By Karen Zeller (Contributing Writer, Women 2.0) As a female entrepreneur who has successfully sold her second boutique consumer goods company, Dante Pauwels is always on the move for solving design related challenges. She has recently sold her share of her second company, originally "Dante Beatrix" now Beatrix NY, a New York based children’s accessories company.
A graduate of Stanford University’s Product Design Program, she has been drawn throughout her career to solving problems through brainstorming, continual investigation and incremental improvement. Here is her advice to those of us interested in building a company around a new, hot consumer product:
Product: You might not necessarily start with a target market or product category defined. One way to start is through observation. Understand what groups of people are doing, how they are doing it and why. This can help you understand needs and may reveal unexpected realizations about a particular situation.
Pricing and Production: How you design your product, price it and what potential market you reach depends very much on production. The cost of materials, steps in manufacturing, and where you are producing your goods significantly impacts how quickly your product gets to market, in what quantity and how much it costs to produce.
Larger cities in the U.S. will have small fabrication shops for textiles, plastics, wood and other materials. (Producing things locally to start may be the best way to go as it will allow you to manufacture in much smaller quantities than you would overseas. The cost for production per piece will probably not be sustainable as you grow, but this will allow you to test your product before you sink loads of money into inventory that might not sell). This allows you flexibility to produce in lots of 10-20 items and costs a few thousand dollars or less. The downside is cost per piece for production is many times higher and the profit margin per piece sold is much lower.
After struggling with high production costs in local NYC factories for several seasons, Dante’s first production was sent overseas.
To find a factory, she networked and asked around with her raw materials suppliers to find out if they had worked with overseas producers who could be trusted. Finally she had met the vendor she had settled on at a tradeshow for her product category. Initial months were spent developing the relationship; making incremental investments by having the vendor build different prototypes, and visiting the factory itself.
One recommendation is to see what other companies are producing at the factory and what quality is being produced. Hopefully other purchasers are making non-competing products; talk to them and find out about their experience with the manufacturer. Manufacturers generally expect to be paid at least 30% upfront before they begin production for your product, and the remainder before they ship it to you. Most production minimums are in the hundreds for soft goods (such as bags and clothing) and in the thousands for hard goods (like plastic or metal items).
There may be an additional tooling charge for anything where a mold is required for production. For seasonal products, having a manufacturer who can reliably deliver with quality on time is critical to your success. Delay is the difference between a successful season vs. money tied up in inventory that won’t sell.
Pivot: Be prepared to adjust your strategy. In Dante’s case she initially focused on tote bags for working women. The women’s fashion market proved fickle and competitive. When one bag in her line, a baby bag, started to sell well, she saw the chance to segway into another market. She took the business into baby bags, and from there branched into children’s bags. The line is now solely dedicated to, a much more stable market then women’s bags.
Positioning: Know in advance where you want to see your product. Visit different retailers and talk to a buyer or store manager. See if they have similar categories of products and ask out how many per month they sell of those products. You can begin estimating how many you can sell for a city or region.
Once your product is ready to hit stores, make sure it is delivered and packaged in a way that is as foolproof as possible. At this point you have no control over how your product is displayed and where it is located. The more you provide your product in a way that is easy to unpack and stick on shelf or display, the better.
About the guest blogger: Karen Zeller is software professional, holding progressively responsible positions in technical communications, program and product management. Most recently she has been working in a 75% legal and administrative position at Stanford while raising a young child. She volunteers for non-profits including RailsBridge and Women 2.0. Karen holds degrees in Anthropology and Finance from UC Berkeley and a J.D. from Stanford University School of Law. Follow her on Twitter at @karenzeller8.