February 15, 2008.
I swear I am trying to keep up with the blog, but this cold has knocked me out for sure. Apparently I did not get it as bad as everyone else in my neck of the woods and I am STILL coughing and a sneezing. So, lazy (please read very busy) me thought I would answer Joy's question:
"I am a relatively new manufacturer and on my first solicitation of a showroom, I was picked up....however....the showroom owner made me rush to get my product to Atlanta for the January gift show because it's the biggest show of the year, blah, blah, blah....after the show was over I had only two orders. I did not make my money back from the shipping and basically no profit...NOW....it's time to pay my second installment for the $75 showroom fee, but there are no sales coming in and I want out of the contract...is this normal?"
Oooooh, tough one, okay I am going to be honest with a little of what happened with me and my company and then some thoughts. I like to always ask the person, "Do you want my advice or do you want me to agree with you?" Since you asked and I can not get this computer thing to talk back.....I shall give advice. Just so we are on the same page:
If You Wonder "What is a Show Room?"
A Show Room is a place where your products can be on permanent display (vs. a temporary display when you exhibit at a show) with the representatives that are representing your line can have stores, websites, catalogs, come and see and touch your products. It is like a retail store for retailers to find new products. Usually you will have some collateral, or catalogs to go with the product line and it will all be placed together in an attractive setting. The show room can charge a fee, and will get at least 15% of all sales - sales for the stores they pick up for you. There are show rooms in all the major markets - San Francisco, Los Angeles, Minneapolis, New York, Chicago, Atlanta, Texas.....I think that is it.
If you get a good sales representative they will go after stores for you, they will show your line to large department stores that you may not be able to get into. It can be a good thing and well worth the money also if you want to get your products into the hands of people in other states - states you do not plan on exhibiting at.
Hidden Fees And Store Samples
We do work with show rooms, and our products can be found in a few show rooms around the country. We have had good experiences and bad ones. Maybe the next post I can tell a few tales about what we experienced. Here are a few fun facts about show rooms:
- You will send samples to the show room and you will pay to ship the samples. The samples are still yours, they are on loan to the show room. They will not pay for these samples.
- You need to send some collateral; post cards, catalogs, line sheets - something that the possible customer (retail store) can take away with them.
- You will pay a 15% fee on everything they sell for you - every store they pick up for you. The fee is for the initial opening order (usually it runs from $200 to thousands, depending on the product line).
- You may be asked to pay a rental space fee for them to exhibit your line in the show room.
- You may be asked to pay a fee when they have a show, this can be quarterly or twice a year, depending on the show room and the location.
- Some sales representatives do not have show rooms, they just travel from store to store to try and sell your products to the store.
- You will sign a contract and agree to not solicit any stores in the territory they cover. This can range from just one state to possibly five states.
Would You Please Cover Your Butt
If you are going to have your products in a permanent show room, now is a good time to get those wholesale documents finished. The documentation should state shipping costs, wholesale costs, product descriptions, minimum opening orders, re-orders - put it in writing. Shipping costs should be set up as soon as you start a business.
Show Rooms can be great if you want to get your products into other parts of the country and if you do not like calling on new stores. Some good show rooms have named accounts that they continually go to year after year with their product line. It helps to make the Show Room an ally of yours, work with them, help them better sell your product and take their advice. We found that show rooms that carried our "non-personalized" products did better than ones with only personalized products.
I personally like the show rooms I work with - but I wish I picked up more stores from them. Some of our super-large accounts that I have, I would not have without the show rooms I am in. These department stores would not even consider my products, had I not been in a show room.
In the End
I would say that after only one "show" you do not have a real feel for whether the show room is a good fit for you. I would stick it out for at least a year so you have a good idea of how much the cost of acquiring sales is - because it can be expensive. Picking up two stores and you just got in the show room is not that bad. It is only been one month and getting out of a contract this soon does not seem like a wise decision.
You may want to consider calling the show room and seeing if they could waive the fee, or ask to speak with another company that they represent - to get a feel for the success of the reprentatives there. It may be that even though January is "the show" your products may do better at the July show, or at a smaller apparel show. It is important to note that paying a fee of $75 to be in a show room is much cheaper than the $3000 it would cost you just to rent your own booth. Or if you want to spend your time emailing and calling stores - instead of making products, then maybe a show room is not for you.
To put the costs in perspective you may want to remember running a business costs money - starting a business costs lots of money. There are so many hidden costs that you probably did not even think of when you started out. The saying, "It takes money to make money" is so true - especially with a small business owner. You may not make the money back right away, but you need to ask yourself if it is worth it? Is the show room a good show room? Have you sold anything else? All sales from the stores that the sales rep picked up need to be included in the "is it worth it?" questions. And it make take months or even years till you see the benefits.