What Makes A Product “Work”?

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In my line of business I come across a lot of products that, for one reason or another, just don’t “work” in the mainstream consumer marketplace.

Three_betamax_vcrsI don’t mean they don’t function. I mean they don’t work. They don’t click with the marketplace.

It is a very interesting combination of factors that makes a product succeed – or not.

Maybe the product itself is flawed. That is always possible. Maybe the design of it is just so poor that it literally doesn’t do what it is supposed to. But in today’s computer-designed world, that happens less and less.

Maybe the packaging is bad – unattractive or unappealing in some way.

Maybe the price is too high – or even too low. (Sometimes a low price can signal to consumers – rightly or wrongly – that a product is low quality.)

Or maybe the product simply didn’t get wide enough distribution to ever catch on.

There are probably a dozen or more other reasons why a product didn’t really “work”.

Let me give you one recent example. In our closeout business, I came across a product manufactured by the company TDK. Maybe you’ve heard of TDK. They are a respected company in the audio space. They were well known during the age of cassette tapes and continue in business making audio and other products.

The product was a small mobile music player designed for MP3 players. Back in the day they used to call these kinds of players “boom boxes”.

I actually took one of these players home and plugged it in and used it at a party. And I want to tell you…this thing sounded fantastic. It was small enough to carry around but large enough to keep the whole party hopping.

I don’t know why this product made it to my hands via the closeout business. I would think that people who love music and want a portable player would love it. But for some reason, this TDK player wasn’t “working” in the marketplace.

Maybe TDK as a brand isn’t cool enough. Would it have been different if this product said, “Beats by Dr. Dre” on it? Maybe.

Was there poor marketing behind this product? Have you ever heard of it? Is there enough demand for this kind of music player?

Well, you get my point. Here is one product that is probably not going to light up retail shelves.

What do you think is the main reason a product doesn’t “work”?

Send me your thoughts to ryan@dva.com.

What Do Dollar Chains Tell Us About The Economy?

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dollarstoreDepending on what part of the country you live in and your shopping habits, you may be familiar with “Dollar” retailers.

These chains – like Dollar General, Family Dollar, Dollar Tree and others – have been growing rapidly in the last decade.

Just as one example, there are over 10,000 Dollar General retail stores in the U.S. As a comparison, there are about 1,700 Target stores in the U.S.

However, news recently came out that these stores are struggling. Their stock prices are all down.

Have Dollar stores peaked? Are they good for consumers?

It’s an interesting question.

In general, the Dollar stores set themselves up as an alternative to big-box retailers like Walmart and Target. Dollar stores are smaller and, often, closer to population centers. (As opposed to the suburban locations of many Walmarts, Targets, etc).

But, with the recession, it’s my suspicion that Dollar stores started becoming much more of shopping staple for people at lower income levels.

When things are tight, you buy just what you need. Dollar stores specialize in smaller sizes at lower price points.

You don’t “stock up” with the large sizes available at Walmart, Target or Costco.

Also, a trip to one of the bigger retailers means a drive – which means gas. Depending on where you live, if it’s a 50-mile round trip drive to Walmart, that can add up when gas prices are high.

So, and this is only a theory, one possible reason for the downturn at Dollar stores is that the economy is actually doing better.

Maybe people are actually making the trip to bigger retailers instead of shopping at Dollar stores.

This is just one possibility. Of course, there were other things going on in the retail landscape last quarter – notably Hurricane Sandy – that affected results.

Dollar stores do provide a valuable retail outlet in many communities. I don’t think they’re going away.

When you just need some milk or toilet paper, it’s much easier to make a quick stop at a Dollar store than travel all the way out to the Walmart.

For those of us that live in urban areas, we have to remember that when you live in a rural area, shopping patterns are much different.

For me, I can get to a big retailer in about 10 or 15 minutes. The discrepancy between a quick trip to the Dollar store and a long trip to the big-box retailer is not the same for me

So what’s the future for the Dollar chains? Many of the chains still have plans for expansion.

Is this a smart move? Have they maxed out and made too many stores (a la Starbucks a few years ago)?

As the economy improves, will the Dollar stores continue to grow?

Tell me what you think. Drop me a line at ryan@dva.com.

Declining DVD Sales – More than Meets the Eye

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dvdsPretty much everyone who follows the entertainment industry knows that DVD sales are declining.

The “death of the DVD” has been happening for at least eight to 10 years now.

But I’d just like to point out a few things that make the stories about the decline of the DVD just a little more complicated.

First of all…though sales have gone down. Hollywood studios still make a lot of money on DVD and Blu-ray sales.

Home video sales in 2011 were about $18 billion dollars. That’s right. Billion.

Now, of course, that is down from about $22 billion (the peak of sales) in 2004.

No one in business wants to be losing sales. But anything that you’re still making billions of dollars on is still a viable business – at least for a while.

Just as a comparison, the online video business (which includes Netflix, Apple’s iTunes and other services) did about $992 million in sales in 2011.

But the writing is on the wall. DVD sales are going down and streaming sales are going up.

Even Walmart is getting into the game by adding a streaming service (VUDU) to Walmart.com.

But streaming is not the only thing cutting into DVD sales – let’s not forget things like Facebook, video games, Angry Birds, Twitter…and on and on.

So you’ve got an interesting situation here: A giant business is on the decline. But just like the dinosaurs, it won’t go quietly.

The introduction of the Blu-ray format seemed to help DVD sales stabilize a bit. But, in my opinion, the vast majority of the public is not that concerned with the nuances of the resolution of their movies. The leap from VHS to DVD was so huge that everyone noticed. But the improvement Blu-ray makes over DVD just is not that big to the average consumer.

But…on the other hand, let’s face it, it’s still a little bit of hassle to get pure streaming on your TV. The easiest way to do it is to use your cable provider (like Time Warner) to order up movies. Using Amazon or Netflix still requires one extra step (like a Roku box or Blu-ray player or game console) or a more-expensive smart TV.

My point is that it’s not quite “plug and play” which is what most technology requires for wide adoption.

It’ll be an interesting next few years to watch. The studios have already been finding alternative ways to maximize their profits with streaming services.

And until the streaming services produce their own content, the studios will still have some leverage.

So stay tuned…and, as always, call me or drop me a line (ryan@dva.com) if you have any thoughts on this.

Closeout Brokers – What to Watch Out For

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With the rise of the Web, our business has exploded.

shoppingonlineIt’s become so easy for customers and retailers to connect with each other and to find new ways to move goods into different channels.

It’s meant a lot of new competition for us.

But that’s a good thing.

I encourage it.

It has forced DVA and other established companies to continuously innovate and find better ways to work with our customers.

One of the offshoots of these recent developments is how easy it has become to set up a business and connect with customers – even if you are a less-than-reputable company.

It’s unfortunate, but I hear stories about this every day.

I can’t tell you how many times people have come to us after being burned by a fly-by-night company purporting to do what we do.

Now, I’m not saying we’re the only company in town. But I want to offer a few tips for finding a reputable company to work with on your overstocks and closeouts.

-This one is so simple that I almost don’t need to say it: Get a referral.

Find somebody else who has worked with the company – and had a good experience. If you can’t find anyone who’s worked with the company – good or bad – that should tell you something. Here’s a simple way to do this: Ask to speak to some of their customers. If they won’t let you or seem uncertain or unable to provide any contacts…the writing is on the wall.

-Don’t work with any company that uses only a cell phone or yahoo.com email address.

I’ve got nothing against Yahoo. It could be AOL or Hotmail. But in my experience, these people tend to disappear. Again, this may sound obvious, but the person you’re working with should have a legitimate company email. Trust me.

-Similar to the one above: Make sure they have an office.

Again, this sounds pretty basic (and it is). Any legitimate company will have an office. I’ve got nothing against two guys working out of their garage to start a company. That’s great. But are those the guys you want handling your inventory?

-Any company you work with should have a warehouse.

This is also fairly easily done. Anybody can rent space in a warehouse. But having your own warehouse shows a level of commitment and experience – especially with the logistics of moving product.

-This is not a hard and fast rule…But one other guideline I recommend: Work with a company that has been in business at least five years.

Basically, if a company can stay in business for five years, they know what they are doing. They have figured out how to keep their customers satisfied, manage their own costs, and get the job done.

-Ask for bank references.

Some companies may get touchy about this, saying it is “private” or “confidential” information. Or they may drum up some story about as-needed financing. But, long story short, you want the company you are working with to be able to cover your deal with the cash they have on hand. Period.

None of these things are going to guarantee a great experience with the company you choose. Hopefully, if nothing else, they will help you avoid those “here one day – gone the next” vendors we’ve been seeing recently.

Cost Cutting – Where Does It Lead?

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After the horrible fire in Bangladesh in November that killed 112 people, it came out that some major retailers were using the factory  to source clothing.

Obviously, this is a really tragic event and a lot has to be done to improve working conditions and safety in factories like this.

factoryBut I can’t help thinking that some of the blame for this type of thing falls back to not only American companies – but also American consumers.

Let’s face it…We want to buy things cheaply. That’s why Walmart is so popular and that’s why so many of us shop there.

But Walmart itself is under constant pressure and faces competition from other retailers to continually lower prices to entice consumers.

And this keeps driving them (and companies like them – I’m not just singling out Walmart here) to keep cutting prices.

Cutting prices, while great for consumers, has an effect. It ripples through the supply chain of a big company.

And eventually…corners get cut.

Somewhere along the line the constant pressure to get things cheaper causes manufacturers, suppliers and retailers to cut costs in a variety of ways.

Maybe they find more efficiences in their supply chain.

Maybe they cut the quality of their products.

Maybe they cut the selection they offer.

Maybe they cut manufacturing costs with technology or other innovations.

Maybe they use the cheapest factories they can find that still produce the same goods.

Maybe certain safety standards get relaxed or overlooked.

These cuts do not always have tragic consequences. I am not saying there is an immediate link between cost cutting and safety.

Some of this pressure is good. It causes companies to innovate and lets other companies compete if they can do things better, faster and cheaper.

But how much are we willing to sacrifice for cheap goods?

Are there other ways to cut costs and lower prices for consumers?

This is a bit of a riddle because I don’t think the downward pressure on prices is going away any time soon. We all want the most for our buck.

I don’t know the answer, but I’m curious to hear your thoughts.

Drop me a line at ryan@dva.com.

 

 

Working With A Closeout Company

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closeoutcompanyI wanted to expand a bit more about the types of things you should look for when choosing a company to handle your overstocks.

Again, I want to say that I believe in competition. At DVA, we have to earn our stripes every day with our customers.

But having been in this business over 25 years, I’ve seen a lot of people have bad experiences before they come to us.

So, from someone who knows…here are a few things to ponder when you are choosing a company to work with on your closeouts and inventory issues:

-Make sure the company you work with will take all of your inventory.

You may talk to people who are interested in your product but claim they can’t handle the volume that you have. Believe me when I say this will cause you more trouble in the long run. You will still have half (or more) of your inventory on hand and will need to complete the sale process twice. In the meantime, you’re paying the costs of storing the rest of your inventory.

-Make sure that whoever you work with will pay 100% cash in advance.

I talked about this in my previous post, but just want to reiterate it. Any company that claims to be able to handle your closeouts should be able to cover the deal in cash. For legitimate companies, this should not be an issue. You will be amazed at the excuses people come up with for not paying you – but believe me you don’t want to hear them.

-Ask them to sign a Non-Disclosure Agreement (NDA)

A lot of companies get nervous when asked to sign anything. A Non-Disclosure is a pretty simple document. It won’t inhibit anybody’s business. And, if the company is willing to sign an NDA without hesitation, it shows that they respect your business and appreciate the issues you face. That is someone you would want to work with again.

-Get a contract.

I feel like I don’t really need to say this to most people. It’s pretty obvious. Anything that you want to be sure of you should get in writing. One of the benefits of a solid contract in our industry is that you can include a DO NOT SELL list that specifies any retail channels that you don’t want your product placed in. Any reputable company will be willing to include this in your contract.

If you have any questions about any of these points or would like to discuss your particular situation, please feel free to contact me directly.

My Book: How to Plan, Produce & Distribute Your Independent Film

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As you may know, I’ve been in and around the home entertainment business for 20 years. I’ve seen the industry change a lot in that time.

Over the years, many people have asked me: How can I get my film on the shelves of Walmart?

Well, I’ve finally taken my knowledge and assembled it into book form.

HTPPDYIFI’m excited to announce that my book How to Plan, Produce & Distribute Your Independent Film is now available on Amazon.

Before I get too far I have to credit my co-author Eric Sherman. Eric is a writer, producer and film consultant with years of experience in the entertainment industry. He’s also the author of numerous other books about the film industry.

What Eric and I tried to do in this book is provide a practical guide for filmmakers who want to get their films distributed. This book comes at the film industry in a bit of a unique way: from the end first. If your end goal is to get your film into stores and onto streaming services, this book will be of interest to you.

This book probably isn’t for people who want to make the next Avengers. But if you are interested in making a smaller movie and devising a distribution strategy for it, you may want to take a look.

We cover the history of the home entertainment business from the advent of VHS up to the present day where streaming and downloads are on the rise.

We’ve also got some great interviews with major players in the industry including people from Netflix and some of the studios.

And, yes…there’s even a chapter called “So You Want Your Movie in Walmart?”

There is also a handy resource for filmmakers that includes contracts and other documents to use as templates as you embark on getting your film distributed.

All in all, it’s a handy, helpful, easy-to-read book that I think a lot of aspiring filmmakers will find interesting.

You can read the first pages of the book for free on Amazon …so please take a look!

I’d love to hear any thoughts or feedback on the book. Drop me a line at ryan@dva.com.

Overstock Fun in the Sun

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People always ask me what business is like here at DVA.

What do you guys do? What’s a typical customer or deal like?

The short answer is that every single deal we do is different and we work with every individual customer in a different way.

Here’s one story that gives you some idea:

About five or six years ago, I got a call from a bankruptcy attorney. He had a client who was going out of business and had some product that he wanted to move into another channel.

I said, “Great. What is it?”

“Suntan lotion. Hawaiian Tropic suntan lotion,” he replied.

“Hmmm…okay. I think we can do something with that.”

After discussing some details, we agreed that we would take the product.

Great.

But there was one thing…when the product arrived, hundreds of individual bottles of suntan lotion, it was covered in, well, goop.

That’s about the only way I can describe it. Somewhere in transit, some of the product, in this case suntan lotion, had spilled all over the rest of the product.

And, of course, as anybody who’s ever smelled Hawaiian Tropic suntan lotion knows, it has a strong smell. And it’s fairly greasy. (As it should be, right? It’s suntan lotion.)

One other thing though…warehouses and the insides of long-haul trucks are not the most immaculate places in the world. So on top of the suntan lotion that was everywhere, there was also a layer of dust on everything.

You know when you put some suntan lotion on at the beach and some sands gets on that spot and it stick to you. Picture that – but with hundreds of bottles of suntan lotion.

Here’s another thing…by the time we received the product, it was the middle of winter.

So there I was with a bunch of dirty suntan lotion bottles in a warehouse that now smells like a giant pina colada… in the middle of winter.

Well…there was nothing else to be done.

We cleaned and repackaged the product – at our expense. And, by that time, it was heading toward spring and we found a customer in the South who had a need for it.

It was a lot of work and we incurred some extra costs, but in the long run both of our clients were happy.

Another DVA deal done.

And that’s just one example of the hundreds of deals that we’ve done over the years.

Now if we could just get the pineapple-coconut smell out of that warehouse…

What Does Hurricane Sandy Mean for Retail?

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Hurricane Sandy was a huge disaster that disrupted people’s lives and had a major effect on economic activity in the Northeast region of the country.

Retail sales were off by .3% in October according to the Commerce Department – primarily as a result of the storm’s effects. (http://www.marketwatch.com/story/us-retail-sales-decline-03-in-october-2012-11-14)

The reasons for this are obvious: people’s lives in the region were turned upside down. Nobody went shopping for the “normal” things in life – groceries, household items, entertainment, etc. And, of course, nobody was burying big items like cars, refrigerators, televisions or other big-ticket items.

But I think it will be interesting to watch in the wake of Hurricane Sandy what happens to retail. One of the great strengths of the American economy is its ability to get goods and services to the places where they are needed.

In the wake of the storm, once the basic recovery efforts are completed – and these are not insignificant, believe me – there will be demand for certain things.

Think about it… Many people in the Northeast sustained damage to their homes and their property. There may be a very interesting upsurge in demand for things like household goods and furniture, cars and even clothing.

I’m clearly not going so far as to say that there is an upside to Hurricane Sandy for retail. But again, I want to emphasize the resiliency of the American economy. Our ability to get goods to where they are needed (and wanted) is incredible. It’s one of the great strengths of our system.

And remember, we are talking about the Northeast region – one of the economic power centers of the country. There is a lot of economic strength in this region.

It will be interesting to watch whether all the TVs and cars and other household items that were damaged are replaced.

Many of the things we do here at DVA on a daily basis are very similar to what companies will do in the wake of the hurricane. We help get goods from one place to another in response to supply and demand. It’s that simple. We’re one small cog in the American economy.

I want to wish all the people whose lives were affected by Sandy a speedy recovery.

And I’ll be watching the retail sector to see its reaction.

It Had to Happen Sometime…Video Game Sales (Gasp!) Decline

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Everybody seems a bit amazed that video games – the growth engine of much home entertainment over the last 10-15 years – are in a downturn.

Games sales plummeted over 20 percent in the first eight months of 2012. That came after a sluggish 2011 as well. In fact, it’s possible that game sales (including hardware and software) will be the worst this year since 2005.

But all in all, I’ve gotta say…this doesn’t surprise me one bit.

At DVA, we buy and sell a lot of used games. Some games that were supposed to be enormously popular just aren’t. Some retailers over buy and want to unload some of their unsold inventory. Luckily, we are able to help.

We have access to all kinds of retail channels that still have a need for product. If you remember my post about consumer electronics, I said that there are all kinds of consumers at all different phases of the buy cycle. And this is as true for the video game industry as it is for consumer electronics.

Many gamers can’t afford the $50-$60 for a new console title. They are forced to wait six months or so for the price to go down. But for retailers, six months is too long to have unsold inventory sitting on shelves or in warehouses. That’s where we come in.

To my mind, the video game industry is simply like most other industries in our economy. This industry is being affected by all the same forces that are changing other parts of the entertainment world: namely the recession, digital distribution and the Internet.

A couple things about the video game biz:

  •  Gamers are primarily young males. It’s a bit of a stereotype but it’s true. This demographic group was hit pretty hard by the recent recession. They have less cash in their pockets as a group to buy those expensive titles and cough up those monthly fees.
  • Games on mobile devices and social networks – even ones without sophisticated gameplay – are taking a bite out of the market for the big-ticket titles. But even companies like Zynga – the maker of the massive hit Farmville – have been having financial trouble. No one is immune.
  • There have been a few creative duds lately in the gaming world. I’m not a connoisseur but if you ask people in the know they will tell you. This happens in movies too, right? Big studios put out bombs. Sometimes people lose their jobs or the company’s stock takes a plunge. It happens.

The long and short of it is that the video game business is now a mature business. It probably won’t see the astronomical growth of the last 10-15 years ever again. But video games aren’t going anywhere.

Call of Duty Black Ops 2 is coming out on November 13.  This is a huge title from Activision. Robert Downey Jr. is in the commercial. That tells you something.

Will it be a bomb or a bonanza?

We’ll have to wait and see.