On a Positive Note
Valerie Watt, loss prevention assistant with Capital City Savings in Edmonton, brings an increasingly rare but important goal to her work environment. Her mission is simple – to make people smile.
>
Retail
Pawning for Profits
Cash Canada earns the 25th place by teaching an old retail concept some new tricks
>
More Than Novelty
Ranked #9, DYNATECH Action Inc. proves there is still room for players in the mature toy industry
If it wasn’t for a chance encounter with an article in a business magazine in his father’s office, DYNATECH Action Inc. president and CEO Brad Pedersen would be cracking backs instead of flogging Frisbees for his rapidly growing Red Deer toy and sport novelty item manufacturing, distribution and marketing company.
Pedersen was a Red Deer College student in pre-chiropractic studies eight years ago when he spotted a story about a California entrepreneur who had invented a cylinder that could be thrown like a football.
“I’ve always been intrigued by sports and I’ve always been intrigued by flight and I thought this was a very cool idea. So I got a hold of them and bought some. Me and my buddies were playing with them and we thought they were just one of the coolest things we’d ever seen. “And I just got the idea like, ‘Hey, why couldn’t I market this?’”
Pedersen obtained the Canadian rights to X-zylo and ended up marketing it with the help of former CFL star quarterback Doug Flutie. Along the way he picked up the exclusive distribution rights to an ever-growing portfolio of toy and sport novelty items and hasn’t looked back.
DYNATECH’s sales have tripled from $1.5 million in 1999 to $5 million in 2001, ranking it 9th on Alberta Venture ‘s list of Fastest Growing Companies. DYNATECH projects sales of more than $10 million for 2002 and hopes to hit $16 million by 2005.
DYNATECH migrated out of the basement of Pedersen’s home into a couple of leased warehouses and is now housed in a 17,000-square-foot space of its own. The 30-year-old entrepreneur now has 22 employees. Vice-president of sales Evert Weenink and CFO Bill Mearns have been with Pedersen pretty much from the beginning. Pedersen says his partners have played a vital role in the success of the business by bringing their respective strengths in sales and finance.
The company opened a sales office in Mississauga, Ont., in October to service five of its biggest customers (Wal-Mart, Zellers, Toy “R” Us, Canadian Tire and Sears).
The company’s phenomenal rate of growth has been challenging to manage as its requirement for cash and space to accommodate staff and inventory grows, says Pedersen. Rapid growth has other consequences: “As the business has gotten bigger and busier it’s easier to spend more of your time inside the office putting out fires and dealing with issues at hand,” he says. Instead, “We should be out in the market taking a look at where there’s opportunities.”
In his business, “Product is king.” DYNATECH only deals in items that have unique appeal or brand equity. The stable of products it distributes exclusively in Canada includes classic Wham-O products such as Frisbee, Hacky Sack, Hula Hoop and Slip’N Slide. The company is also developing its own products, including Aerotech gliders and Micro Grooves key chain collectibles, manufactured in Asia and sold internationally.
DYNATECH has 3,000 accounts with retailers in Canada, ranging from giants such as Wal-Mart to independent toy stores and gift shops.
Chris Speyer, a buyer for Calgary-based sports retailer The Forzani Group Ltd., says DYNATECH does a good job of helping select active lifestyle products that sell well. “They’re extremely innovative in the way they do business,” Speyer says. “And they’re extremely retailer friendly in that they work to understand your business and then they build their plans around that. Which is rare. A lot of guys are coming in just trying to shove stuff down your throat, as opposed to understand how to achieve good sell-through.”
Calgary-based independent retail consultant Philip Jones says the vast majority of distributors fade away with time, but a few continue to grow because of the intelligence and skill of management, relative strength of competition and luck. “It is a highly unpredictable area. That’s obvious, because your not dealing with staples,” Jones says. “The very term novelty reveals its dependence on innovation and appeal to the changing tastes and imaginations of consumers.”
Pedersen isn’t waiting around for luck to determine DYNATECH’s future. His growth strategy is simple – work hard to develop the Canadian market by adding more attractive products to the roster and grow the amount of shelf space existing retailers give the products.
DYNATECH searches constantly for new products, with Pedersen out as often as possible trying to figure out what’s missing from the market. DYNATECH is also developing its own products by investing money in research and development. In an attempt to diversify, DYNATECH recently started a division called Outer Edge Industries, which will focus on the distribution of action sport (skate, snow, surf, motocross) products, using strategies learned in the toy business.
Forzani’s research into its American counterparts shows toys and novelty items have great growth potential, says Speyer, and the sports retailer hopes to capitalize on it. It sold a half-million dollars worth of such items in 2001, but hopes to do about $5 million in 2002. Forzani and DYNATECH recently signed an agreement giving its products dedicated shelf space in Forzani’s Sport Chek stores. Although DYNATECH isn’t Forzani’s only supplier of toy and novelty items, Speyer says it is the most significant.
Pedersen would like his company to do more business outside Canada and will work on gaining more international exposure over the next couple of years. Currently, 10% to 15% of DYNATECH’s sales are outside Canada. A recent attempt to break into the U.S. market didn’t work out as planned. The company launched its Micro Grooves product line in the U.S. in Sept. 2001, the same month as the terrorist attacks, to lacklustre response in a sluggish economy.
DYNATECH has worked hard to get to where it is today, Pedersen says, and nothing has come easy. “We fought against the odds,” he says. “Believe it or not, Red Deer is not the centre of the toy universe in Canada.”
Not yet, anyway.
Plan. Execute. Repeat.
Rocket science? Hardly. As any retailer will tell you, the difference between what-was-it-calleds and the winners in retail lies in business execution. And nobody knows that better than John Forzani. Meet the turnaround king, retail pro and Alberta Venture’s Business Person of the Year >
Back from Adversity
Great ventures come with great challenges, entrepreneurs agree
Although author Aritha van Herk, in her recent book, Mavericks: An Incorrigible History of Alberta, was not referring to entrepreneurs when she wrote of “edge-of-ledge” Albertans, such a descriptor perfectly applies to this resilient group. >
Toys for Tycoons
Maybe all you want for Christmas is a little world domination. Or perhaps you’ll settle for ridiculous amounts of wealth and fortune.
>
Wheeling & Dealing
Wheeling & Dealing
Lodged between the heart and lungs in most men’s anatomy dwells a piece of the soul � the ooh-la-la-yeah organ. It’s triggered by the vivacious curves of a speeding roadster or the mud-splattered sides of a growling Hummer.
A turn of the head, a slight smile at the sides of the mouth, endorphins race through the blood. And then the road is quiet again. Upon this whimsical impulse, Edmonton’s Michael Warf is building his business. Warf drives a 1994 Ford Taurus with a clear coat that peels in the wind, but his e-commerce business, Wheelthings.com, sells polished fantasies in the form of 1:18 scale die-cast car models, preassembled and ready for display.
“When people [collect] models, really it’s an extension of a dream, or it’s an ego thing,” says Warf. The dreamers buy the die-cast models of cars they love but may never own. The egoists, on the other hand, already have the red BMW Z3 in the parking lot, but a replica model on the desk serves to remind everyone exactly whose car it is that is reflecting the sunlight most impressively.
It’s no doubt this car-collecting urge is primarily a male one , Warf says exactly 2% of his customers have been female and he presumes those were purchased as gifts.
A baby finger squeezes through the James Bond Aston Martin DB-5 sun roof, the steering wheel turns and the front wheels follow suit. Warf extols the virtues of the fine detailing that include a revolving licence plate and retractable bullet shield. “The manufacturer recommends you handle the weapons on this car with tweezers,” he says, gently extracting the Ben Hur-like wheel razors.
The Aston Martin is one of 400 hand-picked models of various vintages in the virtual showroom, designed by die-cast manufacturers like AUTOart, Gate and UT Models. Warf’s parents still have his big, vinyl Hot Wheels case in their basement, memories of a time growing up on a Calgary army base when cars were meant to be trashed. But dents and scratches transmogrified into a collecting craze followed by small business passion. As a collector, he scoured the globe to find a decent selection of die-cast models and was often disappointed with the quality and size of the products he received. Last Christmas, Warf combined his love for die-cast models with his online prowess. Working at an Internet property developer in his day job, Warf realized he had a big money resource inside his skull, allowing him to start an online business with mostly sweat equity, not actual dollars. “I’d been in the trenches every day, building (online business sites), talking about them, getting industry trends, the whole nine yards,” says Warf.
In January, site construction began, and by March the online shop was operational. In a house with five networked computers and an unfinished basement, start-up costs were limited to $3,000 worth of inventory. “The beautiful thing is, the face I show to the world certainly isn’t this,” says Warf, motioning to his workout/office/storage space. Serious programming sweat was poured to get the transactional process in place and the searchable catalogue up and running. Cognissa, an Edmonton-based Web site consulting company, put the graphic design through a number of usability tests and made recommendations to remove any hindrances that might impede transactions.
“Usability is a big, hot issue in the Web world,” says Warf. “Having a usable Web site go live in the beginning rather than through trial and error was a really nice feature.” With the site well-tuned, he worked hard to acquire good placement on major search engines. Yahoo, AOL and MSN now direct 80% of Wheelthings.com’s average 370 unique visitors per day.
The challenge is getting the visitors, who stay an average of five to six minutes, to actually pull out their credit cards and transact. Information and content are king and queen, the site loads quickly, is clear and concise and features the shopping instructions prominently.
Warf explored convenient and secure payment options and found that going through a third party, Ontario’s Internet Secure, which boasts 128-bit encryption, was clearly the best alternative. At $35 per month plus 15% of the average month’s $2,000 business volume, it’s a high price to pay, but insignificant when compared to setting up individual online merchant accounts with each major credit card.
The process has proven secure for customers, but not for the merchant. Wheelthings.com took an early $800 hit when a shipment to Indonesia was bought with fraudulent credit cards. For self-protection without discrimination, Warf has ceased sales to anywhere outside of Canada and the U.S., losing good customers in Germany and Argentina, but reducing the risk factor. Currently 80% of sales go south of the border.
Warf says Wheelthings.com has advantages over local retailers because it displays the complete product line-up of its chosen manufacturers. Hobby stores tend to feature top sellers exclusively, with real estate costing more than Warf’s $110 monthly server fee. “In a retail setting, if an owner went to show you a catalogue, the person who came to that store isn’t catalogue shopping, so there’s that hindrance to ordering and waiting that five day lag,” says Warf. “Online you’re flipping through a catalogue anyway and you expect there to be some kind of turnaround.”
But hellish shipping fees are a thorn in the side. Customers are charged exactly what UPS bills him for shipping, but it still comes to about $20 per car, a hefty fee for a product costing between $30 and $120 (with the exception of a $450 limited edition version of the Mercedes Benz CLK GTR FIA Champion).
Warf’s active mind is spinning out big plans for the site in the next few months. The home page will begin to dance with 10 feature cars rotating constantly and visitors will be able to zoom in on any part of a car for closer inspection. Photographing cars from every angle will allow 360-degree viewing at the click of a mouse, the kicking-the-tires experience without the sore toe.
Claim to Shame
Pay up or be shamed. That’s the best tactic Edson Computers Place owner Calvin Hill has found to collect his accounts receivable.
>
Don Lowry
Don Lowry – President and CEO, EPCOR Utilities Inc.
Managing operating assets of $2.1 billion, in a year where energy deregulation has turned the province upside-down, EPCOR president and CEO Don Lowry remains focused on an aggressive growth plan that will see the essential services firm double the size of earnings over the next 10 years.
>
Follow Alberta Venture On: