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Business Observer Friday, Aug. 24, 2018 2 months ago

Big call: Local companies receive retail giant's blessing

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Selling stuff at Walmart can change the fortunes of any business. But that kind of jump comes at a price.

The retail behemoth that is Walmart can be a blessing and a curse for budding, or even established but small, entrepreneurs and inventors. 

Why? By sheer size, Walmart can be a golden road to increased sales and volume. But also, due to its size, getting ready — capacity, quality control, insurance, calculating margins and on — can be a heavy lift.

Of course, most people will take their chances with Walmart — even with any obstacles.

That was the scene one day in June, when Walmart’s home office in Bentonville, Ark., hosted its fifth-annual Open Call event. Open Call is a product bonanza, where the retailer invited more than 450 businesses to meet one-on-one with buyers for a chance to get their products on store shelves.

Open Call, according to a statement, is part of Walmart’s commitment to American-made, sourced or grown products. Entrepreneurs from 46 states, plus Washington, D.C., and Puerto Rico, were invited to the show. Florida, with 44 companies in the competition, was No. 2 overall, behind California, which brought 57 businesses.

Two of the Open Call invites are from the Tampa region, while another one is from Sarasota. A behind-the-scenes glance at all three companies reveals some similar challenges, and different tactics to overcome them.  

Michael Turke, Simple Drain Solutions 

Michael Turke, 27, always fancied himself an inventor and entrepreneur. It’s all the Tampa native — who went straight from high school to the patent office, skipping college entirely — has ever wanted to do.

Turke had so much confidence in his product, a plastic strainer for sinks and tubs called Catch-A-Clog, that he fibbed a bit when he was invited to the 2016 Open Call competition. Walmart buyers expressed a great deal of interest in his product, he recalls, and wanted to put it in 500 stores across the United States.

One of Michael Turke's Simple Drain products. Courtesy photo.

“They wanted a really big order up front,” he recalls. “I said I had the funding for (it) when I actually didn’t. I wasn’t able to fulfill the order, so I looked for help elsewhere.”

Turke didn’t leave Bentonville empty-handed, though. At the Open Call event, he met John Matonis of Branchburg, N.J.-based Drain-Net Technologies, who offered to partner with Turke to help him scale up his operations. Drain-Net has considerable skin in the drain and grease-trap game, especially on the commercial side of the industry, where it works with major brands such as McDonald's, Subway, Chili's, Wendy's, Chick-fil-A, Safeway and Wegmans.

“I do the manufacturing and they do the sales,” says Turke. “They’re funding everything.”

Turke produces his strainers locally, using the trade name Simple Drain Solutions. He buys the raw material and builds the molds himself, using a milling machine in his garage, and then takes them to custom injection-molding companies such as Florida Custom Mold in Odessa and Spectrum Molds in Sarasota.

“I taught myself how to build the molds because it’s so expensive to get molds made,” he says. “I have 20 different products, and no funding to pay for all that work. It can cost $30,000-$40,000 just for a single mold, so I had to learn how to do it.”

Turke has sold strainers on Amazon but had to significantly mark up the price to see a profit because of shipping costs and the healthy cut the online retailer takes from sales. He estimates that he generated about $100,000 in sales via Amazon but was able to turn a decent profit only because his expenses were low.

“They’re not going to take another product off the shelf and put yours on when they don’t know how well yours is going to sell.” Michael Turke, founder of Simple Drain Solutions

At Walmart, the kitchen sink strainer’s MSRP will most likely be $2.99, while the bathtub version should retail for $1.99 or even less, he says.

“I want to provide a high-quality product but at a low price," he says. "I don’t want to have to try to sell it for $10 online.”

Not having capacity to meet a sudden surge of demand is a common entrepreneurial problem. But Turke says he is “absolutely” confident he will be able to meet Walmart’s demand for product this time around.

“We talked them into starting with a lower amount of stores, just to get going,” he says. “We agreed on 100 stores.”

Before that happens, Turke has another challenge. He has to design an end-cap display to house the Catch-A-Clog products — another hoop aspiring Walmart suppliers have to jump through. Walmart, he adds, also requires a significant amount of insurance. 

In anticipation of Walmart upping its demand for his products, Turke plans to merge Simple Drain Solutions under the banner of Drain-Net Technologies.

“It’s just easier that way,” he says, “because they have the insurances and the credit and all that. Plus, if Walmart wanted the product in all 4,000 stores, you would need quite a bit of funds to get that going. I don’t know exactly what their ability (to attract investment) is. I just know it’s a lot more than mine.”

— Brian Hartz

Eddie Rice, RV Air

Eweart “Eddie” Rice never thought he would become an entrepreneur at age 65 — just as he was entering full-blown retirement mode.

Rice enjoyed touring around the United States in his RV with his wife, Rose. “When you’re retired, that’s what you want to do,” he says. But as they traveled, Rose kept having allergy problems, particularly in dry southwest states like Texas and New Mexico. Rice deduced the RV air conditioner’s filter was to blame.

Eweart "Eddie" Rice of RV Air Inc. celebrates his Walmart Open Call success. Courtesy photo.

Not content to see his wife suffer, and thinking he could make a buck or two, Rice set out to create a better, more robust air filter using a blend of unwoven polyester. With that, RV Air Inc., based in Clearwater, was born.

“The stock RV A/C filters are just worthless,” says Rice. “We came up with a full filtering system. For people with allergies, it’s amazing.”

Rice’s varied background includes stints working in machine shops and restaurants, so he knew about making things and the need for proper ventilation. But he had no thoughts about making it all the way to Walmart. 

“I’ve never really had any major retail experience before,” says Rice, adding he's had some success selling his filters via Amazon.com and his own website, RVAir.com, where the products carry a price tag of $13.95.

Walmart is a whole other level. Being summoned to Bentonville, Rice says, was like “walking into the Mecca of retail.” 

While he's impressed, he's not naive. “Once we get rolling, it will be tough to meet demand,” Rice admits. “Many businesses fail because they can’t keep up. Our goal is to be three to four months ahead of Walmart’s order demand.”

RV Air produces seven air filter models, and most sell for about $15 apiece. The company generated some $100,000 in revenue last year, and has already topped that figure in 2018 thanks to a run of successful appearances at RV trade shows nationwide.

"I’d love to tell you I’ve got this all worked out, but I don’t. I know how to make the product, but it’s kind of like going from feeding 10 people to feeding 10,000.” Eddie Rice, RV Air

Walmart plans to carry only three models — “thank God for that,” Rice says — but has requested enough product for 500 stores. That means RV Air is scrambling to add employees and resources to what has basically been a family-run business for the past four years, with Rice, his wife and three of their children producing, packaging and shipping filters.

“We are in the process of interviewing,” Rice says. “We’re going to have to hire 20 to 25 additional employees in Clearwater alone.”

Logistics is another challenge. To address that, Rice is scouting locations for three production and distribution facilities statewide. “Right now we’re just trying to nail down the first one and get everything set up for production,” he says.  

Rice has invested about $300,000 into RV Air. But he knows he needs outside financial help if he wants to grow properly and meet Walmart’s product readiness deadline, which comes in December, and then have enough stock available when the filters hit shelves in March. He’s on the hunt for investors, and has even contacted the hit TV show "Shark Tank."

It’s a steep hill to climb. But Rice comes across as remarkably unperturbed by the pressure of his own success.

“It’s all divine driven,” he says. “Every time we turn around, something else keeps falling into place. I’d love to tell you I’ve got this all worked out, but I don’t. I know how to make the product, but it’s kind of like going from feeding 10 people to feeding 10,000.”

— Brian Hartz

Joe Kuipers, Ezstax

Winning a nod for Walmart’s Open Call to Joe Kuipers is the third big mark of validation since he invented his closet and all-around life organizational product, Ezstax, in 2014.

“It was a simple solution to a complex problem,” says Kuipers, a Sarasota entrepreneur formerly in commercial real estate.   

Joe Kuipers invented Ezstax to help people organize their closet space. Courtesy photo.

The solution: a series of interlocking dividers that allows users to sort and select an item from the middle of a stack or pile without making a mess — or taking up extra space. Made from recycled polyethylene terephthalate, the patent-pending system stacks neatly on top of each other. Kuipers says it can work everywhere from a dresser drawer to a laundry room to suitcase.

Kuipers, 44, invented Ezstax, he says, out of necessity. “I noticed a real problem in our closets,” he says. “I played around with a lot of products until this worked.”  

"If we go nationwide with Walmart, we could easily triple our existing business so we're doing what we can to make this work." Joe Kuipers, founder of Ezstax

With home organization a hot trend — see "The Life-Changing Magic of Tidying Up: The Japanese Art of Decluttering and Organizing," a 2014 smash hit book by Marie Kondo — Kuipers hit a nerve with Ezstax. “Our customers are tired of having a mess everywhere,” he says.

First, in 2015, he raised $118,000 from 1,600 backers in three days on crowdfunding website Kickstarter. Soon after, Kuipers began to sell Ezstax on Amazon and in Bed, Bath and Beyond stores. The current price is around $20 each, though the retail price has gone up and down based on size of the trays. 

In a second validation of the product, sales grew rapidly. Kuipers, who runs the business for Ezstax in conjunction with his wife, Sami Kuipers, says he sold about 2 million Ezstax units last year and has sold some 3 million overall. Total sales, Kuipers says, were a little under $2 million last year. 

Like other Open Call winners, there will be forthcoming logistics and production challenges. Kuipers, for example, is working on a display case specifically to sell Ezstax in Walmart. He adds Walmart is "pushing us to lower our price, which is always difficult."   

But even with a possible dip in margins, Walmart, says Kuipers, is Walmart. “Walmart obviously has a lot of influence on shoppers,” he says. “If we go nationwide with Walmart, we could easily triple our existing business so we're doing what we can to make this work."

— Mark Gordon

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