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Challenges, problems, and triumphs -- from a manufacturer's perspective.

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WHATEVER HAPPENED TO STRAWBERRY?

Does every new product have to be cheap?

by "Vinny Da Vendor" (June, 2003)

(Note: "Vinny" is a top executive at one of the industry's most well known manufacturing companies. He's using a pseudonym so he can speak openly about issues that affect vendors.)

Product Launch is a time of tremendous excitement. You finally get an idea onto paper; an idea that was stuck in your head for many months. You present it to your product development group. Finally the news comes: it has the green light to be taken to market! The excitement is unbelievable!!

A project manager is assigned, engineering drawings are created, and a prototype is produced and run up the flagpole. Three rounds of modifications, and finally, you have the pre-production samples which are test marketed to several focus groups of consumers. More modifications and a final focus group test, and we are now ready to work on the marketing materials and set up buyer appointments.

Costing gets other departments into the act, as issues regarding component lead times and trade-off costs come into play. A product cost sheet is arrived at and a MSRP (Manufacturer's Suggested Retail Price) assigned with varying price discounts to be available to the customer base. Brainstorming sessions go into the wee hours to cover proper presentation materials and discussion points for the big meeting with the key, big-box retail buyer.

An hour after the meeting was to occur with the big-box buyer, the CEO is screaming "Where the {expletive of choice} is the feedback from our salesman?!?" He's worried as if his life depends on acceptance of this new line. (By the way, it does: he has everything he owns sunk into this business.)

Finally the salesman calls in: "The buyer liked the idea but appeared sort of ho-hum on it because of the price. The buyer would take it, but only at half the retail price/cost that we proposed."

Your hopes shrinks like a wilted helium balloon several days after the fair.

Immediately thereafter, the distraught CEO raises the question: is there a chance to jettison critical elements of the product to cut the cost in half? More wee-hour brainstorming ensues.

Ultimately it comes down to two flavors:

In Vanilla we have the company turning a Cadillac into a Chevy Vega, throwing off only 25% of the costs, and accepting an extremely low margin so as to not toss all the product development costs out the window and to get this line to market.

But, the consumer knows a souped-down Vega when it sees one, and the necessary sell-through never quite occurs due exclusively to the bastardization of the product.

The ultimate slap in the face arrives with the markdown, charge-back paperwork, this on top of the fact that you already had provided cash discount and volume rebates, and have no recourse against the salesman for his sales commission as well.

The other flavor is Chocolate which has the vendor accepting defeat, scrapping the product launch before more costs are expended. An exciting new line disappears due to one buyer's rejection after a quick look-see and being unhappy with the price point. Proving once again, Big Box Retailers rule crafts!

Whatever happened to Strawberry? Mom would pay ten cents extra for Strawberry because she knew I loved the real chunks of strawberries in it. And despite Mom telling me she was not happy with the price, she knew I would pay the extra dime from my allowance if she made me.

Customers know quality when they see it. Strawberry is a vendor telling customers: "This is the price; I am sure you will be pleased with the results, but I am unable to lower the price without lowering the quality. I am proud to say our quality is non-negotiable."

I am saddened that we are in a period where creativity realized through innovative, unique products is shown the exit door. And why? Because one buyer believes incorrectly that for so many consumers, price is the only thing that matters. Buyers feel they know the consumers' pocketbooks so well that the consumers' likes and dislikes are irrelevant.

When did we move from a quality-conscious, consumer-demand-driven, creative-unique retail environment to flea-market-pricing, me-too retail stores that are so unattractively filled with only same-old vanilla products? When in fact we are in a design-driven (not price-driven) industry called CRAFTS?

Craft Manufacturers: I wish you great success with your product launches!

(Note: Have any comments about Vinny's article? Or topics you'd like him to discover in the future? Call Mike Hartnett at 309-925-5593 or email mike@clnonline.com -- on or off the record.)

REACTIONS TO VINNY'S "STRAWBERRY" COLUMN

Vinny is absolutely right, and absolutely one-sided 

VINNY IS RIGHT!

"After reading Vinny's article, "What About Strawberry?" I have to write and say Bravo!! The emperor IS naked!!

I have a small manufacturing business selling handmade aromatherapy pillows and soft-sculpture figures that are entirely design- and quality-driven. In the last three years I've seen buyers go from appreciating the uniqueness and quality of my products to just asking the cost.

In response I designed a sachet in a matchbook that wholesaled for $2.50. Never in my "art days" did I think I'd make a product so low priced. (I've sold my collectable dolls to Nieman Marcus in the wholesale $100 range.) At any rate, I was proud of the fact that I could compete in the marketplace that continually calls for cheaper, cheaper.

My joy was short-lived when I discovered that there is a brain-wash going on in the retail world that is ruled, as Vinny said, by "price is the only thing that matters."

I've stopped doing trade shows, cut down to only 10 reps, and am reassessing why I do creative work in the first place.

My only hope is that there will be a backlash when consumers (hopefully) realize they are being sold shoddy and "same-as-the-next-guy" merchandise. That's why, in this dreary economy, I'm back to making my unique, soft-sculpture figures that retail for $150! I refuse to sell my soul for a buck!

Thanks for the format to vent and thank Vinny for speaking the truth! I look forward to reading more on your site. -- Peggy Flynn, P. Fynn Design, Inc.

VINNY IS ONE SIDED.

Vinny has a wonderful ability to write. However, he does see things only from one side. I have had MANY buddies who used to be buyers and left. When they were no longer buyers, they would share things, such as 50 vendors calling each half hour, all vendors telling them how great their stuff sells at chain x, y and z., etc.

The buyers will not change. I have seen buyers come and go, and the vendor will never be in control of the Wal-Marts or the Michaels of the world. Vendors will always be brought to their knees. Buyers are in control and always will be, EVEN with hot items!

Vinny obviously has little time for how the buyers treat us. But they still do pay his salary.

Do I sound like I am on the buyers side? Hell no, as they have "robbed" me many times over the years. But I was brought up in life to understand the concept, "every story has two sides." Vinny only is looking thru his glass walls!

By the way, I wish I could figure out Vinny's real name!-- Large manufacturer

xxx

COMMENTS FROM READERS

(Note: The following are responses to Vinny's column -- see below -- "Whatever Happened To Strawberry?")

I. The Power Base Has, and Is, Changing

Back in the early 80's, when there was 30,000+ craft stores we could take almost any kind of half-assed idea to a craft show, get some orders, and find out what the consumer thought. Today three or four people call most of the shots, but that is changing again. Very soon the consumer will rule like NEVER BEFORE. -- Manufacturer

II. Stop Complaining!

I had to comment on "Whatever Happened To Strawberry" and "Are We Stifling Creativity?" [which appears in the Business-Wise section]:

These are not a new concerns, and I am amazed at how our industry clings to these long-debated issues. It just makes our industry sound unsophisticated and whinny -- like some grandfather pining for the "good old days."

While our industry debates these 20-year-old issues, other progressive industries and manufacturers are creating new categories, developing fabulous products, and helping their big-box customers sell more of their stuff.

If you build an alliance with your customers and become an invaluable vendor, they will pay a premium -- or at least the maximum that the market will bear.

These authors and industry pundits should analyze their own spending habits. Do they go out looking to pay the highest price for a bottle of shampoo? Do they like to shop in trashy little mom & pop stores?

Ultimately, the consumer determines the purchasing price -- and the environment in which they wish to shop. Our big box customers provide that environment. We "rent" the shelf space. It is our job -- NOT the retailers -- to make great products that have broad appeal. Their job is to provide a sales-conducive environment, keep the shelves filled, and yes, offer the latest and greatest.

It is my experience that the primary concerns of our key buyers (with a few exceptions) seem to center on four issues:

1. Being first to offer new product ( a lot of pressure on these buyers to energize planograms).

2. Raising the average. sale/margins while offering solid value to consumer. (We are being asked for more kits, value packs.)

3. Effective consumer pull-through programs. (consumer education/demos, etc.)

4. Attract new consumers.

The authors need to get out of their 70's/80's cocoon and realize that you have a much better chance of a successful product launch when you can get the product into 500-1000 stores in one stroke of the pen. Yes, there is a premium to pay for that luxury, but the instant data received is valuable, and revenues can be large. And the difficulties ultimately make us better.

Sorry for ranting, but I am passionate when it comes to fighting this culture focused on complaining about our biggest customers. They are not the enemy. It would be more productive to discuss how we can sell more to them and do it profitably. -- Sales Manager for a large manufacturer

xxx

 

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