Introduce yourself to the concept of networking for profit with Tom Peters's Liberation Management (Knopf, 1992, $27.50). Some chapters will have you wondering why any companies ever chose vertical integration in the first place. Strategic-alliance consultant Beth Perdue of CPInternational, in Boston, likes Charles Handy's provocative The Age of Unreason (Harvard Business School Press, 800-545-7685, 1989, $12.95), because "it shows you what a pared-down company should look like." Jordan Lewis's Partnerships for Profit (Free Press, 800-257-5755, 1990, $29.95) is good for the basics of designing and managing a strategic alliance. "Lewis is at his best when he's teaching how to choose partners and develop effective relationships," observes Perdue. Mancuso, on the other hand, praises A. David Silver's Strategic Partnering (McGraw-Hill, 1993, $29.95): "Dave's appendix of partners is one of a kind."
Another recommendation comes from Harry Brown, president of Erie Bolt, a maker of metal parts in Erie, Pa. Brown, who outsourced his way from near-failure to profitability (see "Make Love Not War," August 1988), says Jessica Lipnack and Jeffrey Stamps's The TeamNet Factor (Oliver Wight, 800-343-0625, 1993, $25) is a cutting-edge how-to on cultivating and sustaining mutually beneficial teams. Brown adds that when his managers run into bottlenecks, they instinctively refer to The Goal , by Eliyahu Goldratt (North River Press, 800-486-2665, 1992, $19.95). "It challenges our thinking," says Brown. "It assures us that we're not just a manufacturer anymore. We're part of a business system."
One more resource: the Networking Institute (617-965-3340), in West Newton, Mass., helps companies form their own networks through consulting, workshops, publications, and software.
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Discounts 'R' Them
The 99 Cents stores are booming in the suburbs. I'd like to start something similar. What do you know about this kind of business? And what are the keys to success?
Berthe Marquart
Edison, N.J.
Discount retailers profit from the sheer delight consumers feel when they're stretching a buck. With the U.S. economy still looking limp, it's no wonder shoppers are hitting factory outlets, wholesale clubs, and dollar stores in record numbers. Today at least 10 major chains operate 1,250 dollar stores nationwide; the rest are independents. There's room enough for new players, but it's anyone's guess whether upstarts can endure: high rents and ineptitude have already tumbled many operations. If success means longevity, the keys are finding dependable suppliers and knowing what sells.
Relationships with loyal suppliers are essential in this business; regrettably, you won't find them overnight. Even with their head start as wholesalers, the founders of 98 Cent Clearance Centers, a 29-store chain based in North Highlands, Calif., have spent the past 15 years determining which suppliers consistently come through in the clutch. It's taken trade-show appearances, countless referrals, and lots of handshakes, says partner Eric Leon, who recommends wholesaler shows sponsored by the Associated Surplus Dealers/Associated Merchandise Dealers (800-421-4511; shows are free to buyers). Ask for the association's latest Exhibitor's Guide, which lists up to 4,000 dealers. Its monthly journal, TradeNews , read by more than 80,000 buyers and sellers of surplus goods, is crammed with informative articles.
Leading chains claim that keen merchandising and negotiating skills helped them get and stay ahead. Gary Kastel, communications director for Value Merchants, parent of Everything's a $1 stores, based in Milwaukee, says it helps to have a nose for product quality and an ability to sense value among similar products. "Recognizing what customers want is one thing. But you must consistently provide what they want." That takes negotiating the best possible deals on every level, from leases to store design to product. The National Retail Federation (212-631-7400; memberships start at $95) is great for instructional workshops and networking.
As for market research, demographics are crucial. Discounters thrive on volume purchases, so shoot for a location accessible to at least 50,000 people within a three-mile radius. Heavily trafficked commercial districts or shopping plazas work nicely; what's ideal is a lot next to a large anchor retailer that's lured the value-conscious for years.
The Small Business Administration has brochures (50¢ to $1 each) for start-up retailers on selecting a location, writing a business plan, buying, and marketing. Call 800-827-5722 for a directory of the brochures and videos offered.
It's important to operate efficiently and seek advice from competitors and suppliers. Too often, start-ups make the mistake of trying to sell more when they should be focusing on buying the right product. Selling comes naturally, observes Kastel, "when you know who to buy from and when." n
-- Reported by Karen E. Carney, Vera Gibbons, and Stephanie Gruner.
