she says: “As a new business owner, it’s hard to anticipate how to package your product because each retailer wants something different.”
By the beginning of 2006, Perkins hopes to be finalizing an online distribution deal with Birthday Express (www.birthday express.com), an online retailer that sells wholesale party supplies. By the end of this year, she expects to have generated $25,000 in sales from her own Website, which launched in April.
When searching for distributors, many entrepreneurs assume that big retailers are the way to go. But the McHughs used a different strategy, believing that their customers would more likely shop in smaller, specialty shops. “It’s all about knowing your customer,” says Linda Gorchels, director of executive marketing education at the University of Wisconsin-Madison School of Business and co-author of The Manager’s Guide to Distribution Channels (McGraw-Hill; $39.95). “You want your product to be available where consumers would expect to buy it,” she says. “If you sell it through a convenience store and people expect to buy that type of item at a specialty store, you don’t have it in the right location.”
Utokia Langley and her husband, Trent, a couple in Upper Marlboro, Maryland, opted to seek out big retailers for their product as well as use the Web. In the beginning stages, the proprietors of Behold Me L.L.C. cosmetics (www.beholdme.com) sought out Hecht’s and Macy’s department stores to gauge their interest level. Utokia thought it best to have an actual product before she approached buyers, so she produced a small inventory of the company’s signature fragrance and began marketing it on a small scale. This allowed her to get the word out about the product before it actually hit the shelves.
Utokia, 33, and Trent, 28, spent nearly $75,000–which they raised from an investment property refinancing–to develop their fragrance. They set up consumer testing events and got feedback from the attendees. “I smelled over 500 samples just to come up with one scent,”
says Utokia. “Once I came up with my best scent, then I conducted public polls and testing events. Sampling is not a huge expense, but once you pick a scent, the initial investment ranges between $10,000 and $15,000, just for the scent alone,” she explains. Behold Me launched its signature fragrance in March and its skincare and makeup products were launched in September.Schorer says small business owners have to get customers intrigued and anxious to buy their product. He suggests approaching a store that sells items that complement your product and setting up a promotion: “If you are selling party items, then go to a Carvel or Baskin Robbins and offer to give away a dozen plates with every cake purchase in exchange for some display space.”
GETTING YOUR PRODUCT TO MARKET
Here are some things to keep in mind when looking to bring your product to market:
- Start your business with just af ew samples. Set up deals and make plans to distribute your product to customers before you spend a lot of money trying to execute your ideas, says Columbia Business School professor Cliff Schorer. He recommends surveying potential customers to see whether they’d be interested in your product, whether they’d buy it, and how much they would buy. Avoid inventory buildup. A lot of startup owners mistakenly think they need to produce outrageous amounts of product to start out with.
- Good merchandising is essential. It can grow your business and draw customers back to shop. Author and educator Linda Gorchels says merchandising companies are useful because they can help make your product stand out. But be aware: Merchandising companies may charge you as much as 30% of the total shipment. Go to the National Association for Retail Marketing Services (www.narms.com) for more information.
- Customers and retailers purchase products cyclically. There are also certain times of the year retailers buy certain products. Learn those cycles and time your product pitch and launch. It won’t matter if you have the best product in the world if retail buyers have already made their decisions.
- Don’t be afraid to set up a meetingwith a buyer. Department stores and boutiques need you as much as you need them. Without your products to sell, they’d have nothing to profit from.
- Free publicity is always good. Large manufacturers pay to get the word out about their products with advertising, but many startups don’t have those kinds of resources, says Gorchels. She advises entrepreneurs to be their own advertisers and generate as much free publicity as they can. The Word of Mouth Marketing Association (www.womma.org) may be a helpful resource.
- Use the Web. This is a relatively inexpensive and often effective way to reach customers.