An entrepreneur from Singapore, Mark, has been emailing me over the last two months with an idea for a new product. This is a piece of furniture and I think would do very well in the industry he has targeted it for, the hospitality industry. However, the product design is so complex that I have advised him this would only work if he simplified his design, not only to reduce the burden on factories for sourcing parts and contracting out parts of the manufacturing, but also to minimize shipping and end-user assembly. I told him that only a large company with extensive manufacturing and distribution resources could pull of the product as it is now. He agreed and has spent the last month trying to simplify his design. The other day though he emailed me and told me the project is on hold because he has realized there are too many issues. He said he is focusing his time now on an apparel project and is headed over to China this week.
I was glad to hear this and think this is a good lesson for entrepreneurs. Building a product in China and then getting that product to the US and in the stores here are two different things. As I told Mark, all it takes is one defective rivet on a unit bought here in the US and he may have a very expensive return on his hands. This is after all a big piece of furniture. So he had better wait until he has 100% confidence in his product or until he has the means to process returns at minimal cost to himself. And these are the hallmarks of big companies that profit from economies of scale. Not small ones. Just look at IKEA and how easily they process returns. You can return anything to them and they still make money. Small business, on the other hand, can lose a lot of money if they don’t handle product sourcing correctly.
But as Mark said he has not given up. He is just going to focus on something else for the time being. Who knows but maybe the apparel project will go so well that he will be able financially to revisit the furniture project. Or just stepping away for a while may lead him to look back at the furniture product to see ways it can be improved and made feasible, what he was not able to do when thinking about it night and day.