As many fast-growing companies soon discover, too much demand for a product or service can be just as troublesome as too little. The challenge is to come up with a strategy that slows the stampede for the understocked product, but doesn't permanently extinguish its sales momentum.
Bruce Katz, president of The Rockport Co., a Marlboro, Mass., manufacturer of casual shoes, faced that dilemma last year when sales of his company's walking shoes started to spurt. Orders from around 3,500 retailers poured in so fast that the company couldn't keep up with demand. "It's one of those problems you think you want, until it happens," Katz says.
Concerned about alienating his market, Katz decided to try an unorthodox strategy. For the past year, he has been suggesting that retailers buy from competitors whose shoes are similar in price and style to Rockport's. "It hurts us to say, 'Buy from a rival," notes Jens Bang, the company's marketing vice-president. "But every time a shopper walks out the door, the retailer is going to miss a sale. If we're not up front about our situation, the retailer is going to hold us responsible. Ultimately, that's more dangerous to our business."
The company has also placed a one-year moratorium on opening new accounts, a move announced to retailers in a letter from Katz. And retailers are urged to order products as far in advance as possible, so that Rockport will be able to plan its manufacturing schedule more accurately. In addition, Katz plans to provide continual updates on the company's progress: A recent letter to all retailers reported on Rockport's new computerized inventory system.
Finally, the company has begun to redirect its marketing and promotion effort to focus on available inventory. In one advertisement, for example, Rockport substituted a picture of a widely distributed shoe for an especially popular walking shoe that was in short supply. Another tactic has been to temporarily stop advertising a toll-free telephone line for shoppers who want to locate retailers that stock Rockport's shoes.
The company hopes to catch up to demand by next spring. "It may be frustrating to pull back after gearing up," adds Bang. "But even with slower growth, our sales will increase from $65 million this year to $105 million next year. And retaining customer support will allow us to grow even more in the future."