July 2010 – Cover Story: A Closer Look at ERA’s Asia Committee

Committee Chairman Scott Reid Discusses the Group’s Objectives, Encouraging Member Participation and Tackling the Most Important Issues.

BY VITISIA PAYNICH

What can Electronic Retailing Association (ERA) members do to get the most from their membership? Scott Reid, the current chairman of the Asia Committee, says, “It sounds cliché but the simple answer is: get involved.” Reid, operating officer at Oak Lawn Marketing Group in Japan along with other OLM executives have participated in various ERA councils and committees over the years to help affect change within the organization, as well as in the industry.

The experience has not only given him a better understanding of how an association functions, but has also enlightened him to some of the other services that can ultimately benefit his business.

In 2005, the Asia Council evolved into the Asia Committee, acting as a bridge that connects its members from the Asia-Pacific region with ERA in the U.S. Five years later, the committee has greater ambitions–goals that would not only attract more members, but would also give ERA an even stronger presence as the leading association in that region.

Electronic Retailer sat down with the committee chairman to talk about the goals set for the Asia Committee, the key issues that are most important to the group and why others need to step up to the plate and participate.

Electronic Retailer (ER): What is the purpose of the Asia Committee?

Scott Reid: The No. 1 goal of the Asia Committee is to be an extension of ERA. By that, I mean helping the association understand how to service and meet the needs of its growing regional members in Asia. Through the committee, we hope to recruit new members, establish an understanding of the benefits that the members in Asia value and identify the specific needs of these members. What benefits will satisfy and keep them as members?

ER: What are some of the objectives that the Asia Committee has this year?

Reid: One of the objectives, which I’ve been passionate about in my own business dealings, is for the Asia Committee to take the lead in coming up with a solution for solving this counterfeiting problem. Now this isn’t a problem plaguing just our industry; it’s affecting other industries as well. And I don’t think it’s a problem we’re going to be completely able to solve. But we can begin sharing information, working together, educating people and aligning ourselves with other groups and associations that have the same goal of taking steps to find a solution.

By getting involved in advocacy, we can also try to set rules and guidelines for some of these Internet companies that enable people to sell counterfeit products on their homepages. Right now, all the responsibility to monitor these activities falls squarely on us, not on the actual websites that profit from allowing counterfeit products to be sold. At least by doing these things and making it a risk to sell counterfeit ">versions of DRTV or home shopping products, we’ll be able to decrease the amount of counterfeit products on the market. The Anti-Counterfeiting Task Force, led by ERA’s vice president of government affairs, Bill McClellan, proves that the association is doing something about it.

Another objective for the committee is to continue to raise awareness of ERA in Asia, increase membership and add value to the members in Asia. So, one of the things that we’re looking at doing is establishing a self-regulatory [policy] in the major countries.

Another goal is to bring back the Asia conference. We used to have one but we stopped a few years ago. This year, we had a networking reception that ran in conjunction with the Housewares Show in Hong Kong. We had 80 people show up and it was a good three-hour event. It was very well received, and there were many interested people getting involved in the Asia Committee and ERA.

ER: How can ERA members benefit from the work that the Asia Committee is doing?

Reid: As I mentioned earlier, get involved. The more you put into it, the more you’ll get out of it. That’s been my personal experience with any organization that I’ve been involved in. If you care about your industry or if you’re passionate about the business that you’re in, then you’re going to want to get involved in the leading organization in that industry and be a leader yourself, because the fruits of that effort will naturally take place.

ER: Are there vast differences between the markets in Asia? If so, as a committee, how do you make sure that you’re supporting the needs of each market?

Reid: First of all, I don’t think that people who live in this region of the world ever refer to it as Asia. And when you’re talking to Americans, you’ll hear words like “Asians” and “Asia” and they’re often grouped together. I’m sure this happens to Europeans in Europe, as well. People who live in this region–like China, Japan and Korea–would never refer to themselves as “Asians.” They are Chinese, Japanese, Korean, etc.

The cultures are all very different. The business practices are very different. The markets are very different. For example, Korea doesn’t have infomercials; it only has home shopping. So, people need to understand that if you do business in Asia, the way you do business in Japan is not the way you do business in China. I think when it comes to communicating that to others, the Asia Committee is weak in that area. But it’s something that we can improve on.

The blanket assumption is that everybody in Asia is interested in having a connection with the U.S., such as new products or best practices. And I think that’s the biggest value that a lot of the members in this region have is: ERA = America. By becoming a part of the organization, you will be kept up to date on what’s happening in the U.S. marketplace, and you can forge relationships with American product suppliers and vendors through networking opportunities.

But when you look at what ERA also stands for: getting involved in policy, government lobbying and making sure the industry doesn’t become over-regulated, that’s not happening in Asia. And this is a point where I think we need to get to one day so that the members are receiving a benefit in their own backyard–not just simply having a connection to the United States. So, I think that’s one of the challenges.

ER: What other key issues are important to the committee?

Reid: Anti-counterfeiting is the biggest, but self-regulation is another important issue. If we can get involved in regional specifics with regard to self-regulation and start to influence how each country regulates this industry, a) That’s good for our industry; and b) it’s a very good story for increasing the member benefits in ERA. However, it’s difficult because it must be country-specific.

ER: What initiatives are in place for growing and serving the membership in the Asia-Pacific region?

Reid: I think having these networking receptions is another action that will bring back members. Also, setting goals for having a larger vision for the committee and developing self-regulatory programs will make a difference to existing and potential members.

ER: What about providing education?

Reid: Yes. I’ve realized that this region is far more advanced than the rest of the world in terms of some technologies, such as mobile and digital signage. I’ve always felt that we’ve looked to America for best practices, especially since the infomercial came from America. But I think it’s interesting that for the first time, the U.S. can look to Asia for best practices. And we can start to give back to Europe and America and show what people are doing in Asia that can give those in the U.S. ideas of what they can do with these technologies.

That insight is also useful regionally for other members who are in Asia. For instance, Japan is ahead of some of its neighboring countries with regard to some technologies. So I do believe education should play a big part of it. And I think the education sessions that Asia can put on will not only be interesting to other members of Asia, but will also be valuable to other members of Europe and the United States.

ER: What’s the most important thing that people should understand about the Asia Committee?

Reid: I think the most important thing that people need to understand about the Asia Committee is that it’s a group that is 100 percent made up of volunteers who have busy jobs, who are taking the time to get involved in the organization and who work together to make the industry better by developing benefits for other companies in our industry. And that goes back to my earlier message.

If you want to get benefits out of your ERA membership and you’re in Asia, then get involved in the committee and start doing something. You’ll definitely reap the rewards from your efforts.

If you would like to get involved in the ERA Asia Committee, please contact Robin Greenspan at rgreenspan@retailing.org.

2010 U.S. Hispanic Guide

April 2010 – Channel Crossing: International

Know What’s in Store Before Going Global

After a dozen years focusing on sales in the direct response industry, I’ve learned a lot about what it takes to successfully sell products in the United States. Now I’m applying that knowledge internationally. Implementing a global sales strategy requires unwavering commitment, plus a passion to discover and pursue emerging opportunities. It also takes an open mind with a willingness to travel, accepting the necessity of periodic absences from family and the comforts of home. Being on call to respond to messages as they roll in at any hour of the day or night is part of the job as well.

TIPS FOR GLOBAL EXPANSION
The process of building an international business has provided an educational experience, teaching me as well as my colleagues lessons that ultimately will make us stronger in the global marketplace. Instructional volumes could be written about how to sell and distribute DRTV products around the world. To save time and keep it simple, here are some important things to keep in mind as you plan to bring your products to a worldwide audience:

You can’t rule the world from behind your desk! - That’s right, it’s a big world out there and you need to be prepared for long trips abroad. I am now spending about five to six months over the course of the year on the proverbial road. You need to get to know your customers and although e-mail, phones and Skype are great, there is nothing like meeting your customers face-to-face, seeing their offices and meeting their employees.

Think globally, but act locally - You can’t physically relocate to each country, but you can find the right people to support your business. We have spent the time to find the best sales managers and partners in the field. This takes work; it’s no different than building your support team at home. We now have sales agents who manage either a specific country or geographic territory. Between my travels in the field and bringing our foreign representatives to ERA events or other shows, we get plenty of face time–and tools like Skype and e-mail sure don’t hurt!

Listen to your customers – You don’t necessarily need to speak the same language to understand your customers. Something that’s an effective tactic in the United States might not work in another culture. Take the practice of upselling in which we offer consumers the opportunity to add items to their order at a promotional price. In U.S. marketing for Jack LaLanne’s Power Juicer line, for instance, we recommend people buy protein booster to supplement their purchase. But in many countries where credit cards aren’t widely used or aren’t used at all, upselling isn’t a viable approach. People who buy COD might balk at the added expense when they take delivery, which could lead to buyer’s remorse, jeopardizing the original sale.

Protect your customers - One of the biggest problems almost every industry encounters is counterfeiting. Protecting intellectual property is equally as important to international customers as it is to customers at home. Trademarks and patents must be addressed; you need to make sure your customers have complete protection on their IP. When the time comes (not if, but when), they need to protect their territories. The first question will be: “What IPs do we have?” Regardless of your strategy on who is applying for the marks or how they are being sought in general, these steps are essential. If your customer can’t protect the product, then everyone loses.

Certifications, approvals, multiple language manuals – This, by far, is the most time-consuming element in doing business internationally. No corners can be cut when it comes to meeting standards of safety and technical quality to obtain proper authorizations–be it Germany’s TÜV certificate or Japan’s PSE mark, which are similar to Underwriters Laboratories approval. It’s crucial to get the advice of knowledgeable partners who know what is required in a specific region. Similarly, you can’t print instructions and manuals in foreign languages without confirming appropriate translations and making certain conversions of weights and measures are correct. I could go on for pages about specific requirements and what happens when missteps are made by trying to rush through the process. Being patient and doing it right the first time pays off.

Lost in translation - We all know humorous stories about what happens when a word in English has a different meaning when heard in a different language–but sometimes it isn’t funny! Recently, we tested the Comfort Pedic Slippers in an Eastern European country and fortunately found out before it was too late that “pedic” actually meant…well, I will let you use your imagination. The takeaway from our experience is: Do your homework and speak to your customers. It can be amusing when it’s a friendly joke with your vendor, but a serious problem if it slips through the cracks and winds up in your show! Laughter is one thing; being a laughingstock is something else entirely.

As for languages, some countries are happy to use the U.S. version, including the English-language box and packaging, but others need everything translated into their native tongues. Once again, it’s crucial to listen to customers to find out what they want.

A top notch team - International selling isn’t a one-man show. I consider myself the front man leading a talented team of marketing and distribution specialists responsible for handling the countless tasks associated with a successful global sales operation. Having a solid support team is essential. We are only as strong as our weakest link, and I have been blessed with a strong chain of reliable people. Meeting customers and showing them product is the easy part. Managing the countless details that go into processing every order, shipping each container, applying for each trademark or translating each manual, retail box or sales sheet, these are the jobs that take real work to make sales happen.

From my experience, I believe that if done right–with the right products, the right support and realistic expectations–going global is well worth the journey!

Joe Urbay is director of international sales at Tristar Products Inc. in Fairfield, N.J. You can reach Urbay at (973) 575-5400.

October 2009 – Feature: Marketing Beyond Borders: A Delicate Dance

Seven Steps to International DRTV Success

By Peter Sengenberger

Ask any seasoned marketer what their biggest area for sales growth is and they’ll often say–without hesitation–”international.” Ask them how they plan to address the challenge and you may get a blank stare.

The appeal of international expansion is hard to overstate; together, the key DRTV markets in Asia, Europe and Latin America not only contain more customers than all of North America, but they’re also growing at a faster rate.

To give yourself the best chance for international success, take a thoughtful, systematic approach and make sure you’ve got your bases covered by following these seven essential steps to success:

1 Determine Your Goals
What plans do you have for your products in your chosen markets? TV only? Retail? Live shopping? Deciding where you want your campaign to go informs your most critical up-front decisions–the decisions that will shape your overseas business: whether to enter the new market alone or with consultants, a full-service distributor or a combination thereof. What’s your positioning going to be in the marketplace? What’s your DRTV supposed to accomplish in the grand scheme of things? This isn’t a time to be modest. Think big.

As a marketer, it’s often tempting to rush the product on air–even with a dry test–just to see how it does and then decide on the bigger questions after your show has been up and running for awhile. The trouble with this approach is that once you’re on air and expanding your media buy, it’s hard to make changes to the campaign that might affect your ability to enter into other channels, to influence pricing or to release successive versions of the product or show. Without prior planning, you could be limiting your ability to market your products over the long term.

2 Know Your Market
It isn’t news to experienced marketers that in-depth market knowledge is crucially important, especially when exploring international markets. Answer the following checklist of key questions about your target international markets and you’ll be well on your way:

Is this product legal in the markets we’ve chosen to enter? Are the claims made in the infomercial or spot legal to air? How are products in this category perceived in the target market? How does that perspective differ, if at all, from that in North America? What does the competitive landscape look like?

Finally, where are products like ours sold successfully? DRTV? Retail? Online?

If you and your team can’t answer these questions to your satisfaction, it might be a sign that you should seek professional advice or partners in the markets you wish to enter. “Marketers often need local knowledge on the ground to understand what challenges they’ll face in making their show a success,” says Richard Whinfrey of the Maverick Consultancy.

Some products will never have an appeal outside of their home market and some simply can’t be sold in major foreign markets due to legal restrictions, so it’s essential to know where your product stands before investing much time and effort. More often than not, once you examine the answers to the above questions in detail, they’ll influence your strategic or tactical approach for the better.

3 Choose Great Partners
Not every consultant, distributor or retail partner will share your commitment and goals, so it’s up to you to make sure that you’ve put the right team in place for every stage of your operations.

When choosing partners, be upfront and clear about what your goals are for the market and how you think they can be achieved. Take the necessary time to listen to their feedback and incorporate it into your plans. Spend a little time checking their references–a few phone calls to people who have worked with them before will likely reveal a lot.

Once you’re satisfied with your chosen partners, make sure to outline everyone’s responsibilities. Ferret out any potential conflicts of interest–and address them. It’s a delicate dance and everyone has to know where to put their feet. And make sure to put it in writing!

4 Allow the Selling Points to Shine–in a Local Context
If you’ve done your due diligence in addressing the issues outlined above, this should be pretty straightforward.

By far, the best way to make your product shine internationally is to plan and shoot alternative takes and segments specifically for your target overseas markets. Planned in advance, this extra footage can be very effective in driving response–and at a very small marginal cost.

If, like many marketers, you must use existing footage for international creative, engage local, experienced editors and production staff, preferably with the oversight of a seasoned distributor or DRTV consultant.

5 Make Media Relevant and Measurable
Media is one of the hardest aspects of an international campaign to understand as an outsider, so it really pays to have an experienced agency planning and buying for you. Also, study the media landscape–especially what competitors are doing–and gain perspective from media buyers and advertising clients.

Your test airings have to do only one thing: give you a good read that enables you to make an informed next step. With that in mind, I recommend you work with your agency to design a test that:

Uses relevant media – Can you roll out to a significant degree if results are promising or are you just identifying a niche?

Contains contrasts – Each station you choose to air on should tell you more than just its response against advertising spend–it should help paint a clearer overall picture. Try mixing TV platforms, regional geography, lead-in and lead-out airings, caliber of channel and viewing demographic. In the hands of an experienced media buyer, all of these data points add up to sharper, more effective buying decisions.

Is congruent with your goals – Airing strictly for high ROI is admirable, but it might not be the best way to help provide “air cover” for retail or other sales channels. Make sure that your media agency is booking airtime that will help with the wider goals of your marketing campaign and not just identifying a few tried-and-true hot spots where almost anything sells well–you need an honest read on your product’s potential.

Don’t expect your North American media experience to translate seamlessly overseas. Sure, DRTV fundamentals share many of the same characteristics and principles no matter where the show or spot airs, but just because it works on CNBC in the U.S. doesn’t mean it’ll work on the European feed of CNBC.

6 Secure a Reliable Telemarketing, Fulfillment and logistics House
American-style call centers are rare in some parts of the world, and choosing the right company who understands how to sell your products over the phone can be challenging. Your experience at home will be extremely valuable to your overseas call center, so it’s a good idea to visit your vendors and invest in training and monitoring. Regular site visits and monitoring and training sessions are essential, so account for these costs when calculating your overall investment.

Once, while trying to start up a DRTV campaign in The Netherlands, the call center I chose for our inbound telemarketing sent our calls to their customer service department rather than the sales floor, destroying our ability to convert calls to orders. Weeks later, I learned that their head of new business–fearing they would alienate their other DRTV clients–had requested the move. Needless to say, we had chosen a poor partner and moved our inbound elsewhere.

Luckily, fulfillment is often more straightforward, and many excellent vendors with stellar reputations exist all over the world. Some U.S. fulfillment companies have partnerships with overseas counterparts and can help transition new business more smoothly than you might be able to do on your own, so checking with your existing fulfillment company is a good place to start.

7 Be Prepared to Collaborate
The best DRTV professionals consider their international markets to be as much a part of what they do as their domestic markets. Gone are the days when a marketer could send a master tape to a distributor and expect orders to magically pile up overnight.

Just as competition, media costs and a changing consumer landscape have made business more difficult domestically, the same challenges persist overseas, which is why your leadership as the original marketer is vital. Working closely with your overseas partners and sharing your knowledge will pay great dividends over time and open up new possibilities.

Peter Sengenberger is the founder and CEO of London-based Element Media Direct, a DR media planning and buying agency. He can be reached via e-mail at peter@elementmediadirect.com.

August 2009 – Cover Story: An Entrepreneur’s Tale

Even in an industry replete with success stories, Robert Roche’s stands alone.

By Tom Dellner

The direct response world has no shortage of compelling stories of visionary entrepreneurs who strike it big. They’re everywhere: inventors, marketers, pitchmen and service providers who had the vision to spot a business opportunity and the courage, drive and good fortune to transform their idea into reality.

But even in this industry of business mavericks, Robert Roche’s story stands apart. The Chicago native left the U.S. for Japan in 1989 with no particular career goals in mind. In the intervening 20 years, Roche has seen one company he founded go public on the New York Stock Exchange and has sold a 51-percent share of a second company to Japanese mobile phone giant NTT DoCoMo for $310 million.

Electronic Retailer sat down with the unassuming and straight-talking Roche for a first-person–and fascinating–account of how it all came together.

Electronic Retailer: Tell us about the inspiration behind Oak Lawn Marketing. What was the business opportunity you spotted?

Robert Roche: There really was no particular epiphany I can point to. At the time, I was teaching some English, doing some importing of goods, some translating and a little consulting. In my importing business, I was bringing in goods from the States and selling it to a wholesaler. As a part of this business–I can’t even remember exactly how it came about–I was introduced to a leading TV shopping company in Japan. We wanted to sell them some product, but they said, “If you want to sell me this product, you’ve got to be on TV.” So, next thing I know, I was on TV, my partner (Tadashi Nakamura, who is still an important part of our business today) was on TV.

And these were one-hour shows, where maybe 15 products were sold. It was live–although taped and aired later in other areas–and believe me, it was stressful. But we began selling more and more product.

Then, in Spring of 1994 I believe, I had the good fortune of being introduced to Rob Woodroffe of Interwood Direct.

He had time on CNN International and was basically looking for somebody to answer the calls in Japan. I agreed. Of course, I didn’t have a call center. I didn’t have anything. But I thought I would answer the phones myself if I had to. Rob was selling six or eight products at the time, so we imported a couple hundred of each and the phone started to ring.

So these two serendipitous events really marked our entry into the business.

ER: I have to ask about your experience in front of the camera–what was that like?

Roche: It was pretty intense. I fancy myself an accomplished Japanese speaker and I’m a pretty confident guy, but when they start rolling that camera, it’s a whole different ballgame. You lose who you are. I don’t care how cool you think you are. Once that camera’s on, everything changes. From that experience, I really gained a ton of respect for those who do well in front of a camera.

ER: So the business really came together in something of an ad hoc way?

In the early ’90s, Roche and business partner Tadashi Nakamura went on air to sell popular DRTV products.

Roche: Yes. It was all very organic. Basically, we were quite lucky–very much in the right place at the right time. The TV shopping company had been struggling a bit. They were having a hard time getting quality products. And Rob’s company was the major player internationally at the time, so, through our relationship with him, we had the pick of the litter, product wise. Also, as Rob ran the stuff on CNN, we saw which products sold best. We then took those to the TV shopping company. So I was on TV selling DD7, the Pet Mitt, Double Burner–whatever was selling on CNN.

ER: Can you describe your relationship with Rob?

Roche: I was so lucky to have Rob as a mentor. He knew the business like no one else, and I have always been motivated to learn. He was the one who explained per inquiry marketing to me, which didn’t exist in Japan at the time. I eventually bought a lot of media that way. And Rob was motivated to teach me: the more I learned the business and the better I got, the more of his product I sold.

ER: If I can back up, what brought you to Japan in the first place?

Roche: I spent a year of college in Japan (I majored in Japanese studies and economics), another year during law school and then returned in 1989 after graduating from law school. My wife, who I met the first time I traveled to the country, was Japanese. I had personal reasons to go to Japan; I didn’t go there to start a business. I went there to be there and I basically had to “fill in” my career.

ER: You mentioned the word “serendipitous”; it’s a very apt description for the way things just fell into place. But there must have been some challenges early on.

Roche: People talk about how difficult it is to do business in Japan, how it can be very challenging to go over there and do what it is they want to do. And they’re right.

But I went about things a different way. I was very industry agnostic. If I found that it was difficult to do business in a certain area, then I went in another direction. In the early days, when we were acting more as wholesalers, we faced very few barriers to what we wanted to do. When we evolved into more of a TV shopping company ourselves, then we did begin to meet with some challenges.

ER: Can you describe a few?

Roche: The most significant involved media. The television stations were not very comfortable selling media to new companies. We were new and I was a foreigner–the terrestrial stations really wouldn’t give us the time of day, to begin with. So I focused on cable.

ER: Had cable television burst on the scene yet in Japan?

Roche: No, but the explosion of cable was certainly on the way. The laws changed and we went from a few local stations to dozens of stations. I was aware of what had happened in the U.S. and believed that the evolution of the American cable business would pretty much be repeated in Japan. It wouldn’t be step for step, of course, but I knew these changes–an enormous shift in the way business was done on TV–was coming. So I was able to anticipate it to an extent.

We focused on cable and began building our business there. Eventually, we were able to staff a 24-hour call center with 10 or 15 people and assemble all the necessary infrastructure.

At first, it was a disadvantage to grow all these elements of a business–product procurement, production, media buying, teleservices–at the same time: we were like a chicken with its head cut off. But after awhile, it became a huge advantage, because we were wholly integrated. If Rob came to me and said, “Hey, we’ve got this great upsell for this product and it’s working really well,” I could walk down to the call center and implement it on the fly.

We grew to a critical mass where we were just big enough, just profitable enough, to begin taking some chances with terrestrial TV. This was in 1995-96.

ER: So how did you finally break into terrestrial television?

A longtime friend and business partner of Roche, Harry Hill joined Oak Lawn in 1999 and is now president.

Roche: We couldn’t really compete with the other TV shopping guys. In Japan, when you’re the new guy–and being foreign doesn’t help–you’re paying 20 or 30 percent more for media. It is not commoditized as it is–to an extent–in America. So media was a challenge.

Also, we wanted to run infomercials, which didn’t exist in Japan. People sold a number of products–taped live–on what were essentially hour-long variety shows. We struggled a bit with that format. We explained to the TV shopping company we were doing business with that the format was difficult and simply not cost-effective. We kept pushing the infomercial concept, how it was established, cost-effective and a proven success in America. Eventually, they had enough of us and said, “If you’re so determined to run infomercials, do it yourself!” So we did.

We went around and around, asking stations to sell us time in a half hour–most stations went off the air at midnight and came back on at 5:30 a.m.; we offered to buy time from midnight to 12:30. They wouldn’t budge.

Eventually, a company called Quantum did a partnership with Mitsui, a huge trading company in Japan. They had enough influence with the stations to convince them to sell that midnight-to-12:30 time slot for an infomercial. They did well with it and eventually grew to be about a $100 million company. They turned out to be a bit of a flash in the pan–I think they’ve been out of business for about 10 years now. But they kicked down the door, and we were able to walk in. They made the infomercial format legitimate.

We just kept our heads down and slowly began affiliating with more and more stations. And the nice thing about media in Japan is that once you get it, it’s yours. We have certain media that we’ve been buying for almost 15 years.

ER: What sort of products were you selling?

Roche: We were able to mitigate our risks. We took the best products in America–tested, true products–and sold them in Japan. They wouldn’t always work (there are lots of examples of products that kicked ass in America and did nothing in Japan), but certainly our chances of success were higher.

Our standard was whether the marketer had spent a million dollars in media on the product in America. I suppose this was not too sophisticated–we’re certainly far more data centric now–but if a company spent a million dollars on the product, you could pretty much rest assured that most of the manufacturing kinks had been worked out, they had already dealt with customer complains, etc.

ER: You’ve walked us through the development of Oak Lawn through the 1990s–when did you launch your Chinese business, Acorn International?

Roche: In 1997 and 1998, there was a rush of the TV shopping companies into China and the word was that they were doing well.

I partnered with a gentleman named Don Yang who I knew from other business dealings and for whom I had a high level of trust. But our initial dealings in China were very frustrating for me. Working with a translator was extremely uncomfortable.

CCTV was not in the business of TV shopping or selling media to foreign companies. They eventually offered us 10 or 20 minutes per day, and we decided to buy it. We only had about two months then to get everything together–the show, the call center, everything. It was painful. We limped along for awhile, then we brought in another partner, James Hu, who also had lots of TV shopping experience. At this point, I stepped back a bit from the day-to-day business. I would have them come over to Japan to learn what we were doing at Oak Lawn, but they really incubated the business themselves.

ER: What was the eventual breakthrough point for Acorn?

Roche: We found a company that marketed an electronic pocket translator called Haojixin, which translates to “good memory.” We tested the product on TV and it sold very well. We ended up buying a majority stake in the company–we now own 100 percent. The product sold like crazy, did extremely well at retail and became a huge brand in China. That brand alone–there are a number of different versions and line extensions now–does more than $100 million per year. Acorn has also done extremely well selling cell phones.

Jumping ahead to 2004, we brought in investors, raised money and eventually went public on the New York Stock Exchange in 2007. I get a lot of credit for founding the company and I suppose we were helpful in teaching them everything we had learned at Oak Lawn, but the real credit needs to go to James Hu, Don Yang and their team.

ER: Back to Oak Lawn. Can you tell us what led up to the DoCoMo deal?

Roche: Harry Hill came to the company in 1999. At about the same time, we were a part of what was called The Global Alliance, with Rob Woodroffe, Reiner Wiehofen of The Vector Group and others. Basically, we pooled our resources and formed something of a product procurement bloc. The Global Alliance eventually fell apart, but Wiehofen had introduced us to his proprietary software system that analyzed media in a very sophisticated way.

This media analytics software helped us get away from being hit-product dependent. With Harry’s help, we further refined the system and eventually developed efficiencies in the way we did business that allowed us to make a living off of merely good products–singles and doubles. Eventually, a hit product would come along which would be great, but we could make singles and doubles work.

ER: What made the analytics system work so well for you?

Roche: To oversimplify, it focuses on the return on ad spend instead of other metrics that are frequently used. It works perfectly for Japanese media, which, as I explained, is far from commoditized–it might not work as well in the States. But it gives us the information we need to better allocate media and negotiate more intelligently with the stations.

ER: Tell us a little more about Harry’s role.

Roche: We got to a point with Oak Lawn where we needed less of what might be provided by a visionary, entrepreneurial executive and more of the execution of a master craftsman. And although Harry also has tremendous vision and is as entrepreneurial as they come, that’s what he provided. So he began to take on more of a leadership role. It’s a transition that many businesses go through as they grow.

So, with me as chairman and Harry as president and with the help of our Japanese partners, Oak Lawn set about executing on and continuing to refine the efficiencies that we had developed. There’s a Japanese business term kaizen. It’s the Toyota way–a commitment to continuous improvement, even if it’s marginal improvement. That’s what we strived–and continue to strive–for. And as you get bigger, the payoffs get bigger. If you’re a small company, a marginal improvement in efficiency is just that: marginal. But when you’re doing $400 million in sales, these marginal improvements are huge, and we just dropped it all back into media.

Another key point occurred when Billy Blanks came along. He had been attempting to break through in Japan for almost a decade. Finally, we got the rights to one of his shows. The stars aligned and it was a blockbuster. We sold almost 2 millions videos–more than any other item in Japanese TV shopping history. I think it was our business efficiency that allowed us to keep it on air just enough for it to gain momentum and take off. It was a national phenomenon. Taro Aso–then the Minister of Foreign Affairs and now the Prime Minister–once led the participants in the 40th ASEAN Ministerial Meeting in an impromptu Billy’s Boot Camp session.

This really put Oak Lawn on the map in Japan and we began to draw interest from other companies; the seeds were sown for the DoCoMo deal.

ER: Explain the deal from DoCoMo’s side of the table. What did they see in Oak Lawn that most interested them?

Roche: DoCoMo sees the mobile phone as a media; they own more than half of the Japanese cell phone market and their products are world-leading, cutting-edge products. And Oak Lawn is a branding and media company. They saw how our branding, promotions, marketing and everything else we do fits very nicely with mobile as a media. They believe that we can help them leverage and optimize their customer base–which numbers more than 50 million–to which they currently market nothing but phones.

And as they began to look more closely at us, they became impressed with the fact that, like them, we were a data-centric company. We know why we do everything we do. And maybe everything we do doesn’t always work, but if it doesn’t, we know why. They also liked that our company was vertically integrated and that all levels of employees understood the importance of data centricity.

ER: What does this mean for Oak Lawn–and you personally–moving forward?

Roche: This will allow us to leapfrog other companies to an entirely new strata of business without suffering the pain. To be a truly major company, it requires a whole new mentality in management. And the management discipline and expertise that exists at DoCoMo is absolutely world class. They are thoroughbreds.

I feel completely re-engaged. This deal opens up new horizons. We have the elite of the Japanese business community to learn from now. You just can’t get access to this. We’re on a different playing field. We will now be able to apply our principles and strategies in a much bigger playground.

ER: Tell us a little bit about the life of an ex-pat businessman living in Asia. What do you like about it? What are some of the challenges?

Roche: Well, in Japan, we really didn’t live an ex-pat lifestyle. With my wife being Japanese and me knowing the culture and speaking the language, we were well-immersed in Japanese society.

China is similar to Japan in some ways, but very different in others. It’s not predictable, with well-established rules of business.

There are many bad things about China–the pollution comes to mind. The language is extremely difficult and it’s more difficult to immerse oneself in the culture. But I like to focus on the good qualities. I love being an ex-pat. I love being in Shanghai; it’s a huge, vibrant city.

And for a businessman, it feels as though we’re at the epicenter of commerce, of wealth creation. It must be like what New York City felt like in the late 19th century. There are all these Chinese entrepreneurs in the city, building Rockefeller-like dynasties. And they’re all here. Walking around in the city. Their kids go to your kids’ schools. You know some, you don’t know some, but the sense is palpable, historic and very exciting.

ER: Have you always been a risk taker and had the entrepreneurial bug?

Roche: Oh, yeah. I always had some business venture going, starting with a paper route at age 10. And my dad was an entrepreneur. He was a salesman who sold enough that he was able to buy his company. Then he moved on to something else and something else after that. His was a very colorful entrepreneurial career, to say the least.

ER: If you could sum up a few of the nuances of the Asian direct response market that would be surprising or of interest to Western DR marketers, how would you do it?

Roche: I think the similarities would come as a big surprise. The fundamentals of the business are pretty much the same. You’re buying media, putting something on TV and answering the phones.

Now how you buy the media, the lack of service companies–these are big differences. The use of credit cards is very low, too. But people are people. It doesn’t matter where you’re from–everyone wants abs of steel.

May 2009 – Feature: Tough Times for China

A closer look at how the global recession is affecting this country’s
manufacturing–and what all DRTV companies need to know

By Bill Quarless

Despite a worsening economy, or perhaps because of it, the DRTV business is booming in the United States. This might cause DRTV companies to overlook an important area where they are not immune to the effects of the global recession: their manufacturing operations abroad.

Here in Hong Kong, these effects are clear. Indeed, it could be argued that the industry most affected by America’s economic woes isn’t the banking industry, the auto industry or any other American industry–it’s the Chinese manufacturing industry. As U.S. consumer spending has contracted stateside, the flow of purchase orders that keeps this industry afloat has slowed dramatically. The result: An astounding 70,000 factories have closed in the last few months, putting some 20 million migrant workers from rural China out of work.

HITTING CLOSE TO HOME
Some experts are estimating that nearly 10 percent of China’s total factories may ultimately fail, leading to another 20 million without jobs. The situation is so dire that, mirroring the actions of the U.S. government, China’s communist government recently approved a $586 billion stimulus plan.

According to government statistics, the hardest hit have been the factories that supply toys and shoes. But close behind them are the factories that supply inexpensive, low-margin housewares and fitness items. In other words, exactly the type of factories that supply the DRTV industry.

• Before the global economic crisis hit, these manufacturers of low-cost products were already contending with a host of new pressures. Among them:
• A steady increase in raw material prices over the past two years;
• A new China labor law mandating labor contracts, contributions to pension funds and insurance programs for all workers;
• Stricter environmental regulations in preparation for the Olympic Games; and
• The rise of the RMB against the U.S. dollar.

BEING PROACTIVE
With already thin margins and significant fixed costs, it’s easy to see how these factors combined with a drastic reduction in purchase orders could cause so many factories to fold.

So what does all this mean for DRTV companies? There are five ways the industry will be affected by this crisis:

1 Production delays. To reduce unemployment in February, China’s State Council issued an order requiring factories to secure approval from local authorities before any layoffs involving at least 20 people or 10 percent of the staff. Since migrant workers are essentially “let go” every year and then re-hired after Chinese New Year, many factories reacted by being more conservative about how many they re-hired.

The same phenomenon is also affecting skilled labor, such as engineers and factory managers. Some 25 percent of last year’s 6 million college graduates remain unemployed, according to university data. Factories are understandably cautious about hiring these workers without steady orders coming in. Adding to their concern are new labor laws requiring factories to sign contracts with their workers. Such contracts make it difficult for employers to reduce their staff when orders dry up.

Even existing staff is being managed to reduce costs. We experienced this during the recent Chinese New Year holiday. Many factories asked their workers to leave early for the annual two- to three-week holiday, and return later, in an attempt to lower costs. These “extended vacations” affected the entire supply chain, since most DRTV products require several factories to complete the final product. Whether it’s the plastic injection parts supplier, the stamped metal supplier, the paint supplier or the box printer, if one component is not in the chain, the production is delayed.

The bottom line is that even suppliers who are enjoying booming business because of the increase in DRTV sales are scrambling to find new raw material and component suppliers. An immediate effect on the DRTV business will be longer ramp-up times.

2 Higher defective rates. Last year’s news out of China was dominated by stories of defective products. From lead paint in toys to melamine in candy and deadly baby formula, all of these tragedies were the direct result of cutting corners in an attempt to increase profits. These actions were motivated by greed. This year, similar actions are predicted–this time motivated by survival.

Life in China without an income is no life at all. Many factories will do almost anything to stay in business. DRTV companies would be well served to tighten their quality control measures in the coming year.

3 More knockoffs. Desperate factories on the brink of failure will also gravitate to where the demand is. As mentioned earlier, the DRTV industry is booming while many other industries are struggling. That can only mean one thing: An increase in DRTV knockoffs. The evidence will be everywhere at the next China tradeshow. Even factories that don’t normally counterfeit items will be showing off their copies of the latest DRTV hits.

Worse yet, there will be no one to stop them. The Chinese officials at the central, provincial and local levels all have more to worry about than copycats. In fact, they may just be glad that exports are going out at all.

4 Increased social unrest. If the financial crisis in China worsens, as many experts predict, it could have disastrous social consequences that also have implications for the DRTV business. Some experts are suggesting that a “rural revolution” is imminent amid the financial crisis. The reason: In a rural village, as many as three or four people depend on the income of a single migrant worker. So, while current estimates put the unemployment rate at 20 million workers, as many as 80 million people are directly affected. Double that if the most dire predictions for this year come to pass.

In an attempt to prevent this, the Chinese government is creating training programs throughout the country to re-train factory workers in farming and agricultural skills. For example, in the southern central city of Chongqing, some 30,000 factory workers have already taken these classes. However, China’s own leaders admit the national economy must grow by a minimum of 8 percent this year to keep everyone employed and to maintain order.

In recent months, there has been a troubling increase in strikes, worker protests and labor disputes with factories. This news doesn’t make it onto CNN, but it happens often and is a real concern for the central government. With 90 percent of DRTV hard goods made in China, supply lines could be seriously affected if this crisis deepens and is prolonged.

5 New risks. In the current economic climate, there are new risks DRTV companies never had to think about before. An obvious one: What if your factory fails in mid-project?

When demand was high, a factory could make up for lost business with new business. But these days, a few lost orders can be the final straw. And so, after selecting a factory to make your hit DRTV item and wiring them $25,000 for molds, it’s possible you could learn they just became the 70,001st factory to close its doors this year.

All of these concerns are ominous and real, but there are ways for DRTV companies to minimize their exposure. The biggest one is to maintain a constant presence in China.

Doing so will allow you to react more quickly to production delays, to give increased attention to quality control measures that prevent defectives, to police tradeshows and nip counterfeits in the bud, to stay abreast of what regions are experiencing social unrest (and avoid them) and to vet suppliers personally before you risk money with someone on the verge of bankruptcy. If you don’t have the personnel or resources abroad to accomplish this, the need for a competent and trustworthy China partner has never been more critical.

Bill Quarless is president and CEO of Impact Products Ltd., a firm specializing in China manufacturing and production management. He lives in Hong Kong and can be reached at (852) 2139-3961, via e-mail at bill@impactproducts.com, or online at www.impactproducts.com.

February 2009 – ERA: US Hispanic Council

August 2007 – A Conversation With the Commissioner

November 2007 – Channel Crossing: U.S. Hispanic

January 2008 – Channel Crossing: U.S. Hispanic