How we built it: Getting retail right sometimes means taking it slow

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To help aspiring entrepreneurs understand what it takes to translate an idea to an actual product, we recruited six hardware entrepreneurs how they did it. They’ll be presenting some lessons and answering your questions at our Structure Connect event Oct. 21 and 22. Below is the final story in our series written by Gilles Bouchard, the CEO & President of Livescribe on what to expect when you hit retail.

When you create a new, category-changing product, it can be a challenge to find the right strategy to sell it into retail. From the retailer’s side, they need to figure out where to put the product so their customers can find it. From the manufacturer’s side, they have to balance production costs with distribution needs, while managing an increasingly global marketplace. Since we introduced our first Pulse smart pen in 2008, we’ve hopefully learned a few things about how to manage the channel so that customers can find and purchase our products.

The idea of a smart pen that allows someone to write on paper with ink while saving those notes on a computer or mobile device so they can be organized, searched and shared was pretty revolutionary in 2008. It’s still pretty unique in the market today. When we approached some of the “big box” electronics retailers, they were happy to feature the smart pen in stand-alone displays, end-caps and other specific placements. But these specialized locations can be very expensive in terms of co-marketing funds to hang onto that valuable real estate, and these costs quickly become unsustainable for a small startup.

The other option is to place your products “in-line” on the regular shelves. But when you’re creating something new, where on the shelf should your product go? Our smart pens digitized text, recorded and played audio … they were basically “pen computers.” But it didn’t make sense to put them next to the laptops. Nor the TVs. Even the blossoming mobile phone sections weren’t a perfect fit — they were mostly headsets, replacement batteries and chargers. So we ended up in the back of the store, next to the WiFi scales, activity trackers and other products that didn’t really fit elsewhere. Being innovative and new was proving to be a challenge in itself.

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So how to deal with this? You want to try to skate to where the puck is going.

When we were planning the Livescribe 3, we saw the amazing growth in mobile devices, and more importantly, the emergence of tablets as productivity devices. We could have viewed tablets as “the enemy,” with their stylus pens and internet connections. Instead, we said, “Let’s embrace this category, see how this allows us to evolve and refine our product, and create something that makes a tablet more useful.”

This really paid off with the market growth in mobile accessories, which started with cases, but quickly evolved into wearable activity trackers, other smart pens and a whole range of products to enhance mobile computing. Whereas six years ago we were an outlier, by shifting our product strategy just a touch, we created something that fit perfectly into the growth in consumer interest in smartphone and tablet productivity. It enabled us to roll out nationally with [company]Best Buy[/company], worldwide with [company]Apple[/company] and also get space at wireless carrier stores such as [company]AT&T[/company], [company]Sprint[/company] and [company]T-Mobile[/company].

But we didn’t try to roll out to everyone, everywhere, all at once. That would have taken a tremendous amount of capital for manufacturing and also a great deal of training support to make sure the sales reps know how to explain the Livescribe 3 to their customers. A gradual build up within a specific retailer has been key to our success, and we’ve done this with Apple, with Best Buy and with wireless carriers. This helps reassure the retail buyers as well, because it limits their risk and gives them a chance for a better expansion.

A staged process builds momentum, and from the manufacture’s perspective, it also means you can use some early sales to help fund your next round of manufacturing. Finally, it means that if there are any refinements you need to make during manufacturing, you can roll those out easily, without having to retrofit a warehouse full of product.

To recap, if you want to make a splash at first at retail, you need to be ready to make an investment. But a better approach can be to target your product to emerging trends to fit into the current retail mix. More importantly, rolling out to retail can be a case where “go big or go home” can really bite you — it’s better to have a gradual build. There are also some important lessons in terms of managing global retail, around picking the right partners and, very importantly, managing country-by-country pricing in a world of global transparency. But I’ll save those stories for my presentation at Structure Connect on Oct. 21 and 22.

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