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Clark and Causey knew they had to market their idea to inventors first. After all, they needed something to sell. Advertising in inventors' magazines and working through associations and state offices helped. In six months they increased their line to 175 products.
But Causey and Clark had only the dimmest vision of who their retail customer might be. As it turns out, NPS tends to attract an older customer, mostly a low-to middle-income home owner browsing for gadgets. Consumer advertising -- often budgeted at up to 10% of revenues in retail operations -- has been unnecessary. Coverage in both local and national media has kept traffic brisk. Still, Causey and Clark see more curiosity seekers than serious buyers. And the fact that NPS's products are so new, even foreign, to customers means that more staff and service are needed on the sales floor.
Of course, many products will probably never sell. Take the Texas-shaped spice racks, stacked ceiling-high in the back room. Or the Dine-therm, a 10-pound plate-warmer, which has sat stone-cold on the shelves since it arrived. "I don't think it's ever going to take off," Clark says. But who's worrying? With no cash outlay, the two could afford to turn over as little as 32% of their inventory. "It's impossible to lose money on a product," says national account executive Dan Jennings. "If we don't sell the thing, we still haven't lost."
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Is this attitude cavalier or just plain crazy? Perhaps neither, when you consider NPS's chameleon-like approach to the market. Causey and Clark hope to generate revenues on a number of fronts:
* Retailing. This is simply their first plan of attack. "We want to get the products out there in bigger channels," Causey says. "We don't intend to keep them in the store. This is just a proving ground. If a product turns out to be a keeper, then we'll use its success in this store to push it into other stores."
* Wholesaling. Getting products into larger venues has so far meant making cold calls on reps and distributors. It's true that wholesaling to a rep or distributor cuts NPS's margins. "But it's the only way we can get into the chains," Causey says. Under those deals, they settle for 5% to 10%, but volume more than compensates. Out of several hundred new products a year, the founders expect to sell 3% to 5% through Walmart or K mart stores. So far Causey has persuaded four smaller distributors to take on products, one of them his Lawn-sak. Although he imagines at some point distributing some products himself, it's easier on cash flow to rep the products and let others distribute them. "We can let someone else worry about warehousing, selling, and shipping the stuff."
On the international front, where the partners expect to sell $131,000 this year, a Japanese distributor is expected to take on four products, and Causey is talking to a company in Taiwan about manufacturing products to market there.
* Brokering. Manufacturing remains the rub for several of Causey and Clark's inventors, many of whom crank out products from their garages. So Causey finds himself the middleman. "Inventors show up looking to put products into production," he says. "Manufacturers come to us because they know we deal with inventors and we've got products." But occasionally, manufacturers come peddling products of their own.
Take Solera Inc., for one. The Taiwan-based development and manufacturing company wanted to break into marketing in the United States with a line of solar-powered consumer electronic products. "We had been turned down by many retailers and established reps," says company vice-president Michael Hsi. "It was very frustrating." The company slotted four products with NPS to test the retail waters and prove their market. Solera plans to introduce future products the same way.
* Test marketing. Determining pricing, packaging, and markets can be uncertain tasks even for large companies, but they're downright guesswork for many inventors. That's why Clark and Causey decided to offer a $1,200 test-marketing service to eliminate some of the mystery. "By test marketing we find out if a product can sell retail, how many will sell, and whether the product belongs on the shelves at all," Causey says. He realizes that one sampling from one site may not amount to full-blown market research, but contends it will at least determine whether an item is priced and positioned right. As the company grows by adding other locations, its test marketing should become more competitive.
* Direct sales. Clark and Causey are hoping for a joint venture to publish an inventors' magalog as early as this year. But first, they have capital and supply shortages to overcome. They'll begin mail-order sales with a few products that can be produced quickly and in quantity, Causey says. Then they'll gradually expand their catalog line. Finally, for a base price of $2,500 plus 5% of sales, they will produce and place direct-response video ads for local television markets.
On the drawing board, at least, it all adds up to first-year revenues of $937,113. Clark and Causey's suppliers will pay them slotting and test-marketing fees. The partners will open two new stores and see revenues from retail, wholesale, catalog, and video-ad sales. "We hope to do business with everybody," Causey says.
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The founders' ambitious growth strategy is plotted on the map that hangs behind Causey's desk: 20 stores in 20 cities in three years. They expect to have the first 2 open in Boston and Atlanta by summer, if joint ventures go through as planned. Chicago, Orlando, Hartford, New York City, Phoenix, Los Angeles, Miami, and Washington, D.C., will follow.
Clark and Causey claim it will take as little as $600,000 to $2 million in equity investment to do that. If Causey can raise the money through venture capitalists, he will move the Irving store to a better site in the same mall and undertake a $150,000 store design and build-out. He'll hire two experienced marketing pros to address "weaknesses we know we have." And he'll begin the expansion mapped out above his desk. That's Plan A.
