Inventors are often unable to get their products to market
because they can't produce them at a low enough cost. As a
result, they face three unappealing choices: Sell the product for
no profit, price it above what the market will bear, or abandon the
idea.
If you're thinking there must be a better way, there is-find
someone to manufacture your product for less money. Sometimes
inventors try to set up deals with U.S. manufacturers to make the
product for the least amount possible. But when that avenue fails,
take heart: It just might pay to set your sights overseas-and hire
a foreign manufacturer instead.
On the Home Front
That's exactly what Brian Donnelly did when U.S.
manufacturers wanted to charge way too much to make his product: a
special chair designed to be easy to get out of. "I extended
the arms forward on the chair, so people had something to hold on
to when getting into or out of the chair," explains Donnelly.
"I also extended the legs outward so the chair wouldn't
tip over when someone stood up."
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Donnelly, 48, first started developing his LifeSpan Furnishings
product line back in 1992, when he was an industrial design
professor at San Francisco State University. By 1996, having
perfected the Easy Up design, he set out to either license the
product or hire a U.S. manufacturer to make it. Because he had
already won many awards for the innovation-including a gold award
in a competition from the American Society of Aging-Donnelly was
sure it wouldn't be too difficult.
Because his first version of the chair was made of metal, he
started researching that market: He looked at ads and publicity
releases in trade magazines (listed in Gale's Source of
Publications and Broadcast Media, available at larger
libraries) and browsed through local stores for similar furniture
products. He also searched state industrial directories (also
available at the library) to find manufacturers that made similar
products.
Eventually, Donnelly located three U.S. manufacturers and
presented his product to them. But his negotiations for a license
hit a dead end, as the manufacturers asked for too much money to
make the product. Having exhausted his domestic leads, Donnelly
decided it was time to find a manufacturer overseas.
Foreign Relations
Again Donnelly perused stores, looking for metal furniture made
similarly to his. He ran across some patio furniture made in China
that seemed ideal. The products were distributed by Iem, a company
in Riverside, California, with factories in China. "What I
liked about Iem was that they didn't just sell what the
factories made," he says. "They asked [them to make] what
they thought would sell." Donnelly approached Iem,
demonstrating the need for his product among seniors and a sizable
and growing initial target market made up of nursing homes,
assisted-living centers and home health-care stores.
Iem not only was willing to arrange for production, but was also
interested in investing in Donnelly's product. When Donnelly
decided to expand his product line to include wooden
furniture-which Iem doesn't make-the company helped him find
manufacturing partners in China for that, too.
In late 1998, when Donnelly was finally ready to launch the Easy
Up, he decided to first approach larger potential customers so he
could build up a distribution network. So Donnelly started out by
compiling a database. "I attended the American Association for
Home and Services for the Aging and the American Society of Aging
shows in 1999," he explains. "I sold to a number of major
assisted-living and independent-living homes and had a solid list
of leads for the future."
One thing Donnelly has always been careful about is keeping Iem
posted on his marketing plans as well as his projected sales.
Whether you're working with a U.S. or overseas manufacturer,
you need to be careful not to get its expectations too high. The
manufacturer will understand that you need to ramp up slowly and
will be happy to keep working with you. If you end up promising
more than you can deliver, though, the manufacturer might drop
you.
Donnelly has since found another way of locating an overseas
manufacturer. "In 1999, I attended the International Furniture
Fair in High Point, North Carolina," he says. "At the
show, there [were] many booths from Asian country trade councils
looking to find customers for their manufacturers back home. The
shows also had booths from many distributors of Asian-manufactured
products similar to Iem."
That's because major industry trade shows are attended by
global representatives on the hunt for U.S. companies that want
their products manufactured overseas. To find a trade show, log on
to www.tsnn.com or www.expoguide.com. If you can't attend a
show, call the show sponsor and ask for a show directory. Inside,
you'll find contact names and phone numbers for the exhibitors
and trade councils in attendance.
Donnelly's successful partnership with Iem has resulted in a
fast start for his LifeSpan Furnishings-sales totaled just under $1
million in 2001, after only two years in the market. And business
looks even brisker for 2002.
Now that he's acquired a secure base in the senior market,
Donnelly has started approaching mainstream retailers such as Sears
with the hope of entering the mass market by the end of this year.
According to Donnelly, "None of my success would have been
possible without the lower costs and continued support from
Iem." If you find yourself in the same predicament Donnelly
faced-with manufacturing costs squeezing your margins-hiring an
overseas manufacturer could help you turn the corner to
success.
Safety First
One of the big risks in dealing with an overseas manufacturer is
you have to provide an irrevocable letter of credit to the
manufacturer. The letter lets your bank transfer money to the
manufacturer when the product ships.
But what happens if the product ships too early, ships too late
or ships before you have a chance to approve the production run?
The letter of credit may transfer your money anyway. One way to
minimize this risk is to arrange for shipment through an
international freight forwarder. The forwarder can contact you for
authorization when the product is ready, and you can refuse
delivery if the order isn't correct. Forwarders also help you
with a letter of credit, customs and delivery information. To find
a freight forwarder, check the Yellow Pages of large cities.
Far and Away
If you can't find an importer or U.S. distributor to help
you out, contact your state's Commerce Department, which
should have a department that offers import/export assistance.
You can also use a sourcing agent or work with a manufacturer
directly. Sourcing agents will not only find an overseas
manufacturer to make your product, but they usually have overseas
offices to give you easy access to the foreign manufacturer.
Regardless of whether you work with a sourcing agent or a
manufacturer, make sure you inspect the first few models off
the assembly line to ensure they're up to snuff.
For more information, try the following websites:
Sourcing agents:
Direct sourcing:
Don Debelak is a new-business marketing consultant and author
of Think Big: Make Millions From Your Ideas.
Originally published in the March 2002 issue of Entrepreneur Magazine