Assignment
Wednesday was one of the most important days in Colin Roche's and Bobby Ronsse's careers. The pair had an appointment with a Walmart buyer in Bentonville, Arkansas, to present their ergonomic pen, the PenAgain, to the world's largest retailer. Getting into Walmart is an entrepreneur's equivalent of playing in the Super Bowl. A favorable response from Walmart would transform their invention from a niche product into a household name. But getting Walmart to stock a new product in the mature writing instrument market was a real challenge. Roche's path to Bentonville, Arkansas, began during a Saturday detention at his Palo Alto, California, high school. Roche was playing with a toy robot that doubled as a pen and discovered that when he wrote with one index finger between the robot's legs, he didn't need to grip the pen as tightly and he no longer experienced writer's cramp. He refined the design while in college, and after graduation he teamed with his fraternity brother Ronsse to launch Pacific Writing Instruments. They filed for a patent, launched a Web site (penagain.com), and set up production in the San Francisco Bay area. The aging pop ulation of baby boomers dealing with carpal-tunnel syndrome and arthritis created a vast need for ergonomic pens, but their design was truly radical. Traditional pen manufacturers had been attempting to satisfy the market's need by adjusting a pen's length or width or the texture of the grip-never by varying its basic stick design. Initially, PenAgain focused on small retailers and eventually produced $2 million in annual revenue from 5,000 independent stationery and office supply stores, 200 Staples in Canada, and various other chain outlets, including Fred Meyer and Hobby Lobby. To provide an attractive offering to large retailers like Walmart, PenAgain needed to lower its prices and obtain high-volume manufacturing capability, which meant moving production overseas. It lowered its manufacturing costs so that it could offer a $3.99 pen, and it expanded its product line to 10 items, including a pencil, highlighter, hobby knife, whiteboard marker, and children's writing instrument, all in a wide variety of colors and textures. After talking to local Walmart store managers and attending a trade show hosted by the School, Home, & Office Products Association, the partners landed an appointment with a Walmart buyer. The meeting opened with some bad news: "I've seen this design before and passed," the buyer said, mentioning a competitor's product manufactured in Korea with a similar shape. Roche quickly responded, "The difference is that we are building a brand. Rather than going to you first, we've got a base of independent retailers and distributors worldwide who have already picked us up." (Walmart doesn't like to account for more than 30 percent of a supplier's total business.) He showed her the testimonials, media write-ups, and product extensions. Finally, as their time allotment came to a close, the buyer closed her notebook and said simply, "Okay. We'll give you a trial period." But that acceptance was just the beginning. Over the next 10 months, PenAgain's founders completed the intensive paperwork required to become an official Walmart vendor. Walmart placed an order for 48,000 pens and located them on end caps in 500 stores. To earn a more permanent shelf position throughout the entire chain, PenAgain had to sell 85 percent of the pens during the one-month trial period. The PenAgain model sold for $3.76, compared with a nearly identical pen priced at $6.49 on www.amazon.com and more than $12 elsewhere. Walmart did not provide any marketing support for the pens, and PenAgain was too small to afford traditional print or television advertising. So the partners developed a viral marketing program, reaching out to their national fraternity headquarters and consumer groups that had already shown interest in the PenAgain. The company also marketed through its general e-mail list of some 10,000 customers who regularly bought the pens. The Walmart buyer did not have time to monitor pen sales, so the partners tracked daily sales over the Internet, using Walmart's Retail Link software system. The PenAgain founders also produced an extra 100 displays for use in Walmart stores and kept them in their own warehouse. PenAgain then hired a merchant service organization, a third-party group that sends representatives into stores to check out display placement and consumer traffic and then report back electronically to the supplier. In providing its products, PenAgain had to adhere to Walmart's detailed packaging and shipping requirements, which specified the thickness of the cardboard used for display cartons; the placement of a reddish stripe around the shipping container to help Walmart employees know where to place the merchandise in the stores; and shipping labels that included purchase order numbers, distribution center details, and other information. As the PenAgain partners prepare for what may be the most crucial 30 days of their business careers, they seem realistic about the challenges ahead. "There are things that could go tremendously well, and things that could sink," Roche says. "We have a lot on the line, and honestly, we are nervous as hell.
DISCUSSION QUESTIONS
1. What are the key steps that PenAgain took to get Walmart to stock its products?
2. If you were one of PenAgain's small retail customers, how would you react to the company's selling its products through Walmart?
3. Forecast sales for PenAgain in the 30-day trial.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.