Came across this great Kickstarter article … inspiration not to give up if you don’t know what you are doing or if you epically fail. http://www.forbes.com/sites/ericwagner/2013/02/12/diary-of-a-mad-entrepreneur-and-his-6-figure-kickstarter-launch/#20800a3b4a41
I sit in a board of a non-profit start-up – that is seeking to improve patient health and patient care through the education and training of pharmacists in third-world countries. I have a board meeting this afternoon.
So many moving parts with this start-up business right now though.
I’ve decided to pitch to an exclusive to one of the big-box stores for the upcoming holiday season. I am wrapping up all loose ends prior to reaching out for those meetings.
Loose ends include:
– Confirm product packaging for clothing accessories
– Finish prototypes for the remaining clothing accessories
– Finish design of product label tags + handtags
– Second round of product photography
By the way, product photography is a lot harder than it seems. So incredibly detail oriented. Folds and creases in fabrics show up like craters in shoots. I am practicing what poses or “shots” we will want to win during the shoot. This way, we’ll go into our session with very focused objectives (desired shots, angles, poses, etc.).
I had to use a weight to achieve the sitting position of one of our dogs here.
Quick email I received from a plastics manufacturer.
I asked if a particular product was blow molded or roto molded. Answer:
“My guess is blow molding …, but the [product material] description [says] ‘vinyl’ which means [it must be] roto molding. If it is blow molding, the product will be quite hard because HIPS or ABS material will be used.”
Side note from me:
ABS is acrylonitrile butadiene styrene, an oil-based plastic. It is technically grouped under #7 plastics. Generally, if we remember from an older post, #7s may or may not be safe. And may or may not be recyclable. But, ABS is one of the good #7s (NOT PC) as it has been found to be stable and non-leaching. Legos are made out of ABS (though they are starting to think about moving away from ABS).
HIPS is High Impact Polystyrene. More on HIPS here. I think high impact polystyrene is a subset of just the #6 polystyrene plastics, which we have labeled as an Avoid plastic because of its possible carcinogenic qualities.
I had previously written a post that summarized a conversation I had with someone over at the Consumer Product Safety Commission (CPSC) regarding U.S. flammability/lead laws for toys distributed in the US market. While the gentleman at the CPSC specifically told me that toys are not required to be tested for flammability/lead, my third-party testing center abroad keeps telling me that I do need such testing. I’m clarifying flammability requirements here.
Flammability requirements for U.S. toys:
- When Congress adopted ASTM F963-11 as the federal toy safety standard in 2008, it exempt toys from the flammability requirement and it exempt toys from the requirement of third-party flammability testing (see here).
- However, the Federal Hazardous Substances Act has a requirement that applies here. The FHSA requires that “a children’s toy—during its customary and reasonably foreseeable handling or use—must not be a hazardous substance that may cause substantial personal injury or substantial illness during, or as a proximate result of, being a highly flammable or extremely flammable solid.” This requirement does not require third-party testing. Rather, a manufacturer must have a basis for it’s decision to test or not test it’s toys.
- The basis may be the expected pattern of “customary and reasonably foreseeable handling or use.”
- The basis may be pre-existing knowledge that the materials used in a product are known not to be particularly flammable based on testing done under similar standards, such as the listing of certain materials in the wearing apparel flammability standard (16 C.F.R. § 1610.1(d)), such as polyester, which do not require testing due to experience gained from years of testing in accordance with the standard. (from here)
Whether our toy clothing accessories (doll clothes/stuffed animal clothes) need to be tested for lead/phlalates content:
- Per CPSIA, fabric & textiles for Children’s products are exempt from flammability and lead testing requirements. Children’s clothing have a flammability requirement, but Children’s toy products made from textiles do not.
- Some of our accessories are a mixture of textiles + velcro (plastic). Does the addition of plastic velcro material to our textile product now make the subject to the lead testing requirement? Velcro is considered a textile. That Velcro is considered a subset of textiles (and therefore exempt from flammability/lead) is a product of CPSIA regulatory interpretation.
- But, do any of the State laws in PA/OH/MA/CA require flammability/lead testing? CPSIA reminded me here that State law cannot conflict with federal law where federal law has spoken (Constitutional Supremacy clause > Federal law will always preempt State law where federal law has spoken). Therefore, no state law can conflict with CPSIA’s rulings on these issues! Phew.
I almost forgot that the tracking label requirement applies to ALL of our toys and products. As a side note, the tracking label requirement is the ONLY CSPC requirement for toys (that don’t present a choking hazard).
Information about the tracking label requirement is here: http://cpsc.gov/trackinglabel
- Required to be on or affixed to all toys + toy packaging
- Minus the “to the extent practicable” exception on the ‘+’ rule
- Label/information must include (But, does not need to be on same singular label):
- Manufacturer’s or private labeler’s name
- Location and date of production
- Batch or run #
For example, it might look like this:
For us, we might say:
Name of our company
Born in NYC
Made in Jakarta, Indonesia
Run # 1
Welcome to “How I’m Starting a Toy Company” Blog. Where “I” is former tech entrepreneur D.S.
I had some further questions about PA’s toy regulations, so I gave them a quick call this morning.
Do we need only one PA registration number for each factory? Or, does the PA registration number change from product to product?
> Answer: An importer can obtain a PA registration number for each factory they work with. This is required if the factory does not have a master PA registration # that they can use across brand accounts (seems 95% of their applications do not have master PA registration #s). So, we will ask our manu if they have a PA #, if not we need to apply for one. And, we will need one for each factory (and this # will not change across toys).
What if we enter the market now with one toy and then we want to enter the market 6 months from now with another toy – does the PA number change? Do we need to go through some kind of application process again?
> Answer: The PA number won’t change. But, you will still need to submit a sample toy for the Dept. to test. The Dept. will test it and issue you a pass/fail result. If it passes, you are permitted to enter the market with the same PA #. If it fails, it will be illegal for you to enter the market using your PA #. So technically, the first samples you submit will not have any PA reg # tagging on the toys. Samples 6 months from now (after you have already been issues a PA #) may have sewn-in PA reg. # tags.
Our manufacturer has sent us a Golden Sample of our toy. We have approved this sample for production. Can we submit this sample to your Dept. as part of the PA reg. # application?
> Answer: No. You must attest (notarized) that the sample you are submitting is a random sample that picked from a production run of toys that are intended to be sold. It needs to be a random sample from a production run. They advised us to ask our manufacturer what their minimum production run quantity is and then to do a do one of these runs.
The application form is here.
They advised OH and MA are different and to check with each.
Well, today was technically my/our first official sales meeting. It was with a chain of pet stores in the northeast. The chain is fairly small (under 10 locations) but the locations are big (warehouses) and in important geo territories.
I went into the meeting without any expectations. After my meeting yesterday with a toy store and toy rep, I feel generally less enthusiastic about the prospect of distribution through independent retail channels. Because of this, I didn’t go in with a clear win scenario. I went in ‘open’. But, I did go in with a few broad stroke thoughts. Selling a first order (and even securing the coveted credit card – AKA cc – payment terms) was not a priority. Any order would be too small to move the needle. And, I am yet undecided on launching with independent retail distribution. Merchandising (how any inventory would be displayed in the stores) was more important that probably anything else for me (including payment terms – heck I would consider consignment terms for great merchandising).
The meeting was a 10/10. A few notes from the meeting.
- Meeting as a sales meeting was Easy. I have been involved in selling in my prior two start-ups and sales always sucks. But, I guess a retail establishment’s job is to meet with folks like me. Their job is to sell product. So, they need product to sell. They need to find great product. The meeting was super easy to secure (I cold-called in December and asked who I should speak to about showing our new line).
- The reception to our line was very very strong. I would say it was an 8 or 9 out of 10. The gentleman was smiling throughout much of the meeting while I showed him various items in our line. Creatively speaking, it feels I am on a good track. I’m executing well. The concept will resonate. There were a few items in our line that he thought would be blockbusters.
- He said that Q4 was the most important. And, he estimated that 80% of any sales of our line would happen in Q4.
- I asked him, ‘If we hit this thing out of the park, how many units could we sell in Q4 across your 5 stores?’ He thought that if we sold 200 units in Q4, he would be flabbergasted. Outside of Q4, he thought maybe a few units per store per month? (Yikes, these numbers are sounding really low to me).
- We spoke merchandising. He could see his stores dedicating an endcap to our line. In 4 out of the 5 stores (because his 5th store really doesn’t have any space). He was open to me sharing other independent merchandising concepts. But, an endcap in 4 warehouse stores is huge. (And endcap (pic here) is the unit at the end of an aisle. It’s a super great location. Some retailers lease this space to brands.) He asked for possible consignment of inventory, I said maybe and that I hadn’t thought about details yet. With consignment, if things don’t sell, you need to pick up the unsold merchandise.
Today marked the first day that I showed the line to a retail establishment. I walked into a retail toy store in the small town of NC and started chatting with the owner. A fantastically open and sharing gentleman. He spent a good amount of time with me. And, then invited me back to meet a ‘toy rep’ that happened to be coming in later in the afternoon. Here are some things that I took away from each conversation:
Toy Store owner:
- Other companies have tried the whole dog/horse + accessories thing in the past and did not succeed; good concept but not a hit out of the park concept. However, there were certain items in our line that he thought were really really great.
- The big toy brands – Hasbro, Mattel, Lego – have or have been or are trying to pull out of independent toy stores (Hasbro has pulled out completely; Mattel pulled out but is back in half-heartedly; Lego I believe pulled out? or was thinking about it but is now back in)
- Toy store owners hate shipping costs just like consumers hate paying for shipping; they cut into their margins; this gentleman only invited his toy rep in after the toy rep offered free shipping + net 90 terms
- Payment terms. I knew nothing about payment terms going in (and I wanted to understand payment terms to be able to hold my own in a first sales meeting the following day). Some new brands require a credit card for initial orders. But, most of the time terms are net 30, net 60, or net 90. And, consider yourself lucky if you get paid on time or, sometimes, paid at all (pay attention to which geographic areas or neighborhoods the toy stores are in I was advised). I will have to write another post about the finance aspect of this whole business.
- The price point for a good product can turn it into a great smashing product. He gave an example of a particular ‘animal’ toy that I or someone else would just take to be a regular kind of basic toy. Supposedly, it is a golden goose for the company. It’s a good toy, basic, appeals to many, and is a very good price point, – which makes it a smashing product. Price can be everything.
- They want to order things by 4 or 5 or 6.
- Real estate in the stores is everything. Most stores don’t have ‘dead space’. Dead space is open space and it is usually open for a reason. It might merchandise horribly – be at the back of a store in a corner that nobody goes to. Where will the stuff go?
- He gave another example of a company started by two women. Let’s say this company makes accessories for girls to be used at school. The product(s) and the company were a big hit. The company was making a lot of $ and reinvested the $ to grow and solidify operations. But, competition was coming in. And, sometimes when something is successful it will spur the notice of the larger guys, the guys that can produce fast at low cost. And, sure enough, competition came in and this company was in for trouble. They sold out to another company – in something that looked more like a bankruptcy sale. Beware.
- He also advised to beware of two things in the toy business (or physical product business): (1) cash flow, and (2) inventory. It’s all about cash flow. And it’s all about inventory. You don’t want too much inventory. You don’t to be sitting on stuff that won’t sell.
- There are these things called ‘toy reps’ or ‘toy representatives’ that represent certain lines of toys on an exclusive basis in a certain territory; for example, you have the New England territory, the New York City territory
- A toy rep’s job is to go store to store, show lines, and secure orders; they have relationships with store owners/buyers; this rep had some huge account(s)
- The independent toy store business is in year over year decline AKA it is not a growth business; this toy rep lost 7 accounts last year due to retail accounts closing/going under
- One of the big three brands listed above (Hasbro/Mattel/Lego) that does billions in revenues makes under 40 million nationally from independent toy stores (independent toy stores really are a sliver of the pie it seems …)
- I will need to explain something about reps that is hard to communicate with words. It was seeing the rep that really spoke a thousand words to me. The rep comes in with a plastic box. The size of a filing box. And opened it. And, inside there were some 10 binders and catalogs. Each was filled with anywhere between 50 to 350 pages. If this rep had my 20 products to sell on 2 sales sheets, wouldn’t they just get lost in all that? How would it come out? When? How would it get represented?
- Toy reps generally take 15%. That’s 15% of the purchase order value from the retail establishment.
- Rep recommended checking out ASTRA and the ASTRA show coming up. ASTRA = American Specialty Toy Retailing Association. In 2016, June 5-8 in Denver Colorado.
- Reps know accounts. They know who pays net 30, who pays late, who doesn’t pay. Because they have history with these guys. And, because they only get paid when you get paid. So, they know this stuff. He also mentioned that they Big Four (Target, Walmart, Kmart & Toys R Us) – they will push out payment forever – and if they don’t sell it, they won’t pay you.
We are still working on sourcing our stuffed animal toys and doing a lot of back-and-forth with our chosen manufacturers in Indonesia to get them right. A drop in communication before Christmas put me on alert. Terrified that any relationship might be in jeopardy, I am deciding to get on a plane and head over to Hong Kong for the Hong Kong Toy Fair. Both manufacturers will be there exhibiting. I’ll be able to meet the Presidents and some employees of both manufacturers. And, generally work on solidifying those relationships. Eek. I’ve never been to Hong Kong, or Asia, for that matter. Decided few days ago. Bought ticket today. Leaving on next Saturday.