Three Kiwi entrepreneurs prove you CAN make money exporting physical goods

Three Kiwi entrepreneurs prove you CAN make money exporting physical goods
Conventional wisdom would say that independent New Zealand entrepreneurs with the germ of an idea and a small, physical product to take to market could not become globetrotting business owners, selling at volume across the world. Conventional wisdom, as James Robinson discovers, would be wrong.

A good idea is a powerful thing.

In 2005 Jennifer McIver and her partner Rich Latham were living in New York with their two young kids. McIver was a lawyer at the New Zealand Mission at the United Nations. Latham was in New York without a working visa. Te Awamutu-born, he found himself craving green space for both his and his kids’ sake, and gravitated toward the renowned Central Park. Gifted with his hands, he constructed a wooden balance tricycle for his one-year-old son. It had movable parts so it could be adapted from a three-wheel tricycle to a two-wheel bike and help him transition from walking, to balancing and eventually biking.

On family trips to the park, people started enquiring about where he got it. He made 10 to meet these ad hoc requests. The couple set up a website they could direct people to when they were asked about it.

But it wouldn’t stop there. After they returned to New Zealand, the tricycle would become a full-time job and then some.

Inspiration can strike at any moment.

In 2003 Liz Eglinton, coming out of a job working in marketing for Lion Nathan, moved to the East Coast American harbour town of Annapolis in Maryland with her husband and three young kids. Coming from New Zealand, where sun safety was a priority, she was stunned to see American children at sailing camps in thick T-shirts and not wearing hats. Phoebe Hayman was a playcentre mother who was frustrated with toys for kids just above preschool age; they were all lights and noise with nothing to sustain their interest. Hayman saw a need for toys that better engaged kids.

Eglinton turned her observation into a first run of 300 rash tops. Hayman started making a small amount of craft kits in 2006, from which kids could bake, paint, make and explore. Every fair or toyshop she took them to, they all sold in a flash.

Conventional wisdom would say that McIver, Eglinton or Hayman, independent New Zealand entrepreneurs with the germ of an idea and a small, physical product to take to market, could not become globetrotting business owners, selling at volume across the world.

New Zealand has an anaemic manufacturing sector. It constitutes only an eighth of our national GDP, more than half of which comes from our agriculture, food production and forestry industries. Locally made toys and clothes represent a meagre fraction of an already small pie. Labour is expensive. It’s a long way to the global market. Specialised parts and labour usually have to be sourced from elsewhere. Tech companies can
send innovation through cables, while manufacturers are stuck with the dirty business of freight.

Fast-forward to 2013 and Jennifer McIver’s Wishbone has seven warehouses across the world, bank accounts in five different currencies and pays tax in three-different jurisdictions; Liz Eglinton’s Snapper Rock sold more than 50,000 units in 2012 and her swimwear was recently photographed on Orland Bloom’s child in People magazine, while Phoebe Hayman’s Seedling is sold globally through 13 different distributors.

Innovation travels easily across national lines. These three women and the lessons they’ve learned show that with the right idea and the willingness to go for it, being a 13-hour flight away is no roadblock to success.

Lesson 1: New Zealand-made is a label with implications

Eglinton started Snapper Rock in America but she always wanted New Zealand to play a huge role in its image and feel. She investigated manufacturing here on a trip home, but the finished product was going to end up twice the price.  

McIver, Latham and their (now three) kids returned to Wellington in December 2006 and registered Wishbone Design as a company early in 2007. By April they had jumped into an early manufacturing run of 100.

“It was naive of us,” McIver says. The labour involved was Latham and a hired student. They were using computer-assisted design and manufacturing to keep costs down, but it was still a hand-finished, wooden-product, with a design that involved bending plywood.

“You can’t do it economically and hit a retail price point,” she says. They sold the 100 units in New Zealand as a test run and at a loss.  

These early stumbles put Eglinton and McIver at China’s doorstep.

“I had no idea how to deal with manufacturers,” Eglinton says. She found a manufacturing agent, but her order was so small and the cut wasn’t worth it for them, so the agent referred her directly to the factory it uses in China. McIver also had an early, unsuccessful try with an agent. Diving headfirst into the problem, both McIver and Eglinton travelled to China to see first-hand what and whom they would be dealing with.

The scale was intimidating.

“We have photos from our first trips there and there’s just lines and lines of Wishbone bikes. It’s huge. It blew our minds,” McIver says.

Eglinton says the first factory Snapper Rock worked with was producing in an hour what she was going to in a year. Whenever there was an issue, such as a shipment of tops showing up in the US in the wrong colour, she says the factory was suspiciously hard to get hold of. She’s stuck with that initial factory since that first order (she now works with four others in China alongside them) and by keeping with them and growing in scale she has increased Snapper Rock’s standing.

McIver has witnessed different prejudices at play against Chinese-made products. But she says that what people don’t realise is that China isn’t the problem.

“The problem is the West. People go there looking for rock-bottom and China will deliver what you ask for,” she says.

Conversely, Seedling is a rare beast, running all of its manufacturing and distribution from its Auckland hub. Paper, cardboard and timber are very manageable in New Zealand, but everything else has to be reached out for. All products are in the least finished in New Zealand.

“Many of New Zealand’s manufacturing sectors have shut down and we are very limited with what can be produced there,” Hayman says.

Seedling’s craft kits come boxed.

“Manufacturing here in New Zealand means that we have the ability to control what is going into every box.”

Internationally, Seedling takes less profit on each sale because they make it here. The consumer will only pay so much for it.

It is a major gripe of Seedling’s foreign distributors, but it’s still worth it. Hayman wants quality and consistency to be core values. In slowly establishing it as a global brand, its long-term reputation is its most valuable asset, she says. It needs to be protected at the expense of other things.

Lesson 2: Don’t let your passport expire

Wishbone viewed the world as its marketplace from day one. Snapper Rock was formed in America and eventually relocated to New Zealand, taking its global network with it. Meanwhile, Seedling had no initial designs on global domination, but it couldn’t keep international distributors away from a good idea.

Stationed way down in New Zealand, it makes for a lot of longhaul flying. In February McIver travels to the Nuremberg and New York toy shows, stopping in China to visit Wishbone’s manufacturers and the United Kingdom to check in with one of the company’s distributors. In September and October she’s away again, flying through trade fairs in Cologne and Las Vegas, and checking in with different parts of the supply chain around that.

Eglinton is in the USA a few times a year, representing Snapper Rock at as many as 10 trade shows and stops through China at least once around these dates. Hayman lets international distributors rep Seedling at a lot of international events, but will still visit four different continents for work in 2013.  

The humble trade show remains a major engine of global sales, still crucially important.

“They really are what drives business,” Eglinton says. After Snapper Rock started in 2003, she was going door-to-door through shops selling her swimwear when she started asking managers where they were doing their ordering. She packed up her car with product and rented a small booth at a tradeshow in New York. It was a big turning point.

McIver showed up at the Nuremberg International Toy Fair at the start of 2008, with 12 massive halls filled with different distributors, with a single prototyped bike.

“It was pretty gutsy of us to do that first show,” she says. It paid off in spades. On that first trip major orders came in from the UK, Holland and France for containers-full of product.

Allowing potential clients to touch and interact with your product is invaluable.

“You can’t beat face-to-face,” McIver says. Neither her nor Eglinton say that they anticipated how much of a major role these trade shows would play in bringing product to market. They each concur that you have to establish and maintain a presence over time at the shows. It’s how you establish wider brand credibility. There’s little long-term value in going once and not going again.

“After a few years, a lot of big department stores told us that they had been watching us. I was blown away to know that these people knew who Snapper Rock was,” Eglinton says.

McIver adds, “You become part of the industry sector network. It is very tight knit.”

Seedling has been more cautious than this in the trade show arena. However, Hayman says whenever they appear representing Seedling in person, rather than using a distributor, the presence of their product is kicked up a notch.

“It’s natural that we would be the best people at selling not only our products but our brand and our story,” she says.

Eglinton says the first concern large American buyers have is where Snapper Rock ships from.

“They love the Kiwi part of our story, but they want that American presence.”

Lesson 3: Know who you are as a company – and deal with people you trust

“We always invested heavily in Wishbone’s brand ID,” McIver says. She saw Wishbone as a company with a world-beating product and best-in-category design, which she wanted to be run ethically and responsibly. Today, Wishbone is carbon-neutral, buying carbon credits to offset its imprint from manufacturing and travel and it works with its Chinese manufacturers to get them certain certifications for safety and worker treatment.

Eglinton wanted Snapper Rock’s swimwear to carry messages of sun safety. Hayman saw Seedling’s core values as rotating around the high quality and consistency of its handmade craft kits.

Setting up a global presence, you have to be careful to not inadvertently cut against this. You can lose control of your product sending it out into the world in the hands of the wrong people.

Wishbone has numerous warehouses that it partners with and third-party distributors who purchase the product from them to take into individual markets. It acts largely as a wholesaler in the New Zealand, Australian and American markets but splits Europe 50/50, McIver says, with third-party sellers. It does this all with a staff of four.

Snapper Rock is in 650 stores in 25 countries. Eglinton is in Auckland. Its warehouse is in New Jersey and none of the four other staff operates from the same place. Seedling, doing all of its manufacturing largely in house, has more staff than Wishbone and Snapper Rock, but still puts its good name in the hands of 13 international distributors globally.   

Trusting someone to represent your product is a leap of faith not to be made lightly. Hayman has a checklist Seedling distributors must meet: experience with established brands, an evident passion for the product and a solid strategy formed for getting Seedling into that market. Most of Eglinton and McIver’s distribution relationships came from introductions at trade shows: “Warehouses, factories, everything is a partnership,” Eglinton says.

“We don’t accept all-comers,” McIver says. “The values have to match. We want distributors that we’d have a beer with ñ a partnership that we can invest in.”

Lesson 4: Don’t be big, be smart

In general, Seedling, Snapper Rock and Wishbone do not use paid advertising as part of their company marketing strategy. They find trade shows do a huge piece of this work.

“Two ads in a top parenting magazine cost us the same as one trip to an international trade show,” Eglinton says.

The word of mouth from having a product of bankable quality helps. McIver says that Wishbone benefits just from children using its bike out in the world. Seedling and Snapper Rock have seen similar gains from being a high-end product. Seedling has been on The Today Show and The View, and Jessica Alba and Elizabeth Hasselbeck have posted pictures of them using Seedling kits with their kids. Gwen Stefani and Orlando Bloom have been spied in public with their children sporting Snapper Rock swimwear.

“Sometimes when I talk to smaller, less established companies and I hear about how much they spend on advertising, I can’t help but feel like they’re throwing money out the door,” Eglinton says.

Running a global network from a small base does have its share of chaos. McIver says at Wishbone they have to log into about a dozen software programmes each day: inventory management servers, Google Maps, email, e-commerce servers, document management systems. It’s led to Wishbone spearheading its own drive to invent new small business management software with a company
in Vancouver, to help amalgamate these workflows.

As CEO of Snapper Rock, Eglinton has to run a company with its staff spread over continents.

“We’re decentralised, but we’re all working in the same direction,” she says. The only downside is that too often, she’ll wait until her next trip to America before instituting a change she thinks is needed.

All three of these business owners expound on the virtues of steady, comfortable growth. It has led them to a point where they have vast, lean company infrastructures that can cover the world over.  

McIver says that between Wishbone’s website portals and its warehouses it can process large global sales while they’re asleep in Island Bay.

“Still, we have the persona of being underground. It works for us,” she says.

Lesson 5: Be bold, defy convention

Ultimately, if you have confidence in the idea and you want to go big, you’ve got to go for it. “We’ve done nothing by the book,” Eglinton says. McIver says that when they sought out business advice when they were setting up, they were told to pick one or two markets and go deep.

“We were told that our plans would be spreading ourselves too thin, that they were too complex and that they just wouldn’t work,” she says.

Both Eglinton and McIver received huge orders at their first trade shows and they had little idea how exactly they would fill them. Their approaches to each situation were almost identical. You’ve just got to say yes.

Seedling was based out of Hayman’s home when she received an order from Japan for 20 cubic meters of product. It was a perplexing challenge that she wanted to meet.

“I had never even contemplated being an exporter. What terms do we ask for? How do we make sure we are paid? What do different shipping terms mean? Are there specific protocols to ask for when you meet with the Japanese?”

There was little good advice to be had. Hayman just had to dive head first into the problem, roll up her sleeves and teach herself to steer Seedling toward being a mass-producing global exporter on her own terms.

“In true Kiwi style all our family and friends were called on to help,” she quips.