Smart50 rank: 2
Revenue: $8,794,000
Growth: 266.50%
Founders: Jillbert Mulder, 37, Vanessa Garrard, 31 and Richard Chen, 32
Based: Queensland
Employees: 14
Industry: Wholesale trade
Website: www.e3style.com
"Females are doing most of the shopping for consumer electronics yet you weren't seeing portable, fashionable lightweight products aimed at the female shopper. There are only a handful of females in the industry with an eye and we thought we could do it better," says Garrard.
The trio left their jobs, put in $10,000 each, started the business from home in Brisbane and didn't take a wage for the first year while they set up E3 Style in 2006. The business was profitable within six months with revenue of $8.7 million and a growth rate over three years of 266.5%.
"We are now drawing a reasonable salary and with dividends are now on more than in our old jobs," Garrard says.The strategy was to build a range of high quality products with the end consumer in mind, at aggressive retail price points, with easy to understand packaging and artwork. They offered a product development and sourcing service, that included product design and tooling, branding, packaging design, artwork creation, aggressive pricing, full quality control, logistics support and market intelligence including full competitor and product benchmarking information. And they focused on three main categories: accessories for AV, IT and OPTIX, youth electronics and promotional products.
"The vision was to offer the right product, at the right price, at the right time," says Garrard.
They developed products for Estelle Designs, Teac and Akai and distribute products for Philips, TDK and Memorex. Products can be seen in ALDI, Kmart, Target, Big W, Dick Smith, Tandy and Fry's.
They nearly came unstuck very early on. The company received a large order from a valuable client and the goods got held up at Chinese customs. An error was made on the custom clearance form between the factory and Chinese customs and the goods were not released to clear customs. Garrard says they had paid the factory and they also had to pay a fine which had a severe impact on cash. "We now inform factories of appropriate branding of products to mitigate the risk of this happening in future."
"The lack of support from banks to lend money suppressed additional growth opportunity and we had to manage growth within its own cashflow," Garrard says. "We regularly had to turn down orders due to cashflow restrictions."
"Finding the right staff was also difficult as the business model is very complex and the business has found it difficult to find people with the right mind set," says Garrard. "The cost and time involved in recruiting and training team members is higher than a typical organisation, so we have to plan six months ahead for recruitment needs."
A challenge also came from an ex-employer who tried unsuccessfully to restrain them conducting business in Australia. "This caused unnecessary stress and emotional strain as well as financial burden."
They have big plans for growth, expanding the brand portfolio, and offering a variety of options in youth electronics to retailers, launch and expand an eco range of AV accessories and expand the global distributor base. The vision for the next five to 10 years is to continue with the "develop one, sell many" business model as the company expands internationally.
"Products will be developed to be used globally which means a product developed for a customer in one country can be used in another with simple artwork changes," she says.
She says the industry is changing in a number of ways. "There is more interest in products with a fashion element as females are becoming the more dominant buyer of consumer electronic products in the household," says Garrard.
"Also buyers are becoming more conservative with the global financial crisis, with a longer lag between presenting new items and an order being raised. Order quantities are also affected for promotional lines as consumers spend less and impulse price points have dropped. A considered purchase is now a lower RRP than 12 months ago; 12 months ago $99 was still impulse, now $49 is maximum."
The downturn has also highlighted the need to continue being flexible in product development. "The focus has shifted to commodity items that don't require catalogue or promotion. Consistent, replenishable items are the key focus," she says.
E3 attends all major electronics, IT and camera trade shows around the world to source new products and investigate new technology, packaging and retail trends.
"The competition have fairly structured product releases and usually new products are presented once or twice a year, whereas we are showing customers new concepts and products monthly and fortnightly," Garrard says. "We will continue to attend international trade shows, even though competitors and buyers are pulling back on travel expenses."
"You need a really good eye for what's happening in the world," says Garrard. "Why not have a fashionable camera? When a brand brings out a red one it outsells the silver and black so they see that more women are purchasing, so you are seeing more fashion across everything." And the lower impulse price point has also affected consumer electronic products. "You can buy a Barbie doll for $30 or a fashionable digital camera," she says.
E3 has also partnered with Landcare Australia to develop an eco range of products and funds from each eco product sold will go to Landcare to assist with their community environment programs.
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