Vanessa Garrard

Vanessa Garrard is the co-founder of E3 Style, a Brisbane-based company which is the largest supplier of consumer electronics and accessories to the retail market in Australia. The operation, which turns over more than $14 million a year, has just restructured its business, formally establishing a brand management business called Kreative DNA and an exporting business called Zennix. Garrard explains the rationale behind the restructure, her market research secrets and why the tablet market has teething problems ahead.

You have effectively split your company into a few different business units. What’s behind that?

We’re the largest OEM supplier in Australia so that’s still our core business. But we also have a lot of products that don’t suit those OEM brands. Dick Smith’s style guide right now is black, that doesn’t suit female shoppers, it doesn’t suit kids. Teenagers that are after iPod fun colour speakers and things, it doesn’t work in black packaging. So that’s where we come in with our brands and say for example, Target wants a kids’ camera with a puppy picture on it, you can’t put it in a base blue packaging. So then our brands come to the forefront and Kreative DNA is the new business that manages those brands, brand sentiment, style guides and the strategy on where we move those brands going forward.

So what sort of brands do you operate?

We’ve got 15 different brands. We’ve got MiGear, that’s huge with digital lifestyle products. Gear 2 Go does the same sort of things, but we use different channels between different retailers, so not everybody across the market has the same brand, otherwise they start cannibalising. Gadget Geek is IT products of course and then you go into MiCam Junior and MiGear Junior and all those different fun ones for the kids.

Does having your own brands make it more complicated to deal with the OEMs?

No, actually it’s easier. The problem with major retailers is that they’re looking from their own style guide, it’s not flexible in any way whatsoever. So with our brands we can be flexible and go from a consumer point of view with everything we do. We can say: “OK, what does a four-year-old want to see when they pick up a camera? It’s no way near what an adult wants to see in terms of artwork when they get a product.”

Has it required you to bulk up the resources around the marketing side of things?

No, we always did that. One of the main things we do over our competitors is conceptual selling – more about here’s the market and here’s what the trend is and here’s what we need to suit rather than I’ve got a product here to sell and how many do you want?

IIs it fair to say some of that advice you’d take back to the OEMs, even if they don’t always listen?

We’ve built the ranges and the relationships with these guys over time, now a lot of them come back to us and say: “What should we do?” So we’re getting a really strong foothold with these guys in working with them to develop new categories and brands, even to a point where I’ve got a style guide on my desk from one of the majors asking us what they should do to change it to suit the market.

It’s clearly very much about personal relationships in your sector.

Yes, at the top level that is.

Does that make it hard that you’ve got an entire business to run as well? How do you juggle that?

The reason for splitting out the businesses is so that I can pass on some of the jobs that I was doing. The account management is passed on and the sales side of the business is passed on and I’ve got experts in the business that can handle that side of it for me. So for me it’s very much about getting into the strategic side of the business – setting up alliances with these guys that are ongoing.  I’ve got to now focus on the top level strategy.

Any difficulty handing back some of those jobs?

Of course there is. It is very tricky and we pull in business coaches and we’ve got PwC to help us with our HR and human capital side of the business. They’re telling us that we need to delegate more and we need to delegate efficiently. So we’re training and we’re always learning.

Can you explain where your new business Zennix fits in?

In Australia we’ve built on the OEM model so that it’s developing what a retailer wants to take to market. So what happens there is it can take nine to 12 months from concept to actually bringing it and getting it on the shelves. But on a distributor level we can get orders in weeks because they’ll take our products and take them to market.
So Zennix is a business in Hong Kong that deals with all these distributors. It’s a completely different business model. From an international point of view, if we’re looking at expanding we need to look at the easiest option to get our products into retailers in other countries and the easiest way to do that is via a distributor. They go out and handle the front end sales and they’ve got the trading terms set up and the relationships and the local warehouse and everything for their market.

What sort of effort goes into keeping on top of consumer trends?

Huge, huge. A lot of my time now, and Richard’s time too, is really looking from the product point of view. He’s strategically looking at the product development cycle – what brands are back and in, what styles, what patents are being registered. Then I’m looking at shopping trends, a lot of that statistical data that we get shows for example how many kids are born in Australia that are going to be six next year.
So that’s a market where we know we’ve got three million kids that we can hit with a particular marketing campaign around a product. It’s a lot of time spent on who the customer is, how they’re shopping, retail price points. It’s a lot of playing around with the price points to work out where the sweet spot is. Is it $40 for that camera or is it $20? Where does that volume come in? So we play with a lot of data like that to see where the price points go.

What about the old-fashioned strategy of spending time in the shops?

Yes, absolutely. That’s why it is important for us to be in Chermside in Brisbane. We’ve got every major retailer in this shopping centre or within five kilometres. So we spent a lot of time in the shops and seeing what’s up there, but we are trying to work months ahead of that by attending all the major trade shows. Then we also have good relationships with people in Philips and Samsung, and you get intel on the hardware before it launches, which helps us.

Does looking at patents give you many good clues on future products?

If you’re going to spend a lot of money on patents and especially worldwide patents, that’s probably a trend that’s going to come in. But trade shows are actually really, really handy too. We keep our eye on the innovative part, new designs and products and then try to work out ways to do that on an OEM mass market level. A lot of people develop products but don’t think about actually how to sell it. So you might have some really cool products but they’re not actually useful to a retailer because they can’t explain in a catalogue how it works. But we might be able to tweak it and say: “This is really how it will sell well in a catalogue.”

You’ve got a feel for what sort of trends, we’re obviously seeing a lot of tablets but is that sort of mobile devices the dominant theme that you guys are seeing?

It’s all about mobile definitely and then of course from an accessory point of view is going to be juice, power products. Figuring out how to charge these products, keep charge – back-up batteries will be big in the future. But the tablets have still got a lot of issues and there’s still huge return rates where consumers don’t understand how to use things properly. So there’s still going to be a lot of teething problems with the old tablets. It will be interesting to see where things go.

For another 12 months?

I would say at least that.

Are people returning them because they don’t understand how they fit in with other gadgets?

I think they expect them to be as good as a PC and don’t understand the processor speed. When you’re looking at an iPad you don’t have Excel or Word on there. It’s nice to get your emails on it but it’s really not an executive tool yet. I think people think: “Oh this is cool” and then when they actually start using it they realise it’s actually not as handy as they thought it was.

Has the new business structure required new resources and has that been a challenge?

I think in business that’s probably your number one issue. That and capital.  I think when you start your own business the big issue is always the delegation factor but it’s got to be something you learn over time.

In terms of hiring, are you trying anything different?

We just went for a national sales manager and we tried all different avenues of hiring with the recruitment companies with all the rest of it and just thought this is a role that you just can’t get wrong. So it was a matter of getting an actual sales executive recruitment company involved and spending a lot more money to actually find that right person.

How about the problem of having enough capital? How have you handled that?

We’ve always used our own cash, we’ve never used bank facility, so it’s a matter of order on order, just managing our terms. At times it can be tricky with the majors wanting terms but it’s just something we just know that’s part of business.

I’m sure the banks would be lining up talk to you.

When we started we couldn’t even get anyone to return a phone call.

I bet. Is there any possibility that you might use some of that in the future to give yourself a bit more flexibility?

I don’t think so. If we’ve actually got to now, to sit here and say because we want to get to the next milestone in turnover we’ve got to go and borrow and put everything at risk, it’s just not worth it. I just don’t think we want to go and borrow money.
It’s just a nice feeling to know that we can manage within our capabilities. I think it’s hard to get rid of that risk mitigation thing when you start a business. We just don’t want to go in and say yeah, we owe the bank how many millions of dollars and to have that over your head.