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Striking Gold

Can you turn your thriving wholesale business into a successful retail one?

Q: I am a successful small-scale jewelry manufacturer. We distribute to local markets, but the direction we would like to go in is retail. Although we are well-equipped to open a store, our products are popular in the stores already--even though we have not established a brand name. Our customers sell our products as their own designs and resist every attempt we make to establish our own name. Our main concern is that going retail will cost us almost every account we've got. Is there a way for us to do this without losing our existing customers?

A: Vincent Polisano is president of Diana Vincent Inc., a fine jewelry design and manufacturing company in Bucks County, Pennsylvania. Diana Vincent distributes its designs through exclusive retailers worldwide and operates a retail store selling its designs and those of other leading manufacturers:

Don't assume that because you are a successful small-scale jewelry manufacturer you are automatically qualified to become a successful retailer. Anyone can rent space, put up a sign, and stock a store with inventory and employees, but becoming a successful retailer also takes vision and an understanding of the market and your place in it. I have seen many people in the industry attempt to pursue manufacturing and retail simultaneously. Some were very successful, but many ultimately had to make a choice to go one way or the other. To be successful, you need to adjust to the differences between the two and be prepared to structure, staff and market your retail establishment to support the level and exposure in the marketplace you desire.

How will going retail affect your existing customer base? I agree with your concern that you will most likely lose some accounts. But the good news is you don't have to lose them all--not if you give your existing customers a good reason to continue doing business with you, such as structuring your retail store so it doesn't conflict with their businesses.

The issue of brand recognition for your company and its products is a key factor in determining how you can deal with this situation. I don't know specifically what types of products you manufacture, but there is a wide variety of products and category levels in which to build your brand recognition, from a lower-end finely made product to high-end platinum and gemstone jewelry.

You may want to design a totally new product line exclusive to your retail store. The store and the products could be branded with your company name or the name of the designer, or both. You could market these as exclusive to your locations; that way, you wouldn't be competing with anyone because no one is using your brand name.

The better you understand the market and your competition, the easier it will be to decide which niche your company can compete in. Your niche could be based on something as basic as style, or it could be something as complex as a special technique or patent that is exclusive to your style and production.

Additionally, you need to be aware of issues such as copyright infringement and the pirating of exclusive designs. In the jewelry industry, the active protection of exclusive designs and limited distribution channels is crucial. This is very costly, but it's the price we have to pay to hold our position in the marketplace.

My overall advice is whatever direction you choose, even if it's simply opening your store in a nonconflicting area, do it with as much knowledge as possible, understanding that you can only do so much on a budget and do it well. Also, bear in mind that if you are selling the same products in your retail establishment as you do to your wholesale customers, you should sell them in your store at full price with no discounting.

Finally, it's important for you to have a plan. Begin by carefully establishing a mission statement. Add to that in-depth, strategic planning, including cash flow projections for the next several years, and you should have little trouble growing your wholesale business and establishing a successful retail business without losing all your customers. The clients you do lose will be replaced by the retail business you create through your commitment to your own brand.

Q: My question relates to small-business accounting practices. My family owns and operates a small flower shop in North Carolina. The business generates about $300,000 in gross revenue annually and has 12 people on the payroll. We use a computer to enter the monthly invoices and transfer this information manually to a general ledger. The rest of the accounting is done by hand, and often the books are two to three months behind. In addition, we don't generate an annual income or cash flow statement. Are our practices common for small retailers? Could someone recommend an improved accounting system or a preferred computer software package and an estimate of what this would cost?

A: Joe Goodman is CFO of Entrepreneur Media Inc. He holds an MBA from the University of Southern California's School of Business and has been the accounting controller and business manager at numerous small businesses:

The accounting practices you describe are less common among small retailers given today's availability of inexpensive personal computers and accounting software. There are a number of accounting software titles on the market that are very well-
regarded, such as Intuit's QuickBooks, BestWare's MYOB, and Peachtree Software's line of accounting products.

Peachtree has been around the longest and offers four levels of software depending on your business size and sophistication. The entry-level version, Peachtree First Accounting, costs about $69.95 and has everything you need, including general ledger, accounts payable, accounts receivable and payroll. Peachtree also includes many sample company accounting charts, including one for florist shops. Its more advanced package, which is geared toward companies with more than 25 employees or with large inventories, is listed at $129.99.

MYOB's prices range from $84.95 to $144.95; QuickBooks is priced between $69.95 and $199.95. All three packages run on PCs with Windows and do not require any special hardware. QuickBooks and MYOB also come in Macintosh versions.

With a little extra time to set up your computerized system and some general accounting advice from a bookkeeper, you should be pleasantly surprised with the results.

Q: I'm considering starting an online retail business where customers can place orders online and pick up their merchandise that day. The software would encompass order processing and inventory control.

I'm trying to decide whether to develop the software myself or purchase existing software. Developing the software may ultimately have more moneymaking potential than the retail business but would be expensive in terms of time and cost to develop.

How can I find out what types of software exist for this kind of venture?

A:John W. Verity is a freelance writer in Brooklyn, New York. He has worked for Datamation and Electronic News and has spent a decade covering the computer industry at Business Week as information processing editor:

Many companies sell the basic "Web server" software needed to do business online, including Netscape Communications, Open Market and Microsoft; however, these programs require a lot of customizing to fit the retailer's needs. It may be best to hire a local consultant with experience in setting up online businesses. To find a consultant, check out the business pages or computer section of your local newspaper.

Or, take a look at retail Web sites you find appealing; home pages usually provide hyperlinks directly to the Web design companies that created the sites.

Chances are you won't want to run your own server computer and 24-hour link to the Net yourself, due to the expense and hassles involved. Fortunately, lots of Internet service providers (ISPs), ranging from AT&T and IBM to local firms, will do it all for you, providing service packages that include space on a powerful server, customized software, inventory management, credit card authorization and order fulfillment. For more information on ISPs, a good place to start is the Internet: Check out the ISPs' own Web sites where they usually promote their full menu of services. Some sites to try include http://www.mindspring.comhttp://www.spry.net and http://www.netcom.com

You will probably want to explore both the Web site design companies and ISPs before deciding which route is best for you, as either could suit your needs.

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This article was originally published in the July 1997 print edition of Entrepreneur with the headline: Striking Gold.

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