Access to Markets:
Creating Opportunities for Microbusinesses in West
Virginia
A
report by the Center for Economic Options
214 Capital Street, Suite
200
Charleston, West Virginia
25301
Compiled by Rebecca Brady Rice
18
October 2001
Outline
I.
Introduction
II.
Program History & Rationale
III.
Program Requirements
A.
Setting up Systems
B.
Relationships with Mall Management
C.
Identity: Name, Logo, and Packaging
D.
Publicity and Special Events
IV.
Financial Statements
V.
Addressing the Duality of Customer and Client
Needs
VI.
Conclusion
I. Introduction
West Virginia is a land of
contrasts. It is one of the wealthiest in terms of natural resources, but has
the lowest median income in the nation. The Appalachian culture values family
ties and a strong sense of “place,” yet many West Virginians must leave
their communities and state to find work. The original settlers in Western
Virginia were self-reliant agriculturists and inherently
entrepreneurial, yet today, this entrepreneurial spirit has been supplanted
with dependence on wage income. It is not surprising, in face of these
paradoxical realities that West Virginia is lagging
behind the nation in terms of personal income and economic vitality even while
the national economy is booming.
The Center for
Economic Options (CEO), a non-profit organization that works across West Virginia, has nearly
twenty years experience working with a wide array of economic development
strategies. For ten years, CEO was
known as Women and Employment, and initially focused on job skill training for
women and those historically excluded from the economy. Although CEO still
focuses services to those in the latter category, it did not take long to
realize that job-skills training worked only in areas where there were, in
fact, jobs. Instead of perpetuating the dependency on wage income, CEO adopted
a strategy that focuses on reclaiming West Virginia’s heritage as
entrepreneurs, becoming a nationally recognized leader in the field of microenterprise
development by creating innovative program models that serve microbusiness
owners. CEO’s programs are based on a
common theme -- that microenterprise development can
be effective in helping individuals in rural communities build wealth, retain
assets, and take control of their economic destinies. Through successful microenterprises --
small-scale businesses with five or fewer employees -- West Virginians can earn a
living while remaining in their communities.
In 1990, CEO began to focus on assisting
small-scale entrepreneurs access higher-end markets previously beyond their
reach. Often isolated in rural communities, many of these business owners cited
the lack of access to markets as their greatest business challenge and the
primary barrier to achieving what they define as ”economic success.” There are many resources in West Virginia
for people interested in starting or expanding small to medium businesses (such
as Small Business Development Centers and microloan funds); rather than
duplicating services offered by these programs, CEO fills the niche of helping
very small businesses move their product to market by developing pilot projects
to find markets and test the viability of microbusinesses profiting from them.
For example:
·
As early as 1990, the Center was working to promote the adoption
of West Virginia apples into the
School Systems meal program, thus helping Eastern Panhandle farmers
access this market. Before this, the Board of Education was importing apples
from Washington State.
·
1992 - the Center conceptualized and formed the Appalachian
Knitwear Network and the Small Farm Business Initiative. Both
strategies were initiated to increase rural people’s ability to create and
sustain locally based enterprises. Through AKN, 40 home-based knitters combined
their production and marketing efforts to sell to large exporters -- and in one
year earned $78,000 they would not have otherwise!
·
1993 - Through an arrangement with Stone and Thomas
Department Stores, the Center’s “Gourmet Foods from the Fields and Forests of
West Virginia” project, created new markets for small-farm businesses.
The Center produced gift baskets containing products of nine businesses and
distributed them to the chain of stores in the region, resulting in over $7,000
of specialty food sales in less than two months!
·
1994 - Out of the Appalachian Knitwear Network the
Center created Appalachian By Design, Inc. (ABD) and continued to provide
financial support and technical assistance to establish it as an independent
organization. In one year, 30 home-based knitters produced 3,000 sweaters and
earned more than $137,000 that they would not have without ABD.
·
1994 - The Appalachian Flower Network Showcase
was designed for a small group of AFN rural flower businesses to present their
products to corporate, retail and wholesale buyers. The opportunity was
designed to allow these AFN businesses to access markets that would have
otherwise been closed.
·
1995 - The Center conducted both a festival market study
and a corporate market study. The Milton Pumpkin Festival and One
Valley Bank’s corporate gift-giving program were tested to see if these
markets were profitable opportunities for dried flower products -- and to help
businesses determine if these approaches worked for them. The Festival
Market Study participants made over $1600 in two days and gained
valuable retail experience. The six corporate market study participants made
$2,260.00. Both studies opened new
marketing channels for the participating businesses beyond the study.
·
1996 – The Center initiated the Forest Enterprise Network
by beginning to identify businesses that have an interest in pursuing
sustainable “green” formation of product development for specialty markets.
·
The Center co-sponsored with the West Virginia Small Business Development Center three consecutive Appalachian
Small Business Expos at the Charleston Civic Center in 1996, 1997, and
1998 with over 500 businesses participating collectively. This experience led
to the Center’s creation of the People’s Marketplace in 1999.
·
1999 - The People’s Marketplace attracted over
seventy regional buyers from retail, wholesale, and catalogue outlets to scout
and shop from over sixty of West Virginia’s rural small-scale
businesses. Almost three-quarters of the businesses participating made sales
during the two-day event -- several receiving major contracts from stores and
the West Virginia State Park System.
·
2000 - The Center produced the People’s Marketplace
Catalogue featuring the products and services of the People’s
Marketplace participants. The catalogue was distributed to over 800 targeted
buyers nationally.
·
Twenty small-scale businesses participated in “Marketing
to the Max” in August 2000. The training prepared these businesses to
market their products at tradeshows and expos.
Through this history of experimental
efforts examining entrepreneurship in West Virginia, the Center discovered that
the key to helping people develop their businesses, and thus their ability to
reach and maintain economic self-reliance, was linking “just in time” business
training to specific marketing efforts. The Center’s Appalachian Knitwear
Project /Appalachian by Design, Inc.,
for instance, initially brought together nearly 50 home-based machine knitters
to produce items for ESPRIT Corporation. The availability of the market provided
the incentive necessary for many of these knitters to formalize their
businesses, set up accounting systems, and generally increase their business
acuity through the Center’s trainings. In 1998, the Center made the strategic
decision to focus exclusively on the development of microenterprise as its
program approach, and, specifically, on the development of, and access to,
markets.
This
decision has since translated into solid results, leading to the formation of
Showcase West Virginia, a retail store offering
products made by microbusinesses across the state.
II. Program
History and Rationale
In August 2000, twenty
small-scale businesses participated in “Marketing to the Max,” a two-day
training designed by CEO to prepare each business to successfully present their
products at a retail show. To attract
businesses to the program, CEO made the offer of free booth space in the
upcoming West Virginia Made Products Expo, sponsored by the West Virginia
Chamber of Commerce, and the guarantee of two hundred dollars in sales. The guarantee of sales was a first for CEO
and it brought the needed response.
A week before the Expo was
scheduled to open, the Chamber of Commerce cancelled it due to a lack of
marketing and preparation. CEO was left
without a marketing opportunity to offer the businesses that had attended
Marketing to the Max. The search began
for an alternative and when Kay Kingry, owner of Dark Hollow Foods, approached
CEO staff about setting up a store featuring West
Virginia products in the area’s premier indoor mall
for the holiday season, Showcase West Virginia
was born.
CEO agreed to underwrite and support the project,
based in the Charleston Town Center Mall for the months of October, November,
and December 2000. Under an agreement
with CEO, a limited liability partnership was set up between Kingry and Diana
Sowards, owner of Gifts of State, to manage the store. Participants in the Marketing to the Max
seminar and a select number of other specialty food producers were offered the
opportunity to place their products in the store on consignment with a 70%-30%
(vendor-store) split of the retail price.
Initially forty accepted the offer, marketed by CEO as an excellent
opportunity to both generate sales and gain visibility with minimal risk and
effort.
Three weeks later on October 9,
Showcase West Virginia opened its
five hundred square foot space for the first time. The new store offered a range of products –
specialty foods, soaps and lotions, candles, dried flower arrangements, pottery,
stained glass, textiles, jewelry, chocolates, and gift baskets, among other
things and all were produced in West Virginia. Customer response was enthusiastic and the
store’s sales reflected that enthusiasm for the West
Virginia products.
Vendor participation increased by twenty-six over the three month
period.
CEO planned to close
Showcase West Virginia at the end of December 2000
but the response from the shoppers, the vendors, and mall management indicated
that the Center had hit the mark.
Showcase West Virginia grossed almost $46,000 in
its first three months with close to $34,000 going to the sixty-six
participating microbusiness owners in the form of consignment checks.
Showcase West Virginia is distinct from previous
CEO programs accessing new markets for West Virginia microbusinesses in that it
has the potential to provide an unrestricted funding stream to CEO’s other
programs, such as microbusiness trainings.
It is this system of mutual benefit to both the microbusinesses and to
the non-profit that makes Showcase West Virginia a valuable model for
microenterprise development.
Showcase as a
new market for West
Virginia
microbusinesses
Since Showcase West Virginia opened, a steady stream of
microbusiness owners from across West Virginia have contacted CEO to see
how they can get their products in the shop. At the same time, CEO has been
contacted by development groups, mall owners, city planners, and resort
developers to learn how they could get the retail store in their locations. To
CEO, this is a double positive: small business owners want to sell their
products through Showcase West Virginia and development locations
across the state want to replicate the retail format, thus increasing marketing
opportunities exponentially. This will result in CEO having opportunities to
provide appropriate technical assistance and business training to a large and
growing number of microbusinesses. In
fact, CEO currently uses Showcase West Virginia to offer microbusiness
owners a low-cost, low-risk way for them to do market research, test new
products, improve packaging and quality, assess competition, and form strategic
alliances with other businesses. For many businesses, Showcase West Virginia is an appropriate “next
step” and a way for business owners to determine how to approach other
wholesale or retail opportunities.
While other markets and
opportunities exist for these microbusinesses, the key to making these
businesses stable and thus sustainable is to help them diversify their markets,
encouraging them not to put all their eggs into one basket. For example, if retail store ABC is the only
market for West Virginia products
a business can access and build their business through, and ABC discontinues
sales of a certain product or goes out of business, the microbusiness will take
a big hit, possibly going out of business itself. If ABC is only one of several markets that
microbusiness sells their products through, while the loss of the account may
hurt the microbusiness, it is in a much stronger position to recover.
Showcase as a source
of sustainable program-related income for CEO
While CEO
has a working history of encouraging entrepreneurial methods of economic
development, that history is based in the role of CEO as a non-profit helping
other businesses develop entrepreneurial skills, rather than applying that
knowledge and experience in the marketplace directly as an entrepreneur
itself.
Through
Showcase’s role of entrepreneurial intermediary, CEO is not only working with
the vendors in the retail store, but with retail customers as well. The retail customers act as thousands of
small funders for CEO’s activities, making funding decisions one purchase at a
time. By necessity, the approach for all
these individual funding sources is very different than more traditional
methods of obtaining funding for the organization. Most mall shoppers wouldn’t respond if CEO
staff approached them in the food court, giving out Annual Reports and
proposals requesting large grants, and CEO would soon be out of business. Learning how to successfully retail was, in
their own words, “a sharp learning curve” for CEO staff and a new challenge for
the organization. CEO had to have enough
faith in its plan and employees to stick out the large number of staff hours necessary
to figure out exactly how to run a retail operation, from merchandising to
customer service.
With the
decision to take over Phase II of Showcase West Virginia,
directly managing the store itself, CEO immersed itself in the marketplace with
the goal of expanding and providing available markets for West
Virginia microbusinesses. CEO took a calculated risk that people would
purchase West Virginia-made products, supporting Showcase West Virginia, and,
indirectly, the work of CEO. And the marketplace has responded favorably. Rather than spending two dollars on a jar on
jelly at SuperWalmart, customers have shown their willingness to pay a premium
for the small batch quality of locally-made jam. By gathering in one place some of the unique
and quality products made in West Virginia, Showcase provides a valuable
service to these customers searching for authenticity, workmanship, and
quality.
In order to
run Showcase successfully, CEO has been required to realize their goals of
being competitive in the marketplace, understanding the retail business, and
educating their retail customers as to the value-added inherent in the products
of state microbusinesses.
III.
Program Requirements
A. Setting up Systems
Coordinating a project as large as
opening and operating a retail store on a consignment basis takes time, effort,
and planning. An operation of this type
requires not only retail management experience, such as scheduling employees
and arranging merchandise, but also financial experience and systems, such as
inventory control and paying on consignment.
·
Management Evolution and Staffing Structure
By its very
nature, selling products on consignment, especially those produced by
microbusinesses working with small margins, is a labor intensive process, requiring
a great deal of communication both ways.
It is important that CEO program officers keep in touch with vendors
about product sales, opportunities to promote their products in the store,
quality issues or problems. Vendors
need to be honest about the levels of inventory they feel comfortable leaving
in the store.
Phase I – October through December 2000
Phase I, Showcase West Virginia
LLC, was managed entirely by two of the microbusiness owners represented in the
shop. One of the two, Diana Sowards, had
prior experience in running a retail shop through her own business, Gifts of
State. Decision-making power was shared
between the two, with veto power held by CEO in any financial decisions made. Details of responsibilities required of the
LLC were detailed in the underwriting contract with CEO, and included an
accurate financial reporting at the end of the three month period, as well as a
written report detailing the success of the venture, which was never completed. Both members of the LLC were compensated on
an hourly wage based on time spent in the shop.
:::picture mapping relationships
between LLC, vendors, CEO, mall management, and employees:::
Phase II – January through mid-May 2001
During Phase II, Showcase West
Virginia was managed by a team of CEO employees at all levels of the
organization, stepping out of their roles at CEO to contribute to the
operations and development of the store.
In March, one of CEO’s program officers took the lead in coordinating
management responsibilities of the team.
This approach to Showcase took a great deal of commitment on the part of
CEO staff, requiring many hours of unpaid overtime to get everything done.
Phase III – mid-May 2001 through present
In May, CEO hired a salaried
manager with a degree in merchandising and several years’ experience in
retailing to be in the store full-time.
The manager is responsible for setting employee schedules, supervising
and training employees, merchandising within the store, maintaining proper
inventory levels, etc. The two full-time
assistant managers are responsible for reordering, store operations,
merchandising, etc. and are paid on an hourly wage scale like the rest of the
employees. All full-time employees
receive benefits.
CEO currently maintains two full-time
program officer positions for Showcase West Virginia, one dealing with vendor
relations and store management and the other dealing with the marketing and
training aspects of Showcase. Both staff
work to recruit and develop relationships with vendors. These staff work out of CEO’s offices,
visiting the store on a regular basis.
Decisions are made by consensus between CEO staff.
:::picture detailing relationships
now:::
Showcase has had the same staffing
problems other retail stores have had during the recent economic boom, the
difficulty of finding and keeping good employees in the store for minimum
wages. Traditional means of finding
employees, such as ads in the classifieds, ran without any response. By offering other incentives, such as paid parking
and some flexibility in scheduling, and creatively looking for new hires, CEO
has managed to assemble a solid staff for the store. One example of creativity in hiring was
sending one of CEO’s program officers to a monthly meeting of the senior citizen
mall walkers. Out of that contact, CEO
was able to hire Mary and Clarence, both older people wonderful at connecting
to the store’s target customers. While
neither are proficient at working the cash register, each has skills that are
valuable within the store setting (i.e. coordinating tastings, interacting with
customers, and fixing things around the store) and have proven to be very
reliable.
Showcase
staff have required some major changes in CEO’s Personnel Handbook. While the final revisions are still in the
works, personnel issues that have had to be addressed are a dress code, holiday
leave, parking reimbursement, and, as employees, with the exception of the
store manager, are non-salaried, overtime and wage hour laws. Operational procedures added include
reordering, inventory check-in, customer relations, financial end-of day
paperwork and cash drawer procedures, cleaning, opening and closing the store,
tastings, gift-wrapping,
Lessons Learned
¨
While CEO did not have the staff capacity to start
Showcase West Virginia without the LLC, working with the LLC was a risk. CEO staff did not have control over many
decisions made by the partners in the LLC.
With CEO’s name being displayed prominently in regards to their
underwriting, their reputation was at stake.
When discrepancies arose over amounts of inventory, the inventory system
in place was not adequate to settle the claims; CEO was forced to pay out the
inventory in question or risk losing the vendors.
¨
In operating a store such as Showcase West
Virginia, both retail employees and non-profit staff must share their expertise
and try to see where the other party is coming from. Showcase retail employees must understand
that CEO’s mission of helping microbusinesses access markets is the underlying
reason for the store. CEO staff must
recognize that the merchandising and retail experience of the Showcase store
staff increases sales at Showcase West Virginia, thus making the venture
sustainable.
¨
Starting and maintaining the retail store used
“a tremendous amount of CEO staff time,” much of which was overtime donated by
the employees. This time investment
would be reduced by experience in relevant fields, like merchandising and
retail management.
¨
Being flexible and responsive in hiring staff has
definitely been productive for Showcase.
It is important to capitalize on the skills your staff already has and
encourage them to develop new skills through positive feedback.
·
Financial and Inventory Systems
When
Showcase first opened, sales were rung up on a register, leaving inadequate
records of product sales by vendor, and thus making accurate consignment
payments difficult. Consignment payments
were further complicated by the inadequacy of the cash register system to
handle the number of vendors the store carried.
Moving to a computer based POS (point-of-sale) system was not an easy
process, but one that was definitely worthwhile for Showcase, making
end-of-month consignment checks more accurate, while also supplying daily
transaction logs and other marketing and sales data to CEO staff.
Accurate
inventory records are vital to the success of any store operating on
consignment. Showcase West Virginia’s
vendor policies clearly set out the procedure for reorders and where and when
vendors can drop off their product. The
store’s hundred and seventy vendors are split between the three full-time
managerial positions; each manager is responsible for staying in contact with
his or her vendors and reordering as necessary to keep their product in stock. Vendors are expected to submit an inventory
sheet with their product, showing clear quantities and a wholesale price for
each product submitted. This sheet is
compared against the physical inventory brought in by a member of the retail
staff, so that any discrepancies can be dealt with immediately.
The retail
staff then enters the new inventory into the computer inventory system and
prints out removable labels with bar codes compatible with the store’s scanning
system. The products are labeled and put
on display by the store’s design staff.
Vendors are not allowed to place their own product in the store, a
decision made by staff to prevent disruptions and eliminate competition for
“prime’ spots in the store.
Other
financial systems in the store, such as night deposits and credit card approval
are handled through a merchant account at a bank in the mall.
Lessons Learned
·
Software that runs consignment records is not
easy to find or inexpensive. Software
that can simply run inventory and ring up sales can be both.
·
If at all possible, begin with a computerized
consignment inventory system in place.
Mistakes are made more easily without the system in place. Switching from a register-based system to a
computer-tracked inventory system is a long and difficult process, requiring
both systems to be run side by side until any discrepancies are ironed out.
·
Set clear policies concerning in-store breakage
and theft. Showcase WV takes
responsibility only for breakage by employees, and is working on how to hold
employees partially liable. Breakage by
a customer is the responsibility of that customer. While Showcase employees take every
precaution against theft, it is ultimately the responsibility of the vendor.
·
One of the challenges of operating the store on a
consignment basis is a working return policy.
At Showcase WV, customers can get a full refund with receipt only during
the same calendar month as the purchase.
Other returns can be exchanged for merchandise of the same vendor
only.
·
Learning to anticipate ordering can be
difficult. As the microbusinesses
selling their product through Showcase are doing so on consignment, it is
important not to stress them with overstocking demands. On the other hand, the store shouldn’t run
out of their product either. A full
shelf of product sells much better than a half empty one. Striking a good balance takes close
observation of sales trends.
B. Relations with Town Center
Mall management
Initial
contact with Town Center Mall management was made through Kay Kingry, one of
the original partners in the LLC, and it was the LLC that signed the original
lease contract with the mall.
During the
holiday season, Showcase offered a number of tastings and demonstrations, which
due to the small space within the original shop could not be accommodated
within the store. Tables set up by the
mall outside the storefront normally cost $40 a piece. Mall management offered to waive the fee in
return for a filled basket valued at the same amount to use as a doorprize for
their senior citizen mall walkers program.
The basket was such as a success with the mall walkers group that
management asked Showcase to continue the exchanges in the future. This was great for Showcase because it meant
that the cost of each table rental was reinvested in vendors’ products in the
store and was a great source of exposure for those West Virginia products
included in the baskets.
It soon
became clear that the store was going to need a larger space if it was to stay
open. Lack of storage space in the
original shop forced CEO to use their main offices on Capital Street, several
blocks away, as storage for inventory.
Lack of on-site bathroom facilities required CEO employees to walk over
from the Capital Street office to relieve employees for bathroom breaks, as
well as for lunch.
Town Center Mall management
recognized the value in having Showcase in the mall and offered
deeply-discounted rent and, in later negotiations, a larger space for the store
as incentives to stay open indefinitely.
In February 2001, CEO negotiated for a storage space on the second floor
of the mall and, in mid-May, moved to a new location, quadruple the size of the
previous space with storeroom and employee bathroom in the back.
Lessons Learned
·
As a non-profit, it is possible to negotiate for
expenses like rent. Think of other ways
your organization can contribute. By
operating a store offering West Virginia products, Showcase West Virginia is
adding something unique to the mall, as well as something attractive to older
customers. CEO is a well-known
non-profit in the area and is able to leverage publicity more effectively than
the mall itself. Special events, like
the West Virginia Day celebration, bring people to the mall to shop that might
not have come otherwise.
·
In considering possible locations for a retail
store, it is useful to look at required opening hours and customer flow. Being
located in the Town Center Mall brings Showcase West Virginia a steady flow of
customers, but it also has required hours of operation (10am-9pm Monday through
Friday, and 12:30-6pm on Sunday). Even though Showcase rarely breaks even on
Sundays, it must be open while the rest of the mall is open.
C.
Identity:
Name, Logo, and Packaging
Working out an identity for the
store was one of the easiest parts of the process for CEO. The Showcase West Virginia name was first
proposed by Kay Kingry, one of the original managers of the store, and met the
requirement of clarity (explaining that the store sold West Virginia products)
and implied quality (things that are showcased are typically different, higher
quality items). In the original legal
agreement between Showcase LLC and CEO, CEO was given rights to the name
Showcase West Virginia after the LLC was dissolved.
During Phase I, the LLC provided a
sign, used as a prototype for the logo after CEO took over operations. Working with a graphic designer, CEO came up
with the final logo – a seal featuring the Showcase West Virginia name and
mountain scenery.
A color version of this banner logo
was used in the sign, made by Appalachian Signs, a microbusiness based in
Elkins, West Virginia, that now hangs over the new store location. Miniature woodcut versions were made as staff
badges by the West Virginia Wood Tech Center.
The name Showcase West Virginia was
officially transferred over from the LLC to CEO during Phase II by CEO legal
counsel through the office of the Secretary of State. There is currently an issue with another
party buying up rights to the Internet website domain name, www.showcasewv.com;
as this was done after Showcase first registered the name Showcase WV with the
Secretary of State, CEO has possible legal squatter’s rights on the name.
Packaging of items purchased at
Showcase help to identify the store’s look.
Bags used are beige craft paper with a single twisted paper handle of
the same color with a metallic gold Showcase West Virginia label with forest
green print. Boxes and tissue paper
follow the same color scheme, tying in with the store’s overall color scheme of
forest green and dark gold.
Packaging costs for the store are
broken down to give some idea of what Showcase West Virginia spends on bags,
tissue paper, and boxes per transaction.
Estimates would, of course, vary by the quality of the packaging
used. CEO staff did a great deal of
research and testing of various sizes and dimensions of bags and boxes to find
ones that met Showcase needs. All bags,
boxes, and tissue paper have been ordered through Nashville Wraps, a company
that has been consistently helpful and understanding of the needs of a small
business like Showcase West Virginia.
Labels were ordered through ColorCraft Printing, a small business
located in Charleston, West Virginia.
Item
|
Size
|
Cost/Unit
|
Brown craft bags with twisted paper handle
|
16X6X19
|
$.39
|
|
8X5X10
|
$.26
|
|
5X3X8
|
$.27
|
|
16X6X12
|
$.34
|
Tissue paper – forest green
|
20X30
|
$.04
|
Tissue paper – recycled craft
|
20X30
|
$.03
|
Boxes – heavy brown craft
|
3X3X21
|
$.12
|
|
4X4X4
|
$.15
|
Gold foil labels with Showcase logo (roll of 5000)
|
2x3
|
$.05
|
|
3X5
|
$.06
|
Showcase business cards (double-sided green print)
|
|
$159 for 5000
|
D. Publicity and Special Events
CEO has proven quite successful in
leveraging publicity for Showcase through a steady stream of press releases and
contact with the media. Local media, particularly
print media and newspapers, have been cooperative in keeping the public
up-to-date regarding Showcase, from stories on Showcase becoming an on-going
project to features about Showcase hosting a West Virginia Day celebration at
the mall. This cooperation was due in great part to previous work by CEO in
promoting the importance of microenterprise development to the state’s
economy. In getting the word out about
Showcase, CEO has received regular publicity in local papers, such as the
Charleston Gazette Daily Mail, the State Journal, and Graffiti, since its
opening in October 2000.
Showcase
has sponsored several special events since moving to the larger store as a way
of attracting both more customers and more publicity. The Mother’s Day Garden Party featured
female-friendly products like Straight Fork Farms line of botanicals and dried
flowers and demonstrations of basket weaving and hammered dulcimer. The Father’s Day Barbecue, held the Saturday
before Father’s Day, featured tastings of Langston’s Barbecue Sauce and Gauley
Gourmet spice rubs among other male-oriented products.
For West
Virginia Day, June 20, Showcase held its grand opening celebration for the new
larger location. This event featured
live musicians, tastings of specialty foods featured in Showcase,
demonstrations by craftspeople, a chance to win a $50 gift certificate to
Showcase, and birthday cake for five hundred people (made by a local
microbusiness, Cranberry Faire). Not
only was this a good sales day for Showcase, it was a great chance for
exposure. The event was mentioned in the
Charleston Gazette Daily Mail several times leading up to West Virginia Day and
was well-attended. Several news organizations
came to cover the event, from a local TV station to West Virginia Public
Radio.
In late March 2001, CEO had a booth
promoting Showcase at the West Virginia Home Show at the Charleston Civic
Center. The display included many of the
products sold through Showcase, and while sales at the show were prohibited,
many potential customers filled out tickets (which they had to drop off at the
store) for a free night at a West Virginia Bed and Breakfast.
Lessons Learned
¨
Coordinating these events is, by necessity, a
large investment of behind-the-scenes staff time, lining up musicians and
businesses to do specialty food tastings and product demonstrations, making
arrangements for space and equipment, and publicizing the event. Out-of-pocket expenses can be minimized
however; for the West Virginia Day celebration, CEO paid for the cake and
balloons, the Town Center Mall donated tables and setup equipment, and many
vendors came to do free tastings.
¨
CEO developed a customer mailing list by holding
a drawing for a gift from the store, resulting in 500 local addresses and
approximately 750 addresses statewide, which are used for future mailings and
publicity
IV. Financial
Requirements
For several
years, CEO’s funders have asked the organization to look at programs that would
help the organization to become more self-sustaining financially. With Showcase West Virginia, CEO has taken up
that challenge, successfully relating it to organizational goals of assisting
microbusinesses to access markets.
By
investing in Showcase West Virginia, CEO has invested in the success of the 140
microbusinesses that sell their products through Showcase. To generate an unrestricted funding stream
for program work, CEO assumes part of the sales its clients generate. (In the case of the Showcase retail store,
CEO keeps 40% of sales.) If CEO’s clients
prosper, then the organization is able to continue expending resources to
research and develop new and innovative marketing strategies, expand services
and trainings, and develop policy initiatives that will serve the state’s
broader economic goals.
During
Phase I, CEO underwrote Showcase West Virginia in the amount of $10,000. This initial start-up money was managed by
the LLC and used to cover expenses such as rent, wages, insurance, licenses,
and professional expenses, such as legal fees.
During the three months Showcase was run under the management of the LLC
(October, November, and December 2000), gross sales equaled almost $46,000, and
payments to consigning microbusinesses, almost $34,000.
|
Phase I - Profit (Loss) Statement
|
|
Revenues
|
Expenses
|
|
Grant Income
|
$10,000.00
|
Consign. Payment
|
$33,861.64
|
|
Sales
|
45,854.31
|
Payroll Expenses
|
13,300.22
|
|
|
|
Professional Fees
|
1,125.00
|
|
|
|
Rent
|
4,499.66
|
|
|
|
Supplies
|
850.65
|
|
|
|
Telephone
|
619.86
|
|
|
|
Miscellaneous
|
3,271.77
|
|
|
$55,854.31
|
|
$57,528.80
|
Total Profit (Loss) –
Phase I
|
$(1,674.49)
|
Phase II
began when CEO took over operations of Showcase West Virginia on January 1,
2001. From that point, Showcase West
Virginia was operated as one of CEO’s programs, coming under CEO’s direct
supervision and fiscal responsibility.
Following are the expenses tracked for the first two quarters of 2001 –
a large part of the costs during these quarters are expenses related to moving
the store to a larger space and setting up the store on a permanent basis (i.e.
buying fixtures and implementing the POS (point-of sale) computerized inventory
systems). Rent expense (shown as a part
of General Expenses) is a specially negotiated rate for the calendar year 2001;
leases in the Town Center Mall are renewed on a yearly basis and thus may rise
in the future.
Phase II - Expenses
|
|
First Quarter 2001
|
Second Quarter 2001
|
|
General Expenses
|
$9,207
|
General Expenses
|
$12,314
|
|
Salaries & Wages
|
45,071
|
Salaries & Wages
|
47,260
|
|
Administrative Expenses
|
19,718
|
Administrative Expenses
|
6,618
|
Total Expenses Q1
|
$73,996
|
Total Expenses Q2
|
$66,192
|
|
Average Monthly Expenses – 1st
Half of 2001
|
|
General Expenses
|
$ 3,586.84
|
|
Salaries & Wages
|
15,388.50
|
|
Administrative Expenses
|
4,389.34
|
Total Average Monthly
Expenses
|
$23,364.68
|
During the
second half of 2001, it is expected that the general expenses will drop because
of reduced equipment costs and decreasing packaging costs due to increasing
volume. Salaries and wages are also
expected to drop due to increased staff efficiency.
Sales have
increased drastically at the store since Showcase moved to a larger space
mid-May and increased the number of vendors represented in the store. Gross sales from the retail store can be
expected to rise during the second half of 2001 due to the holiday season.
Gross Sales Income – 2001
|
|
Month
|
Gross Sales
|
To Consignors
|
To CEO
|
|
January 2001
|
$ 4,692
|
$ 2,815
|
$ 1,877
|
|
February 2001
|
6,194
|
3,716
|
2,478
|
|
March 2001
|
8,029
|
4,817
|
3,212
|
|
April 2001
|
6,169
|
3,701
|
2,468
|
|
May 2001
|
10,367
|
6,220
|
4,147
|
|
June 2001
|
18,333
|
11,000
|
7,333
|
|
Totals – 1st Half of 2001
|
$53,784
|
$32,270
|
$21,514
|
|
July 2001
|
18,916
|
11,350
|
7,566
|
|
August 2001
|
|
|
|
|
September 2001
|
|
|
|
To date, it
has been determined that sales income from Showcase West Virginia is
non-taxable program income for CEO.
While starting Showcase West Virginia has been a significant investment
for CEO, it is increasingly looking like a good one. At the current level of sales, it is
projected that Showcase West Virginia will have repaid CEO’s initial financial
investment entirely by the end of 2001, covering its own
V. Addressing the Duality of Customer
and Client Needs
In making Showcase West Virginia a
success, CEO essentially has not one client, but two. Both retail customers and vendors must be
satisfied by different means. In this,
Showcase acts as an intermediary. For
the retail customer, Showcase works to provide high quality West Virginia
products. For the vendor, Showcase
attracts new customers and provides a new market for their products.
Focusing on the Consumer
From
previous entrepreneurial programs, CEO staff realized the importance of
customer service and customer loyalty to a store like Showcase West Virginia
from the beginning. In the higher-end
markets of specialty foods, bath and body products, home furnishings, and
gifts, superior customer service becomes more important as products reach
premium prices. One of the key reasons
for the continued success of Showcase West Virginia is the store’s
relationships with its customers.
Showcase employees are trained in
working with the customer – greeting them, assisting with gift selections and
gift baskets, putting the customer first in any situation. Sales clerks and managers often know the vendors
and are able to share stories about the products in the store, as well as
answer many questions about them.
Showcase managers frequently gets comments from customers about the
friendliness of their employees; one woman, for example, came in to suggest
that Showcase should set up sessions to train other mall employees to be as
friendly and helpful as their own.
Customers are encouraged to taste,
touch, smell, and interact with products.
Samples of bath and body products are displayed prominently with wooden
tester sticks. A sign beside a handmade
walnut rocker invites customers to “set a spell.” A table near the front of the store is
devoted to specialty food samplings of Showcase products ranging from jams and
honey to barbecue sauces and meatballs.
Strategic use is made of the store’s
space and display capacity with frequent moving and redesigning of product
displays, called visuals, to keep the shopping experience interesting for
frequent shoppers and highlight new product lines.
West Virginia music offered in the
store, ranging from Appalachian Celtic to bluegrass, is played over the sound
system with a copy of the current selection being prominently displayed. Customers spending a long period of time by
the music display are often asked if there are particular selections that they
would like to hear played. In the same
area, a television, set at eye level in the wall, allows customers to preview
videos on West Virginia, ranging from a video on Bridge Day down in Fayette
County to CEO’s own documentary, Microbusiness
in West Virginia: NOT Business As Usual.
Gift baskets are one of the store’s
more popular items; customers can choose either from pre-assembled baskets
featuring specialty foods on a theme (i.e. a jalepeno basket featuring a hot
salsa and jalepeno jelly) or they can choose what to put in themselves. Gift baskets are available in four sizes and
are put in plastic gift bags and tied with ribbon to finish them. Gift boxing is available with no additional
charge and customers can ship their purchases through the store.
Lessons Learned
¨
Sampling a food product can drastically affect
its sales, dependent on several variables: volume of customers, full inventory
levels of products, encouraging/outgoing personality of taster.
¨
Music playing in the store can increase sales by
giving people a feel for the music they can buy, as well as giving the store a
unique atmosphere.
¨
Demonstrations of product production, such as
basket weaving or pottery, can increase customer interest in and sales of the
product being demonstrated.
Focusing on the Vendor
While most of the original vendors
featured in Showcase West Virginia came out of the Marketing to the Max
seminar, new vendors have approached the store on a regular basis, asking how
to get their products in the store. CEO
staff have also made outreach efforts to find new vendors, visiting crafts
fairs around West Virginia and drawing on contacts made through twenty years of
experience working with microbusinesses.
Special effort has been made to recruit a wide variety of products to
represent West Virginia. Word-of-mouth
by current vendors has been very successful in helping CEO recruit new vendors.
Primary requirements to place
products in the store are being a small business operating in West Virginia,
owning a valid West Virginia business license, and, if a food producer, having
liability insurance and a current health certificate. If these three requirements are met, then an
informal appointment is set up with a CEO program officer to look at the
product and determine if it is appropriate for the store.
Vendors are invited to be involved with the store
through tastings, performances, and demonstrations of their products and are
frequently advised of other marketing opportunities available to them. This involvement, combined with the
consignment format of the store, give vendors a feeling of ownership in the
store. Vendors selling products on
consignment tend to be much more emotional in regard to their product sales and
ownership, making the job of the retail staff in displaying and working with
the product more difficult.
Lessons Learned
·
Clear policies must be outlined in dealing both
with vendors and customers to delineate the responsibilities of the non-profit,
the retail store, and the participating microbusinesses. Showcase West Virginia has used written
vendor policies successfully to advocate professional “best practices” to
businesses that may not have experience formally working with another business,
or understand the general expectations of doing so.
·
Conflicts of interest between vendors and store
staff can be damaging to staff relationships and morale. It is vital that a non-profit keep its
reputation for fairness intact to preserve working relationships with vendors.
·
If resources are available, purchase products outright
to sell, rather than accepting them on consignment. Problems that arise in working with consigned
products are pricing issues, breakage, return policies, and negative vendor
involvement in the store (i.e. vendors placing their own products in the store
without consulting store staff).
·
Relationships based on mutual trust and
understanding are essential to the success of a project such as Showcase West
Virginia.
VI. Conclusion
As an organization committed
to helping microbusinesses access new markets, CEO is currently pursuing the
development of a broader-concept Showcase West Virginia encompassing not only
retail operations, but CEO’s other marketing and brokering activities that
particularly benefit economically challenged small enterprises in rural areas.
CEO is seeking underwriting to determine the feasibility of developing Showcase
West Virginia in this broader form and to allow the Center to evaluate the
myriad opportunities that have sprung forth since October 2000.
To date, the Center has
identified the following Showcase West Virginia opportunities that would enable
rural, small-scale businesses to reach lucrative markets and develop products
for emerging markets while receiving appropriate, timely, and custom designed
business training and services.
These include:
·
Expansion of Showcase West Virginia retail stores
·
Regional and national tradeshows
·
Product marketing for sector associations, cooperatives, etc.
·
Web-based marketing service, e-commerce
·
Direct product brokering
·
Creation of a for-profit subsidiary and brand
With the creation of Showcase West
Virginia, CEO has looked at new possibilities for funding CEO’s work with an
unrestricted stream of program-generated income. Money spent at Showcase West Virginia is
recycled back into West Virginia’s economy, through payments to microbusinesses
throughout the state and support of CEO’s non-profit program working to make
other markets and opportunities available for West Virginia microbusinesses. As
a state mired in poverty and debt, West Virginia has few foundations based in
the state to offer grant money. This
sponsorship of individuals is one solution CEO has found to making fundraising
in the areas in which it effects change a real possibility.