I'm No Copycat

So says Belvin Friedson, who insists there's more than one way to be innovative.

By Bernard Swartz | 
 

Belvin Friedson hears a lot of complaints about how his company lets competitors spend money on innovation, then knocks off their products with lower priced copycat versions.

Friedson is perfectly happy to agree with his critics that he isn't a product innovator. Friedson is founder and chairman of Save-Way Industries Inc. of Hialeah, Fla., a worldwide manufacturer and distributor of personal care products. Though he's only a gadfly to such giant rivals as Gillette, Clairol, Norelco, and General Electric, Friedson has built a company of respectable size: 1980 revenues broke the $50-million mark. Most of that revenue, moreover, came from sales of low-cost products made in Hong Kong and marketed through wholesale channels to discounters, retailers, and mail-order catalogs.

But if Friedson is willing to admit that his company has never spent a lot of effort and money trying to invent a better hair dryer, he does lay claim to an entirely different kind of inventiveness. Save-Way Industries, says Friedson, has been a constant innovator in distribution techniques -- and that's just as important as product design. "We showed how to get a product off the shelf and into the hands of the customer," Friedson says. "We brought new thinking, new methods to the distribution of barber and beauty supplies. That's how we innovate."

Friedson points out that his techniques have worked so well that others have copied him -- extensively. Half the barber and beauty supply merchandise sold in the United States, he says, now passes through the kind of distribution channels he developed for Save-Way.

Friedson is an unlikely figure to have triggered a series of minor marketing revolutions. He grew up in Miami, attended three colleges without earning a degree, and set out to make his fortune selling chilled orange juice. When that didn't work out, he became a partner in a barber school, a business he knew nothing about.

That lack of knowledge may be one of the more important reasons he has been able to think innovatively about distribution. Soon after he joined the barber school business, he came up with the first of his ideas: He sold graduating students the tools and supplies they needed at a 20% discount. The alumni then turned into a loyal market for personal care products, which Friedson sold by mail order.

Until he started selling products to his alumni by mail, the professional beauty market had been a one-on-one, low-margin business for distributors. Mail order eliminated the need for salespeople, delivery systems, and other expenses. But it still didn't solve all the problems that Friedson saw, because it wasn't a very effective way of selling to the users. "The entire distribution system in the beauty and barber business was totally antiquated and needed complete revamping," he says. "The average order from a beauty shop in those days was $2.68. For that kind of money, it was difficult -- if not impossible -- to give shops the kind of service they wanted."

Friedson decided that the best solution was to eliminate service almost entirely. In 1963 he pulled together $45,000 from investors and opened a wholesale, cash-and-carry discount store for beauty- and barber-shop owners. "We decided that the store would drastically reduce the traditional costs of selling and distribution, while giving customers a good price and ourselves a good profit."

He was right. That single store has become Save-Way's Barber & Beauty Supplies division, which operates 42 company-owned units in Florida, Georgia, and the Carolinas. By 1966, Friedson had gotten out of the barber-school business to concentrate on his burgeoning distribution company. In 1968, Save-Way Industries went public and started to expand the mail-order business into the national market.

As the mail-order business expanded, Save-Way's competitors and suppliers began to notice the impact it was having on the business. The company was undercutting almost everybody on price, and that upset its suppliers. "We had such difficulty obtaining our merchandise from American manufacturers that we were forced to go looking elsewhere," he says. "The industry was trying to bang us on the head to keep us from growing. At the same time, other distributors didn't want the kind of competition we were giving them."

Frustrated by his suppliers, Friedson ended up in Hong Kong in 1973 looking for somebody to manufacture his merchandise. He found that somebody in a group of Chinese businessmen called the Durable Electrical Metal Factory Ltd. Three years later, Friedson and the Chinese group started a joint venture to manufacture appliances. With Friedson's help in modernizing their manufacturing processes, the Chinese began to supply Save-Way with "knock-offs." Friedson likes to refer to it as "emulating" a product. "I hate to use the word 'copy," he says.

Friedson really bristles at the idea that he's doing something bad. He uses the example of hair dryers, the first product the Chinese made for Save-Way. "Products like dryers are in an open area," he says. "The dryer we had was originally produced by a U.S. company. It was copied by one of the major companies and we copied that. The whole industry copies.

"Let's face it: There are very few innovations. Hair dryers have been around for about 50 years. The only big change that's taken place in that time is plastics, which enabled the dryer to go from heavy metal to something much lighter and cooler."

According to Friedson, Save-Way does do research and development on new products. But he refuses ever to lay claim to coming up with a truly new product. And he thinks his competitors ought to get off their high horse about their products. "How many people are doing anything original?" he asks. "There are some high-technology inventions, serious inventions, but not that many. I regard the television set as an invention. There are many things happening to TV now, but they're modifications of the original, not inventions. The same goes for the electric light. They are variations on a theme. Like most people, we just try variations in order to make things better."

In Save-Way's case, the variations have paid off. The company's gross sales began a rapid climb in 1974: from $6.9 million that year to $9.4 million in 1975 to $50 million in 1980. And the joint ventures in Hong Kong are now responsible for employing over 1,000 people making almost all of the company's appliances.

Friedson hasn't hesitated to continue innovating in distributing his products. At the same time he was getting into the joint venture to manufacture products, he opened a way to sell those products to retailers. Using a loss carry-back from a discontinued product line, Friedson established Save-Way's Windmere Products division. The division supplies over 1,000 retailers with prosaic and inexpensive versions of personal care appliances, mainly hair dryers and electric curling irons. In addition, Windmere packages captive labels for retailers who want a marketing edge in their area. The Windmere division now accounts for 59% of Save-Way's annual sales, and promises to be the source of most of the company's future growth.

And this year Save-Way is testing a new method of distribution -- direct sales to beauty salons, the technique that prevailed in the industry before Friedson came on the scene. Save-Way's new Pro-Care Research Labs division will sell an exclusive product line available to consumers only through salons served by Save-Way. So, in 13 years Friedson has come nearly full circle in his distribution innovations: from mail order to cash-and-carry to the retail market and now to a sort of door-to-door approach.

Despite a slowing in his company's growth rate last year (to "only" 26%), Friedson is now being paid the highest compliment -- his competitors have begun to copy him. Two large U.S. competitors are manufacturing products at the same plant in Hong Kong, and mail order and cash-and-carry are now standard methods of distribution in the industry. "All businesses are basically the same," Friedson says, "and you might as well sell the same products as the other guy because that's not what makes the difference. I'm going to keep developing our distribution thinking. I'll get Save-Way's products to the consumer and I'll do it with methods I think up."