Taking On Goliath

Where The Action Is

Even with d'Addio's commitment and heart, going up against powerhouse isn't something experts recommend. "These are tough guys,' says William C. Lazier, a business professor at Stanford University and co-author of Beyond Entrepreneurship: Turning Your Business into an Enduring Great Company (Prentice-Hall). "They're smart, good at what they do, and typically operate with higher margins [than start-ups]." With these stakes, it seems only a genius or a fool would want to enter the game.

But sometimes you have to play with the big boys to get in on the action. And jumping into a hot market isn't necessarily a bad idea. "New entrepreneurs often come up with [breakthrough] ideas they think are extraordinary, but the market isn't developed," Lazier explains. "The problem then is finding enough money to develop a new market." For those just starting out, creating that kind of momentum can be impossible.

This reasoning--or perhaps its opposite truth--prompted Jerome Darby, 33, and James Sonzero, 36, to get into the highly competitive underwear business. The founders of Papi Inc. in New York City had seen other companies, from Joe Boxer to Calvin Klein, create a stir in the undergarment industry, and figured one good turn deserved another.

"All men wear underwear," notes Darby, "so we knew there was opportunity." But going up against everyone from Hilfiger to Fruit of the Loom presented its challenges. "Getting department store space was nearly impossible," says Darby. "But with so many companies [promoting underwear], consumers do have a greater awareness."

To differentiate itself, Papi is focusing on the Latino market, which the partners feel has been overlooked by most brands. Vividly sexual (but not pornographic) ads depicting Latino models have apparently grabbed enough attention to generate interest at the retail level. "Our boutique business is strong,' says Darby. "We're seeing 100 percent sell-throughs, sometimes in two days." In time, Darby and Sonzero hope Papi's success in this ethnic niche will serve as a springboard to new markets and products--the company, which projects 1999 sales of $2.5 million, will launch a sportswear line this year.

Keeping one's focus keen--like Papi's--makes good sense for small firms. By keeping your eye on the ball, you can fashion yourself into a player, albeit on a slightly smaller field. Yet even when you find a unique position, you can't count on owning the game forever. Whether you're an independent bookseller in a town without a Barnes & Noble or a hardware retailer in one of the few remaining Home-Depot-free zones, your competition is coming. And it's probably going to be big.

"Most category-killer concepts operate on a market-saturation strategy," explains business consultant Don Taylor, founder of Data Staar Communication in Amarillo, Texas, and co-author of Up Against the Wal-Marts (Amacom). "They keep growing to keep their stock up, so they're going into smaller and smaller markets. If you feel like [big competition] won't impact you, you're probably being naive."

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This article was originally published in the June 1999 print edition of Entrepreneur with the headline: Taking On Goliath.

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