February 26, 2014
By manufacturing whimsical products such as a trailer that carries a kayak, Bob Bell's company has fought off big competitors by focusing on niche products. But how can they steer a course for growth?
Each week, we seek out expert advice to help a small or medium-sized business overcome a key issue.
Two decades ago, Bob Bell was a manufacturing consultant. One of his last jobs was developing and installing the production line at a furniture factory. But that wasn't his dream – he wanted his own company, his own product.
"The idea of a bicycle trailer sort of floated into my mind," he said. "I guess I made the first prototype in 1993."
The competition facing his business, Wike, came initially from other North American companies that made trailers for kids and pets that could be pulled behind a bike. Then competitors moved their manufacturing overseas and clogged the market with more cheaply made trailers.
But Bell's eight-person, family-run company is holding out, even succeeding. It still designs, welds, sews and assembles its products in Guelph, Ont. (except for the wheels, which would require a whole separate manufacturing operation, so those come from Taiwan).
To survive, the company today makes highly specialized trailers – one for pulling golf clubs, for instance, another for hauling a kayak and yet a third for canoes. Larger trailers carry children with special needs. Each appeals to a particular type of bike-minded consumer.
"We don't try to market to hippies," he added with a laugh. "When I started the business, the goal was to provide products that would change urban transportation." In addition to his cycling advocacy, Mr. Bell is a Guelph city councillor.
But when a product succeeds, there's the risk that larger manufacturers will copy it and flood the market. "We had a very successful introduction of pet trailers and strollers in the late 1990s. We were doing great guns. And then the following year, five or six competitive products arrived into the marketplace from Asia, at one-third the price we were selling at," he said.
"So we lost that entire market."
With the kayak and canoe trailers, however, "there's only one or two people in the world that make that product. The market's small, but we have most of it," Mr. Bell said.
He has appeared on CBC's Dragon's Den to tell his story, but the panel, in its combative, reality-TV way, couldn't quite grasp the nuances of Wike's niches.
Still, it's a quandary. Business has never been better, Mr. Bell said, but exploring new niches – the company is venturing into cargo bikes – could invite competitors as well. And to stay competitive, Wike sells only from its website, to avoid the markup that distributors and retailers would add to the final price.
"If we don't expand, somebody is going to take our business," he said. "We see what's opening up. We know where we have to go. Being a Canadian manufacturer in a marketplace which is entirely dominated by Asian imports is not a place where the average investor would like to dabble."
The Challenge: How can Wike continue to innovate and yet prevent big manufacturers from stealing its niche-product ideas?
THE EXPERTS WEIGH IN
Thomas Hellmann, business professor, Sauder School of Business, University of British Columbia, Vancouver
If Wike wanted to defend one of those niches, that probably means sending manufacturing outside of Canada. It probably means professionalizing the management team. It might mean completely new sales and marketing and distribution approaches.
But they obviously seem to be good at what they're doing. They can continue to innovate. It's maybe more fun. And they can do things they value the most, which is family and local production.
Karen Fischer, partner at the business consultancy RK Fischer & Associates, Uxbridge, Ont.
If you have a great idea, it is almost better to license it out to a large manufacturer before they come along and take it. There is really nothing proprietary about creating trailers for pulling pets and kids. This is a retail product that would be sold in Canadian Tire-type stores. And then again, larger manufactuers have a greater ability to get in distribution as well.
Larger manufacturers have breadth and volume, and they will win on price every time. Unless you have some unique feature that they do not, you don't have a chance.
Toni Smith, owner of custom-bicycle builders Independent Fabrication Inc., Newmarket, N.H.
I can see where that's a tough market. If that company had a really clever idea that really took off, someone else could come in and produce a container load of the same product.
But I would say that somewhere between large and small, there's a sweet spot for most companies. When you get too large, it can get sort of we and they, between departments within the same company. We did this, they did that. And when you're too small, it can become clubby, where you really have to say this isn't a hobby, this is a business.
THREE THINGS THE COMPANY COULD DO NOW
Follow your values
Dominate a market segment through innovation, and continue to find new segments, while preserving your values and local production.
Licensing an idea to a larger manufacturer could be an option.
Go with what you have
Smallness allows for nimbleness, and for some businesses smallness is simply in their DNA.
Interviews have been edited and condensed.
Reprinted from The Globe and Mail, in the "The Challenge" section.
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