Fluent Systems found an effective model for product distribution. The Fluent E-Team, originally formed at the University of Madison Wisconsin, devised the Wireless NH3 Monitor to help farmers apply ammonia nitrate fertilizer more efficiently to fields. The team relied on free product publicity provided by trade journal articles to pique the interest of end users. They then made the product available to consumers through a network of distributors. In the end, after less than a year of product sales, Fluent sold to Raven Industries for $1 million.
Fluent president Chad Sorenson says that in the product’s first season, a handful of fertilizer dealers were offered exclusive regional distributorship of the NH3 Monitor. In exchange, these distributors were required to purchase a minimum inventory of monitors. Sorenson says, “We had the luxury of selling a product not available anywhere else. If you create a product of value and you’re convinced that distributors will make money, you have some bargaining power, even though you’re a small producer. We wanted our distributors to have a vested interest in moving the product like we did. If we had distributed the units on a consignment basis, our distributors wouldn’t have had any stake, and we would have had to finance our own inventory. “Diversification = survival”
In 1999, former economics professor and entrepreneur Dick Sabot co-founded eZiba, an e-commerce company selling handcrafted products made by individuals in the developing world. After the dotcom bubble burst, eZiba was listed by Forrester Research as one of the companies that would not only survive but benefit from the Darwinian shakeout (along with amazon.com, Wal-Mart and e-Bay). Why the success? Sabot points to the fact that eZiba didn’t remain exclusively an e-commerce business for long. As soon as possible, the company diversified its channels, reaching the customer through an award-winning catalog and retail stores on top of the website. Says Sabot:
“EZiba was one of the first e-commerce businesses to recognize it needed to go multi-channel. We had to find ways to generate traffic, and the portal sites just weren’t doing the job. So we experimented with a catalog that would arouse people’s interest in eZiba and bring them to the website; the catalog worked well and became increasingly cost-effective. Then the opportunity to expand into brick and mortar stores presented itself, and we jumped on it. So we now view ourselves as a multi-channel retailer. There is an online side to the business, but there’s also the catalog—millions of copies of which are distributed every year to households all over the country. The catalog is the biggest driver of eyeballs to the website and the biggest driver of business overall, so we’re very much a multi-channel retailer.”
Having a company with social goals also went a long way in ensuring eZiba’s durability. “Our customers are very aware that not only are they are buying beautiful products at good prices, but when they buy one of these products they’re also having a positive impact on a low-income community,” says Sabot. “One of the reasons eZiba has been so successful is because it’s offering a positive and potentially quite large social rate of return on investment.”
Sabot says the future is bright for other companies with social aims. “I believe that as the buying public becomes more sophisticated, social responsibility will increase profitability because the public will vote with its dollars for products they view as socially responsible. So in terms of generating demand and a marketing message, I think being socially responsible as we move ahead is going to be a big plus.”
