The New Rules for Product Invention
Launching a successful consumer product company is like climbing Mt. Everest barefooted. With 80,000 SKUs at a typical Target, it's nearly impossible to introduce something unique. Not to mention raising enough capital to cover the costs of design, development, inventory, and marketing. And success invites competition, which can drive down prices and margins.
That's why Richard and Stephanie Smiedt, the pair behind bobble, chose a path around the mountain. And they chose wisely. Just two years after launch, they're on track to generate revenue of $40 million, with distribution in 33 countries, and over 40,000 retail stores. Their Facebook page has nearly 30,000 likes, with hundreds of photos from customers showing bobbles in unlikely places, like on the Matterhorn, and swimming with dolphins. Better yet, they got started without traditional investors, employees, advertising, or even an office. Here are some keys to their success:
Pick Products Backward
Most consumer product founders invent their own intellectual property. But Richard and Stephanie started with a theory about what type of product would make for a great business, and searched for one that already existed. "We wanted a product with an iconic design, that could be sold at an accessible price, to a massive audience," said Richard. They set their sights on one huge market: The confluence of people who drink water and care about the environment. They also looked for a product they could manufacture and ship quickly, with high margins and low costs.
Instead of tinkering away with inventions in their attic, they found a product that met their criteria on EBay: A portable bottle customers could fill from the tap quickly, that filtered water on the way out. Instead of buying the patented product, they licensed it from the owner in exchange for a share of revenue. Then they hired design guru Karim Rashid to develop a sexy bottle they could produce in just 10 days. The design they chose feels great in a customer's hand, and on their conscience: bobbles are made in the USA and are recyclable, shipped empty (and light) for a low carbon footprint - and each one filters the equivalent of 300 plastic water bottles, doing wonders for landfills.
Play Nice With Big Retailers
Says Richard, "To avoid fighting for budgets and shelf space, we created a new category, with disruptive packaging and traffic stopping point of sale displays." They made it a point to provide excellent customer service, including quick replenishment of inventory and meticulously-curated public relations support. And they managed to build in attractive margins for retailers, even at a low, "magic" price point of $9.99.
Do More With Less
In a business where months go by between producing products and getting paid by retailers, inventory is a killer. Ironically, the better you sell, the more cash you need, and it's not uncommon to grow yourself to bankruptcy. That's why Richard and Stephanie started with just one product version, in a single size, expanding only after their initial success. They created variety and impact on shelves by offering six colors, which could be changed at the last minute, to adapt to demand.
Slam the Door on Competition
"We secured exclusive rights to the patent behind the filtration mechanism, which bought us valuable time," explains Richard. That gave bobble a big head start - it would be years before competitors could emulate their approach, and by then they'd have a dominant market share.
As for financing, Richard and Stephanie tried but failed to raise venture capital. Instead, they turned to their own suppliers and vendors, who where so impressed they put up over $1 million in financing, and offered favorable terms. A few years from now, those investments may just have a trajectory as steep as Mount Everest.