Banking on a fresh Business Model

How an online party glassware company saved its business by revamping how it would go to market.

The founders of HuePhoria LLC thought that they had a winning business design, selling their colorfully hand-painted party glassware to upscale gift boutiques. Just a couple of years following its 2005 launch, the business had built a wholesale channel around 1,800 stores nationwide. However when the U.S. economy fractured in 2008, so did sales because of this microbusiness. Consumer spending shriveled and upscale gift stores that bought products like HuePhoria’s cut inventory drastically.

"The stores started getting really nervous, and products like ours" (weren’t attractive anymore), says co-founder Lisa Assenza, who oversees the Syracuse, N.Y.-based company’s advertising and graphical design.

A MINIMAL Point Things started looking really bleak by mid-2008. HuePhoria co-founders — Assenza, Jen Falso, and Kathy Berger — have been attending about four gift shows a year in NY and Atlanta to attain prospective buyers. Each show cost the four-employee company about $10,000, between travel expenses, product samples, and registration, booth and merchant fees. In previous years, the shows paid through a large number of new store orders. But nervous retailers either stopped attending or weren’t as thinking about their products.

"We began to recognize that the formula because of this company just wasn’t working,” says Berger, who handles the business’s sales and marketing. "It became clear we were on an easy track to the poorhouse."

Late 2008 brought more pain. Nearly 40% of the independent retailers HuePhoria sold to were struggling financially, Berger estimates, plus some had filed for bankruptcy. So, they made a decision to focus more on selling through HuePhoria’s Site instead of wholesale to retailers. In early 2009, the business also hired a search-engine optimization consulting firm at a price of $1,200 per month for seven months to greatly help drive traffic to the website. As the firm did deliver more eyeballs, they didn’t result in paying customers, Berger says.

By year’s end, revenues for 2009 plummeted 40% from the prior year to total $154,000 — and continued to slide in early 2010.

The Turnaround The trio decided they needed a business coach to greatly help them refocus. Assenza had a family group link with Ann Hofferberth, a former executive at FTD Inc. and Hallmark who had started a coaching business located in Panama City Beach, Fla. The partners create a gathering with Hofferberth over Skype in mid-2010 and were immediately impressed with her knowledge of the retail world and fresh ideas for expanding their business. They signed a retainer with her in October 2010, in a consulting relationship that continues today.

Hofferberth recommended that HuePhoria put in a greater selection of party-ware products to its Site by forging relationships with drop-shippers, other manufacturers and retailers ready to manage the inventory and ship product on-demand. It had been ways to expand product offerings without the trouble and expense of housing the inventory.

Then Hofferberth looked for methods to capitalize on HuePhoria’s loyal customer base of moms. Having seen the success of direct-sales companies like Pampered Chef where women sell products during parties they throw because of their friends, she suggested this model for HuePhoria.

"I saw that that they had all this enthusiasm around their product," Hofferberth says. "It made sense that they use that enthusiasm to get other folks to market their products."

In November 2010, HuePhoria launched its "Ball Mom" program, that provides women start-up kits for $150 to $599 to allow them to host parties and sell HuePhoria products for a 25% cut of most sales.

The founders of HuePhoria pictured with their hand-painted party glassware.

Photo thanks to the company

HuePhoria currently has eight direct selling reps, including some long-time customers, and recruits through ads on Craigslist. Ball Moms now take into account 44% of HuePhoria’s revenues, while drop-shipping makes up about 35% and alternative party retail sales only 19%.

The brand new strategies are paying down. Sales in the first quarter of 2011 are up 72%, weighed against the same period this past year. The company is on the right track earn $300,000 in annual revenues in 2011, which would mark the tiny company’s best year yet.

Lesson Learned: The co-founders credit their improving financials with their willingness to get one of these home based business model when the old one wasn’t working. Berger says in addition they will work with their business coach and become available to more outside expertise: "Our biggest lesson is we need to never hesitate of asking people for help."

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