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Archive for September 3rd, 2009

Adapt to Changing Business Climate and Prosper Or Get Left Behind and Perish

Thursday, September 3rd, 2009

by: Geoff Ficke

Two business announcements this week reconfirm the unbelievable pace of change the world business climate is undergoing. Visionary fashion designer Liz Claiborne died and her Company announced that it would sell or close 16 divisions. And, pioneering retailer Leslie Wexner announced that his firm, Limited Brands, Inc. would put up for sale the Limited and Limited Express chains.

The nature of retail, like most other industries, has undergone radical change. Big box category killers like Staples and Best Buy have evolved into dominating international success stories. Tesco, WalMart and Carrefours offer enormous scale, one stop shopping unimaginable a generation ago. Specialty retailers such as Wet Seal, Aeropostiale, Abercrombie and Fitch, L’Occitaine and Talbots attack specific niches.

Consolidation, bankruptcy and liquidation have allowed fewer and fewer national department store and supermarket chains. Macy’s has consolidated nationally after absorbing numerous regional department store chains such as Lazarus, Bullocks, Burdines and Marchall Field. W.T. Grant, Montgomery Ward, AyrWay, Venture and Gold Circle are only a few examples of once strong groups that no longer exist.

The Limited began in 1963 as a single clothing store in Columbus, Ohio. Leslie Wexner saw an opportunity to create an amazing retail growth story by replicating designer clothing designs, mass producing offshore and selling tailored business clothing to the rapidly emerging population of female businesswoman. He became a billionaire by leveraging and extending The Limited to numerous additional store brands including Limited Too, Victoria’s Secret, Henri Bendel and Bath and Body Works.

Despite the huge past success of the ready to wear concept pioneered by The Limited stores, times change and Mr. Wexner reacted accordingly. Work patterns have changed, women’s fashion taste, always fickle and subject to unexpected trends, have become even more unpredictable. His decision to sell the chain is prudent and will result in a stronger Company with redeployment of assets and full concentration applied to faster growing divisions. The decision to spin off his alpha divisions may have been difficult from an emotional standpoint, but future success requires staying ahead of the curve and Leslie Wexner will always strive for maximum success.

Ms. Claiborne built her eponymous fashion house by creating high quality, suits and ready to wear that women loved for their cut, tailoring and detail, all the while keeping prices affordable. Though she had retired some years ago from active management, she and her husband remained involved in consulting on fashion direction for the Company.

Nevertheless, as always, things never remain the same in retail. Department store consolidation has enabled groups like Macy’s to create in house private label brands that produce much more profit than designer brands like Claiborne, Polo and Nautica can offer. As more store space is dedicated to private label store brands the designer labels have to reinvent themselves. In the case of Liz Claiborne, 16 divisions will be jettisoned and total focus applied to the namesake men’s and women’s brands, accessories, shoes and fragrances.

These are only two examples of successful, well managed, mature Companies adjusting to the business realities they confront. W.T. Grant did not react to change and died. Thousands of independent stores have not reacted to change and they no longer exist. Local and regional chains that did not adjust to market realities are gone.

Ice houses, barrel makers and bicycle manufacturers are non-existent today, though they thrived in the 19th and early 20th century. Dozens of auto manufacturers folded in the past century and the remaining “Big 3” are in real trouble because they have not adjusted to market realities. Numerous airlines have failed, been through bankruptcy or been purchased by stronger, better-managed lines. Change is inevitable and is best confronted and embraced, not fought.

Every day in my consulting business we are introduced to people offering products, services and business opportunities seeking a way to successfully commercialize their offerings. Invariably, the dream of the entrepreneur is to secure placement in WalMart. Yes, the same WalMart so scorned by so many as a small business and small town killer. I often think that the people so opposed to WalMart would be proponents of home delivered ice instead of refrigeration if alive a century ago.

These Luddites can not recognize that WalMart is only the latest, most significant, agent of change. Does WalMart put mom and pop stores out of business. I contend they do not. Business owners that do not recognize the change that WalMart represents, adjust accordingly and create new services that offer real value for their customers do close. Failure is never pretty, but is usually accompanied by solid reasons and an unwillingness to change.

WalMart has spent billions of dollars trying to perfect a ready to wear clothing business. They have failed to date miserably. WalMart has grown a huge food business, however, traditional chains such a Kroger and Safeway are more profitable and growing faster. They have added organic food departments, exciting bakeries and deli’s and a much broader range of products than WalMart. They evolved, changed and keep a step ahead of WalMart.

Thousands of small, independent clothiers, florists, grocers, butchers, pharmacies and auto repair shops do compete successfully with neighboring big box retailers. They do so by offering goods and services that are highly targeted, providing better customer service, a faster shopping experience, customizing offerings, home delivery and personalizing the buyer/seller relationship. These successful small retailers do not like the big bullies, but they recognize reality, confront the changes they face and compete. They do not whine, sit idly awaiting disaster or quit. They work smarter and compete.

Change is coming, always. It is good. We all live better lives because of change. Our children will as well. If we do not embrace change we will be left behind to perish. This is true for people, companies, organizations and societies.

In Defense of Success

Thursday, September 3rd, 2009

by: Geoff Ficke

During a January 1980 television interview, then British Prime Minister Margaret Thatcher stated, “No one would remember the Good Samaritan if he’d only had good intentions. He had money as well”. Our current times make this keen observation particularly relevant. We continually are bombarded with facts and figures concerning fairness, income distribution, giving and sharing the wealth.

I am a capitalist. In certain circles that assertion is met with derision, claims of selfishness and images of Dickensian hoarding. I plead guilty. I seek, pursue and continually work to increase my share of the planet’s treasure. I do so honorably, with planning, effort, assumption of reasonable risk and a fair amount of toil. I have the opportunity, and in the United States, at least for now, the right to try to succeed. I also have the chance to fail.

Adam Smith, the original philosopher for capitalism, wrote of the “Invisible Hand”. His theory was that people working in their own self interest, pursuing gain and profit, indirectly contributed to the common good by dint of their selfish efforts. If I start a business, I typically am trying to make a profit. That is the goal of any private enterprise. However, as I push to achieve my profit goal, I will consume supplier’s goods and services, pay fees and taxes to government, probably have to employ labor and invest in plant and inventory. My selfish pursuit of profit inadvertently benefits a wide range of other entities.

Without profit, and thus success, there can be no Good Samaritan. By succeeding in one’s chosen endeavor, we have the ability to pay taxes, thus funding government. We can endow universities. We can give to a vast array of charities and religious organizations. Whether for Live Aid, Tsunami Relief, food for Darfur, or the local food-bank, success and profit enable most good works to happen.

Government is a consumer of profit. Government makes nothing and produces no wealth. Government has no money except the revenue it takes from citizens through taxation. When a government grant is bestowed on your town it is not a gift. It is simply your tax dollars being returned after a HUGE discount has been absorbed in the state capital or Washington, D. C.

There has been a wonderful hoax perpetrated by the modern political class. Promise something for everybody and project that another group is going to have to pay for the benefit. Only profit making enterprise, paying employees wages and consuming suppliers goods and services provides the capital to fuel the insatiable lust of government for ever more funds to grow ever more programs and benefits.

When profits disappear plants will close, employee jobs are lost and ultimately the ability to pay taxes and donate to worthwhile causes is inhibited. This is the exact reason that high taxes cripple growth, while lower taxes create the impetus for industry to expand, and thus, generate more goods, services, jobs and revenue that can be taxed.

And yet, many of the people most beholden to the “Invisible Hand” of profit generation, government employees, bureaucrats, charities, those receiving government benefits and the dole are most contemptuous of the capitalist system that funds this largesse. A successful businessman is pictured as greedy. A prosperous business or industry is cast as profit mongering. When was the last time a Hollywood film represented business as anything other than a Gordon Gekko parody?

All over the world the pursuit of success, free enterprise and freedom is on the rise. Former second and third world economies are rapidly industrializing and assuming many of the traits of capitalism. Centrally planned economies, even in formerly doctrinaire Communist countries like Romania, Russia and Bulgaria are following more and more of the American model to prosperity.

Success is an admirable goal. Profit is wonderful. The creation of some form of wealth, financial and personal, should be everyone’s goal. Accumulated capital enables us to fund our wasteful, contemporary, bloated government, but more importantly donate to causes and groups we deem important to society. As Margaret Thatcher stated of the Good Samaritan, “He had money as well”. We should all be thankful he did.

A Novel Way to Get An Innovative Product to Market

Thursday, September 3rd, 2009

A Novel Way to Get An Innovative Product to Market

This week I had the opportunity to launch a new product at the Juvenile Products Manufacturers Association’s annual trade show in Orlando. This is an annual fair that brings together the manufacturers of all size to present and introduce new wares for the youth market. As in all industries, the competition is fierce, the innovations many and the marketing strategies are endlessly varied.

During lulls in the action I walked the floor and did a bit of networking. I had the good fortune to meet a woman, standing at the smallest, most sparsely merchandised booth in the show. As we chatted she opened up to me about what her goals were for her product, at this time and at this expensive, high-end show.

Her display consisted solely of a single prototype of her invention. She had no packaging, no graphics, no branding, none of the elements present in glowing abundance at every other booth on the trading floor. She was also scared. Her expressed fear was that she would be dismissed as a dreamer for attending such an event with no bullets in her gun.

Despite all of her perceived disadvantages, this lady had a really great product concept. Her invention was novel, a true product improvement over the existing universe of competitive brands currently being marketed. I thought she had an excellent chance to find a partner, a license or sell her patented concept and told her so.

Each day I would see this nice lady several times and I noticed a subtle change happening at each meeting. She was gaining confidence. She was seeing her product concept being exposed to a very tough crowd and people were confirming her assumptions about product potential. Her experience at the show was proving invaluable in energizing her for the task ahead of making her invention market ready.

The last time I saw this lady she was positively glowing. A senior executive from one of the largest companies in the industry had visited her stand. Then he returned with subordinates. She had been invited to corporate headquarters to formally present the prototype to the corporate team and commence negotiations for a license deal.

Now this is a great step for her but she realizes she has a long way to go before she closes a license deal. I know this after several days of exposure to this woman, if the deal does not happen I will see her at this or another show down the line with a fully branded product ready for sale. She will not stop until she achieves her goal.

My consulting firm looks at hundreds of new invention and product submissions each year. We actually engage about a dozen in an average year. A very high percentage of the items we pass on nevertheless have real commercial merit. What they invariably lack is a person such as the lady I have described in this article.

The ability to take an alternative path, expose your idea to a critical marketplace and take a risk is what separates successful entrepreneurs from dreamers. The word “no” is something all of us dread hearing. And yet, overcoming “no” is the hurdle every entrepreneur must learn to accept, understand and handle. I tell my clients, “no just means not today”.

I meet many people who simply give up. Their reasons, really excuses, are endless. I could not raise the money. I was misled. I have three kids. My partner took off with the plans. I can’t sell. These, and countless other complaints are indicative of a fear of success. Not everyone is constructed with the “right stuff” to succeed as an entrepreneur.

I was personally and professionally re-energized after my brief, meeting with my new entrepreneurial friend. She had taken an uncertain, risky and novel road to launching her product. Her courage was to be admired. She confirmed my belief that the road to success is open to all with the drive, ambition and positive attitude essential to face and overcome the obstacles that inevitably must be encountered. Markets are brutally competitive. Only the strong will survive in this jungle.

When Your Business Is Small You Must Appear to Be Big!

Thursday, September 3rd, 2009

by: Geoff Ficke

I recently returned from representing a client at the annual Cosmoprof Fair, in Bologna, Italy. Cosmoprof is the largest cosmetic show in the world, and the beauty business is all about image. As such, the companies present at this mammoth exposition offer stunning product and technology displays. Many of the stands feel like upscale department stores and boutiques.

My client was a startup business with no sales history, a single item product and limited working capital. This was to be the actual unveiling, the market launch for the product. We rented the smallest booth the management had available. Our location was not ideal as this client was a first time participant.

Nevertheless, despite our inherent limitations we were a rousing success. The booth was constantly crowded. The product was instantly recognized as a significant advance in its category. We were exhausted at the end of each day from demonstrating the products performance features and benefits and discussing business opportunities through translators. We have been consumed with follow up interest and are currently negotiating exclusive country distribution deals with over 40 companies.

While the show was in progress we took particular note of activity in the displays around us. The Cosmoprof set an attendance record this year. Everybody displaying should have been as busy, or busier than my client, especially considering our limitations. However, we spoke to numerous company representatives from all over the world and there seemed to be a prevalent mood of mild disappointment.

Several elements account for the disparate response our single product, shown for the very first time, and with restricted resources, received from this international, very critical clientele, and the disappointment so many fully funded and resource rich businesses experienced. In a word, we made our product look much, much grander than it actually was.

Using stock, off the shelf display pieces we dressed them cleverly with creative graphics. Banners were similarly produced at a fraction of our competition’s cost. The branding we created for the product cut instantly through the chaotic clutter of the show environment and resonated with buyers. The product was constantly being demonstrated and the performance benefits we claimed, we proved, at point and time of application. Buyers were amazed that the immediate benefit we guaranteed could be instantly experienced.

My company attends and displays for clients at numerous trade-shows every year in a wide range of consumer product categories. When we work with inventors, entrepreneurs and smaller businesses we stress the importance of appearing to be stronger than you are. At Cosmoprof, if we had simply relied on the great product we knew we had, we would have been much less satisfied with our result. We appeared technologically advanced because we offered a full slate of performance and demonstration benefits that we alone were utilizing.

In today’s very hectic consumer product marketplace it is essential that new products offer unique features and benefits. My counsel to entrepreneurs is that there are many ways to stretch limited resources and appear to be a more robust enterprise. Being small offers the unique benefit of being much more nimble and flexible than larger enterprises. Leverage this advantage.

An Alternative, Inexpensive Way to Penetrate the Market For a New Product

Thursday, September 3rd, 2009

by: Geoff Ficke

My consulting firm receives an average of 2 new product submissions from entrepreneur’s each day. Last year we viewed almost 700 such offerings. They ranged from the silly to the spectacular. The majority of these concepts actually possess some commercial merit. Nevertheless, fewer than a dozen of these will ever make it to market.

There are many reasons for the paucity of successful product launches. The process is challenging and many people are not up for the fight. Many people dream that their idea or concept can succeed, but at no risk or expense to themselves. Still others have recklessly expanded valuations on their product and thus, expectations that are not realistic.

From this deluge of creativity there are always a handful of gems that have all of the essential elements necessary for success. The one constant, however, is almost always capital; or the lack thereof. A certain base level of working capital is always necessary to market launch, license or create a strategic alliance for a new offering.

We have been successfully using a guerilla strategy for years that mitigates the level of investment to expose a product to the marketplace and secure a positive “Proof of Life”. This strategy has proven successful over and over and minimizes the costs of a full-scale inventory build before the chances for success has been fully vetted. Our goal is always to minimize risk until we have a clear positive green light from buyers and professional decision- makers in the product’s category.

We just returned from a Home and Garden Show in Orlando where we employed this strategy to successfully launch a garden tool. We secured a 10 foot display stand from show management (the smallest and least expensive in the show). For about $200 we had very professional vinyl signs created at a local franchise shop.

Our client had a friend with some creative photography talent and we utilized him to shoot stills of the product in action in a nice garden. The client’s wife did the voice over and we edited the photos into a video loop that we ran continuously for the duration of the show.
That brings us the most vexing question: How do you display product when you haven’t built inventory? We regularly have to address this issue. We have our graphic artist create art for the product based on creative direction that we provide. This art is the basis for the package that contains the product, a counter display and sales collateral.

We have one or two pieces of the actual product made. IMPORTANT! This must be a production quality prototype. It must have all of the features and benefits that factory production pieces will offer. Do not take shortcuts here.
These few pieces are the demonstration models that we use to dazzle the buyers.

The next step is to look bigger, a whole lot bigger, than we really are. We do this by using a boutique display presentation. We use the graphic art to create two, three or four counter displays. These are done at local printers, hand die cut and assembled. The front facing of the display contents are dressed with the graphics but are actually empty of product. Behind the front tier of graphically dressed, but empty product boxes, we have blanks to make the display appear full. Usually all dummy display contents are glued down.

The sales collateral is printed based on the creative we utilize on the display and unit carton. The brochure has embellished copy points and expands more fully on the unique features and benefits the product offers. Also included are pricing, terms, conditions and contact numbers.

The process I described saves our clients tens of thousands of dollars, shortens the process to market entry and confirms market potential, or very occasionally the possibility of failure. During these shows we also pre-sell based on a future delivery date that we have verified with our factories. These orders are often the basis for a funding round, or factoring of the purchase orders.

The essence of this strategy is simple: Our client’s may be the smallest entity at a trade show, but they have positioned themselves to be introduced among the big boys at a fraction of the cost most new products incur during market introduction. Executed properly, these strategies result in unleashing new excitement and energy to support and propel the invention into stores.