When Melissa Cam launched Oakbrook Engraving in 1991, she never dreamed it would evolve from a home-based business to a retail outlet and then to a manufacturing facility, only to return to the entrepreneurial side, all while greatly increasing sales. “I did everything for everyone—trophies, plaques, custom gifts—I had one New Hermes 3000 engraver,” recalls Cam, who started out by engraving cat show plaques in her home. As the volume of her Westlake Village, Calif., business increased, she secured a retail location along a busy corridor. After purchasing sandblasting equipment, she moved off the retail strip into a warehouse in a nearby industrial park in order to meet the increased production demands in-house. “I became the ‘queen’ of glass engraving,” says Cam, who also subcontracted for a neighboring retailer who hadn’t invested in in-house engraving equipment. “I also had a 750-sq.-ft. showroom housing a retail business called ‘Wine Toys.’ I continued to do everything for everyone, but the business owned me.” With an ulcer, worry and no free time, Cam decided she needed to assess her situation. “I subleased 2,400 square feet to a sign business, and I stopped making everything for everyone. Now I sit at my desk, run the business, create solutions for clients and balance what we do in-house with what we outsource.” Cam’s solution is increasingly typical for smaller gift retailers who do not want to invest in capital equipment, expand physical facilities, meet the challenging demands of job volumes and production times, or handle volume shipping and fulfillment, says David Bloom of GoodCatch.com, based in Miami. “I consider myself a ‘manufacturer,’ and yet I don’t own one piece of machinery,” says Bloom. “If you are letting customers walk, you could be making a mistake. It’s all about doing the research, getting educated and finding the right job shop for a specific job.” There are instances, however, when the custom gift retailer might want to steer a customer to another source for imprinting and decorating needs. “For example, if we had a request for 100 towels for a corporate golf outing with a small profit margin per towel, it would not be worth it for us to tie up our [embroidery] machines, and there would be no room for mark-up to turn it over to a commercial embroidery job shop,” says Janine Jerominek, owner of Pretty Personal Gifts in Albany, N.Y., whose niche is personalized sterling jewelry, baby and mother items. Her company’s two Toyota ESP 9000 15-color embroidery machines are kept busy with her baby line. “You also have to ask yourself, is this a one-time order, or would this be the beginning of an ongoing relationship?” she notes. “You do what is right for the customer, so in this case it would be okay to walk away.” Gift retailers offer and produce personalized gifts and promotional products for their corporate, nonprofit and small-business clients. But all don’t possess the in-house capabilities to print, embroider or engrave all the items they can offer, either in small or, especially, large volumes. Can they—you—still get the business? Should you use an outside fulfillment specialist? JOB SHOP SAVVY Job shop imprinters and decorators agree that if jobs don’t quite fit a retailer’s capabilities, they don’t necessarily have to be turned away. “Because much of the equipment that is designed for smaller shops may have limited production capabilities, or the retailer has a specific niche, retailers and smaller shops should not turn down jobs that exceed their in-house capacity,” says Ted Bauer, president of Laser Magic Inc., in Hudson, Wis. Established in 1985, Bauer’s company offers CO2 and YAG laser imprinting and marking, pad and screen printing, and full-service art, production and fulfillment. Job shops can be key in helping gift retailers expand their businesses, without making much, if any, additional capital investment, Bauer says. “As a subcontractor or job shop imprinter, we have made a living out of helping people expand and improve their business lines. We can prepare the art, imprint the product, handle all packing, shipping and fulfillment, and never interfere with the relationship between the gift retailer and the customer. That’s what job shops do.” Retailer Cam says there are some tradeoffs. “There might be a smaller profit margin on outsourced jobs, but I am buying peace of mind and time to do multiple smaller jobs. While we use outside suppliers for some jobs, we also act as a supplier for other businesses. Profits are up, and stress is reasonably down. It frees time to do the things we excel at in-house.” Currently, Oakbrook Engraving employs a Vision Engraving rotary engraver, Epilog laser engraver, inkjet sublimation and sandblasting equipment. “Part of my business plan was becoming an ASI distributor [of promotional products],” Cam says. “I can supply large quantities with art and logos on it—from magnets and mugs to Weber Kettle grills—easily and efficiently. I have a huge, interesting selection of goods that I don’t have to figure out how to imprint.” DETERMINE IN-HOUSE COSTS, CAPABILITIES Several best practices should be put in place when determining what and when to outsource and then selecting the right job shop for the work. First off, custom gift businesses should determine if the job matches in-house capabilities by looking at all costs involved, including overhead, equipment, supplies, maintenance, labor, shipping, waste and other related expenses. “You have to figure out your capacities and what you need to charge per hour,” says Sharon Blumenthal of Initially You Too-Personalized Presents Plus of Beachwood, Ohio. Her company specializes in personalized and handcrafted gifts catering to a variety of customers, including select retailers, schools, sorority/fraternity members and corporate accounts, so her needs vary with each job. Her online store, Names2U.com, is a valuable marketing tool for the online portion of the business. All engraving is outsourced, but custom embroidery and handpainting is done in-house. “My son has started a new business [www.specialclient.com],” Blumenthal said. “For his needs, we can only produce a certain number of custom embroidered blankets [on Blumenthal’s two machines] per week, so as he grows the company, we will have to outsource the job. As a rule, if or when I can’t do it, or if I can make a good margin without touching it, that’s when I outsource.” EDUCATE YOURSELF The job shop can play a critical role in educating gift retailers on when to outsource corporate gifts and promotional items as well as the best methods and materials to meet customer expectations, says Laser Magic’s Bauer: “The experienced job shop has a depth of products they’ve imprinted, and this knowledge can give the retailer a big picture of the possibilities. This will open up the dialogue between retailer and customer, so they can think in bigger numbers and larger projects for their customers.” In addition to talking to subcontractors, one of the best ways to gain knowledge about different imprinting methods and materials and job shop capabilities is by reading industry-related magazines and attending trade shows. “A good place to start is to attend shows like the ASI Roadshow [asishows.com], which admits non-members who show a business card related to the promotions industry,” GoodCatch.com’s Bloom says. “Trade shows offer a wealth of information.” Sources also can be found by conducting searches online and in business directories. But, keep in mind, advises Bloom, that the “Internet is not your friend. It is often your competitor. The good news is [that although] most Internet-based discounters are not only less expensive, they’re delivering (or not delivering in a lot of cases) garbage. Put the company name and the word “sucks” into a search engine and see what you come up with; you’ll be amazed at what you find. Also, be leery if the website badmouths brokers or distributors.” Promotional products distributor programs, in which a retailer buys into a sample program, can be a good regular resource for specific products and are usually very profitable relationships for little investment. One of the best ways to find the right job shop is by getting to know the competition and attending business networking events. “I keep apprised of my competition and sources,” says Blumenthal, of Initially You Too. “Often my competition becomes my wholesale source. With 35 years in the business, I know this business is based on relationships, and I’m friends with most of my competitors. If I can’t do it because I’m booked, I can call a competitor who can get it done for me.” DEVELOP RELATIONSHIPS All business is about good communication and relationships, and when a retailer establishes regular volume in one area, there will be some advantages. “It is important to find a company with which you can work closely,” says Bloom. “On many occasions I will send a job shop the artwork in the morning, they will ship it the same day, and they won’t charge a rush fee. But you have to have the volume to establish those types of relationships.” The job shop can assist the retailer in many areas, such as artwork preparation and streamlining the ordering and fulfillment. “You should find out if the subcontractor can offer support through the graphics cycle and by supplying prototyping or samples,” says Bauer. “That is one big way to help the retailer. Another is fulfillment and drop shipping under the retailer’s label. It is a seamless way to get the job directly to the customer.” When seeking a subcontractor, ask for references, referrals, samples and an example of the proofing and order processes. If you can, visit the job shop or send a test job. In addition, Bauer says, seek competitive quotes with clear, written specifications and ideas about customer’s expectations. “If you need 5,000 engraved key chains, make sure that you communicate to the job shop that the customer wants it a little dressed up or upscale, if that is the case,” he says. “Let the job shop know how the item is to be used or how durable it needs to be.” Cam adds that “The most important thing to me is a personal referral to a supplier. For example, for an order of 10,000 from our Logomall.com website, I would have hunted down the product and then used a local large-scale embroidery supplier. A friend in the business referred me to a company that supplied, embroidered and shipped a product from their New Jersey warehouse. The transaction was blissful.” Bloom advises to use manufacturers “who sell strictly ‘to the trade,’ and never charge a customer more than the vendor would charge the customer if they contacted them directly.” ESTABLISH CONSISTENT ORDER PRACTICES Pretty Personal Gifts’ Jerominek has a standard list of questions that she asks prospective job shops. First, she inquires about the preferred method for order transmission: fax or e-mail. “Always put it in writing,” she says. Secondly, she asks about shipping and quality: Which carriers are used, how orders are tracked, and what policies are in place for missed deliveries, damaged items or errors. She also asks if there are back orders on certain items, cut-off dates for ordering or other production lead-time concerns during holidays. “One good tip is if you are drop shipping, you need to establish a comfort level. For the first few orders with a new supplier, you will want to pay a little extra and have things sent to you first to see if they are correct.” Finally, she asks about error return procedures and the responsibilities between the client, the retailer and the job shop. Discussion about loss, scrap and potential problems are very important. “A reliable job shop will always give you ample time to proof and sign off on artwork or a preproduction sample prior to production,” says Bauer. “This should eliminate errors. There should be clear practices in place to solve any problems.” While most job shops will provide a set of baseline prices to retailers, there may be some room for negotiation. “A lot of jobs will come back year after year, so we have customer service personnel who serve specific accounts,” Bauer says. “That promotes communication between our shop and the retailer, who is ultimately taking care of the customer’s needs and expectations.” Purchase orders, notes Bloom, “should specify ‘Must ship on/before X date via ground freight,’ and then make sure they pay the difference if they have to ship by air. A purchase order is an enforceable contract. Beware of per-box handling charges. Get written confirmation from all vendors.” Further, Bloom says, “don’t run your customer’s credit card until the order is complete. The vendor/manufacturer will frequently make over-runs which you will be paying for. Charge the customer for all over/under-runs accordingly and all freight charges.” DETERMINE PROFIT MARGINS, CLIENT END COSTS The retail price in the market is key to establishing prices. “It’s all about perceived value,” says Bloom. In general, when a retailer becomes established as a wholesale account, profit margins can range from 25-100% of the cost of an item, depending on volume, Bloom notes. Another way is to compare prices in catalogs from the ad specialties industry. “Use the expertise of those companies,” says Cam. “They have experience and know-how to determine how much it costs to deliver a product to the client. “It is crazy to look at an item that is generally supplied at $50 and think you’ll sell it for $30 because you can buy it blank and engrave it in-house. Don’t undercut the value of your work, and don’t work for free.” There’s a lot of invisible work that goes into an order. “When negotiating with the supplier, know your costs, what your profit needs to be, and see if they can supply you at your fair cost,” Cam continues. “Consider how long you will spend on the job, from the moment the client walks in the door to the follow-up call after you’ve delivered the goods. Count all the moments. You have to chat, you have to source the item, find an imprinter and make the purchase order.” PROMOTE EXPANDED CAPABILITIES It is important to toot your own horn in promoting yourself as a solutions expert. Customers typically have an idea of what they want, but will rely on you for suggestions and bringing the idea to reality in a cost-effective manner. “It’s all about branding,” says Bloom. “You need to be creative in sending out things to promote your business. It’s all about eyeballs; everything has to look very professional. For example, you’d be surprised at the result of putting a sign up like, ‘We do custom work.’ You’ll be amazed at how many people will see that and ask about it.” Other ways to promote such expanded services as handling promotional products and corporate gifts include a recorded message outlining capabilities on your voice mail and telephone hold system, as well as having samples of previous work in the store, creating a catalog and having an easy-to-navigate, professional website. While outsourcing promotional products and corporate gift production seems a simple solution to increasing profits, Cam may have learned her lesson in a roundabout way. “Your clients don’t have to know you don’t do everything yourself,” she says. Yet you’re getting the business you might have let slip away.
Expand Your Capabilities With No Major Investment
December 2, 2009