Question

Topic: Strategy

Distribution Strategy For Easy-to-produce Gimmick

Posted by Anonymous on 2/8/2004 at 4:20 AM ET 125 Points
As consultants we are always discussing choice of strategy for gadgets / gimmicks distribution. Here is one of the nagging cases – hopefully you have some good insights:

A customer of ours have patented a gimmick/gadget that suits cars. We are now discussing what distribution strategy to recommend.
The customer might earn something like 5 cents per unit, so the mass sale is a must. And the major opportunity for mass sales will actually only occur twice in 2004.

The major problem here is that even being patented, it's very easy to manufacture the same gimmick cheap and fast. It is possible to initiate sales at say gas stations, or kiosks around a couple of states, yet at that same instance someone else will start manufacturing, and we will loose substantial market elsewhere.
The question is how is it possible to distribute without investing all earnings in the process?
We have discussed JV or renting the distribution means of existing brands with complete coverage (soft drink, candies, hygienic etc.).
Is this the right way? Are there more ways? On one side the customer requires complete coverage in one defined period and on the other we want to limit the cost of distribution.
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RESPONSES

  • Posted by Chris Blackman on 2/8/2004 at 7:21 AM Accepted
    This is an intriguing question that brings so many more questions to mind.

    One "quick fix" type idea, based on an assumption this "widget" is smallish. light, and low cost: Why not do a deal with an Auto magazine where you package the product as a 'tip-on" or premium gift stuck to the cover of an issue, like the computer mags do with Software CDs.

    If the mag won't spring for the cost, try getting it sponsored by some big rich company with their logo printed on it, so it becomes the "BrandX" widget. Plus all your re-orer details, web address, etc if applicable.

    Gets you distribution immediately, nationwide, and uses OPM, the best!

    If this won't work, try plying the guru base here with some more helpful info, like how big/heavy is this thing, will it be a repeat purchase or a one-off, etc?
  • Posted on 2/8/2004 at 9:01 AM Member
    Hi,
    Although it's hard to say exactly how to distribute an unknown product, I agree with Michele about one-shot distribution. Another idea that goes with that: co-market. Especially with some well-known global charities. This differentiates you from competitors you'll have in the future because it buys in customers and creates switching costs.
    Good luck and have fun with this!
    Ricky
  • Posted by Blaine Wilkerson on 2/8/2004 at 11:18 AM Accepted
    I would take the MALL KOSK route. Why?, it works at a TREMENDOUS pace and gets massive exposure.

    Don't worry about paying for the kiosk space, employees etc yoursleves, the mall corporations have big lists of kiosk owner/operators who are always on the hunt for products to sell in their existing kiosks and/or seasonal kiosks. Send the Mall corportations samples of the product for approval along with a price list for wholesale ordering and shipping. They will contact you AND their kiosk operators to get the ball rolling. Your best sales are going to be at Christmas time here in the States. You will make 10 times as much money from Oct-Jan verses Jan-Oct. I have done this many times and IT WORKS!!!

    I would jump on this quick. The toy show is coming up soon and retailers will be making purchasing decisions very soon. plus, if you get a big bite with the malls, you will need to notify your manufacturer so they can prepare for the extra load.

    As far as knocking off....it's too late...at least this year. As you may know, molds cost 10's of 1000's of dollar to purchase and design, 1-2 months to make, several thousand dollars in test samples and new packaging, THEN they would have to try to beat you to the market which is already at your finger tips!! Don't worry, this year...a knock-off is unlikely.

    You may also increase profit this way. I don't know why your client's profit is only $0.05, but at that low of a margin, you can raise your wholesale cost to the kiosk owners so they can meet the "standard impulse retail price" of $9.99 US and they still stand to make at least 100% profit. Sell them for $2.30 each or something ( I don't know your specifics).

    You see, the kiosk owners pay for the mall rental, kiosks, AND your product. All you have to do is take orders and ship them out! The malls skim the profits of all retailers so they will naturally promote your items along with the kiosk owners' own ads. All of this kills two birds with one stone...distribution, and preserving capital.

    If you need contact info, shoot me an email. I know how to get your foot in the door!

    Good Luck!!
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