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Timbuk2 v. CompUSA. Mark Dwight thought he had finally gotten his big break when CompUSA agreed to carry his Timbuk2 brand of "urban shoulder bags," but within four months he realized that bigger isn't always better, at least for a niche brand like his, reports Andrew Tilin in Business 2.0 (May 05). Although Mark's sales volume was turned up to 11, his profitability was "squeezed by CompUSA's slim margins" and the retailer's "reduced markups meant Timbuk2, timbuk2.com, had to bundle extra accessories with each bag to avoid undercutting the final sales prices of Timbuk2's other retailers." Even with his "employees working overtime to prepare the bundles," Mark couldn't keep up. Realizing his mistake, Mark killed his dream deal with CompUSA, but not before losing some $50,000 along the way.
Actually, what Mark learned was that not only was a big-box like CompUSA bad in terms of profitable sales, it was also bad, image-wise, for a quirky product like his to show up in a mainstream store. He realized he had to find "a sweet spot between niche obscurity and mass-market dullness." As Mark observes: "Look at Coach. It's a billion-dollar company, and it's not mass-market." Comments Dale Achabal of the Retail Management Institute: "Niche products get more attention in a specialty retailer than a big-box store ... The salespeople are more knowledgeable, and specialty stores naturally draw customers who are looking for unique things."
And so Mark's revised distribution strategy centered on stores like Apple, where in July 2003, he launched a $99 laptop bag. It was so successful that it boosted Timbuk2's "overall sales 130 percent virtually overnight." That gave Mark the momentum he needed to create "more than 30 new products, including iPod holsters, tote bags, and yoga mat carriers." And those line extensions "provided the backbone for expansion into new markets." Today, Mark is busily "expanding his network of 1,200 specialty retailers," and Timbuk2 "building elaborate point-of-purchase displays for its biggest accounts, including EMS sporting goods stores. Its Marina handbag for women has been a hit at fashion boutiques ... Sales have more than doubled since 2003, hitting $10 million last year, and the company expects them to climb another 50 percent in 2005." Says Paragon Sports buyer Jim Laros: "The brand is on fire."
Tim Manners, editor
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