Stringing It Together

BeadIt! Inc. pursues profits beyond the balance sheet

February, 2005

Walking into a BeadIt! store is like entering an exotic marketplace. Strands of gold-filled vermeil and silver chains hang from the walls across from displays of needle-nosed pliers and wire cutters, while tables glimmer with glass and natural beads in various colors, and store windows sparkle with finished jewelry, demonstrating the creative possibilities of bringing all these materials together. Owner Jill Barry says the layout is meant to encourage customers to literally get a feel for the materials and the design process: “The best part of beading is being able to touch and feel and design without having to see things in a package or a box or behind the counter that you have to ask for. The whole hands-on experience is something our customers really appreciate and enjoy.” By offering jewelry-making classes for both beginners and experts, BeadIt! gives customers plenty of reasons to return.

BeadIt! Inc. started in Kaimuki in 1992 as a way for Jill and her husband, Brendan, to work around their growing family, which now includes son Zak, 13, and daughter Zell, 9. Jill says what started as “a cool idea” – a place where people could design their own jewelry and create their own gifts – has exceeded their expectations from day one. “We really honestly didn’t know what to expect, and every day we’re blown away with what it’s become,” she says. From a two-person business with $95,000 in revenues, the company has become a two-store retail, wholesale, e-commerce, bead-show-producing business, with $1.5 million in revenues and 16 employees.

Kaimuki was their first location, because it’s where they live, but they saw something else: “It was trending toward more of a shopping/walking community, and it just looked like a great place to have a business,” Brendan says. Because of improvements made by Kaneohe Ranch, they saw the same characteristics in Kailua, where they opened their second store in 2002. The company manages a Neighbor Island presence through bead shows, inviting related businesses on those islands to participate in the shows for a fee, and to spread the word within those communities.

While many entrepreneurs learn through trial and error, the Barrys approached their new venture by assimilating their retail and customer-service careers into their small business. Jill started her career in retail clothing, at the now-closed Spanky’s at Ward Center, where she learned everything from product presentation to sales to stocking merchandise. Brendan was a restaurant manager at California Pizza Kitchen (CPK) when the chain went from five locations to more than 30. “Our strategy has often been to apply bigger business principles to our small business,” he says. “It’s all about systems.”

Keep Business Functions In The Background
Brendan says it’s no accident that, in the restaurant business, serving customers is known as being “onstage.” He explains, “The most important thing in your business, [is] being in contact with your customers and giving great one-to-one service … All the functions in that business, ordering and inventorying and human resources management and accounting, those things have to shift to the background.”

BeadIt! does this by outsourcing functions, such as accounting. In-house, the company uses a point-of-sale system called Synchronics Counterpoint, which automates transactions, tracks inventory turnover and manages the customer database. This is particularly helpful now that the store has two locations. Jill says, “Because I’m in the [Kaimuki] store, often I can see what people are buying, or what’s going out the door. But for our Kailua store, I may not get a day-to-day feel, so it gives me an idea of what’s working out there.” The system also helps fine-tune their customer mailing list: “If we decide to have a trunk show, we can pull up what customers are buying, or which customer maybe came in and really spent a lot at the last pearl show. That tells us this would be a good customer for the trunk show,” she says. In addition, proceeds from BeadIt!’s off-site trade shows can either be tallied in real time – through broadband or wireless connections – or collected offline and uploaded into the system at the end of the day.

Brendan says he evaluated several systems to avoid investing in what was essentially an expensive cash register: “We looked at all the ways a system could help us be productive. We have a long-term action plan for it, so we can weave in more features.” BeadIt!’s application of big-business systems to his small-business enterprise has attracted Mainland companies interested in doing the same. He says, “We’ve really broken ground in establishing systems for this niche business.” Applying traditional retail practices to the bead business is complicated because inventory comes into stores in different formats – by weight, piece, strand or lot – from the way they are purchased by customers, i.e., in loose beads or packages. “It all has to flow together with purchasing, so the system incorporates best practices like [tracking] hot and cold sellers, and turnover,” he says.

International Finance Is Not Just For Stock Brokers
Another big-business feature is BeadIt!’s wide-ranging business partnerships. BeadIt! combines retail, wholesale and e-commerce with far-flung suppliers of everything from Indian clasps to Austrian Swarovski crystals. This entails international travel and constant communication with overseas suppliers, manufacturers, designers and agents. “We’re beyond just importing products, we’re establishing relationships [overseas],” he says.

It also means paying attention to price fluctuations of commodities like silver. With sterling silver comprising 20 percent of the company’s inventory, Brendan says, “If I send an order to my suppliers in India or Thailand it’s going to go at today’s price … So if they see a dip there will be a little flurry of emails and we’ll say, okay, let’s get 20 kilos … kind of hedging, I guess. That’s just one little product line.”

Because the company is also a direct reseller of Austrian Swarovski crystals, it is vulnerable to fluctuations in the dollar’s value against the euro, he says, “Over maybe 18 months there’s been a swing … I was getting a positive currency adjustment with Swarovski and now we’ve got a big negative.”

Despite the price fluctuations in supplies, the company takes great pains to keep prices stable for customers, says Brendan. That’s another way to keep business functions in the background. “In these two instances we’ve just eaten the increases, we’ve made a few adjustments as we go along … If it’s too expensive to buy a certain product at this time, there’s millions of [other comparable] things out there that can make great jewelry.” If price increases are inevitable, then employees are advised to be upfront with customers on the reasons behind them, whether they are related to manufacturing or shipping.

Fine-Tune Your Online Features
The Barrys were early adopters of e-commerce, selling beads on eBay six years ago under the screen name ibeads. Starting out as an online store linked to eBay, it evolved into a full-fledged, 1,000-product Web site. Brendan says that while the site wasn’t always profitable – BeadIt! still uses eBay for closeouts – they were committed to it as a way to keep in touch with Mainland and Neighbor Island customers: “We’ve got a lot of Mainland customers who visit our store once or twice a year when they’re out here for their vacations.”

While allowing customers to purchase online was a great option, the site was expensive to maintain, he says. “We had selected a very robust but expensive solution where the inventory levels on the site were completely tied to what was in the store.” In addition, traffic was directed to the site as part of a national advertising campaign, which added to the expense.

Last April, the company refocused ibeads.com into a portal linking BeadIt!’s various lines of business. One of those lines is a licensed product the company sells wholesale to other bead stores, called beadgirl bags, launched in 2002. Another e-commerce site, islandbead.com, was launched in December. Instead of linking inventory to the brick-and-mortar stores, Island Bead’s inventory is kept separate from the retail stores. “Rather than expensive national advertising, this is focused on one-to-one interaction with customers, where we would contact the customers who come through our stores, and at our [off-site bead] shows,” says Brendan.

Back Up Your Employees
From training to benefits to branching out on their own, the Barrys have created an environment that supports employees, in some cases, beyond their employment at the company. It’s another lesson he learned from CPK, he says: “Our company is getting nowhere near [as big as CPK], but still I think it’s a very important principle to take care of the staff. They’re the people that are taking care of the business.”

Initial training includes access to a lending library, and an evolving training guide. New employees are also paired with a mentor for up to three weeks. “We don’t just throw them to the wolves, we make sure they’re scheduled with a mentor every time they come on shift.” After initial training, Brendan says, “Training is just continual. In a growing business there’s constant change.” Jill says that employees are sometimes called upon at staff meetings to share new ideas.

The company also shows its support for employees by its approach to benefits. Brendan says, “When you ask a lot of employees to wear different hats, it’s important to take care of their needs. If an employee is working for us, I don’t believe he or she should need to get a second job to get insurance or some other benefit; we ask people to be successful with us.” In addition to the company health plan, BeadIt! offers an optional pension plan that is transportable, rather than tied to the company, “because transitions in life happen all the time.”

One of Brendan’s sounding boards in this area is Matt Claybaugh, president of Marimed Foundation, a nonprofit organization that provides services to at-risk youth. Their wives have been friends since high school, but the two men found common ground when the Barrys started the bead store. Says Claybaugh, “We’ve talked a lot just because … we were both growing in our [organizations] at the same time.” They’ve helped each other navigate through similar employee issues. “We [both] have [employees with] introductory jobs, but there are also employees who go through life changes and have higher needs, so you have to provide both the opportunity for advancement and equitable benefit, because everyone’s lives are changing all the time,” Claybaugh says.

Sometimes support extends beyond an employee’s tenure in the store. One example is Teresa Eliason, a jewelry designer and former employee who set up her own business. Eliason developed a bead-party concept called allaboutthebeads.com, which helps customers host their own parties. BeadIt! provides materials and fulfillment of web orders, while Eliason does the marketing. Former employees who no longer live on Oahu have also been given jobs such as overseeing the company’s Web sites.

Support The Community
Claybaugh and Brendan also share the idea that companies should produce not only a single, but a triple bottom line: monetary profits, a great place to work and contributions to the community. “What businesses call profits, nonprofits call surpluses. Both create a stable foundation that their respective organizations need to make it viable into the future,” says Claybaugh. He adds that while businesses traditionally keep their eyes mainly on monetary profit, creating a positive impact on the community should also be second nature.

Over the past four years, BeadIt! has mentored three students from the Assets School to come in weekly for six months to learn everything from computer skills to customer service. BeadIt! also has a full-time employee who fields requests for donations. While that may seem like overkill, Brendan says, “Everyday she has something to do, whether it’s follow-ups or preparing donations for groups, ranging from the tiniest preschool in Kailua to the governor’s ball at the Hilton Hawaiian Village requesting merchandise for silent auctions or door prizes.”

The company may become more generous this year, if it reaches its goal of $1.75 million in revenues, a 17 percent increase. Most of the increase will come from wholesale business anticipated from more than doubling the number of bead shows statewide, from eight to 17. The Barrys say they will continue to be conservative in choosing new store locations, to ensure that customer service remains consistent. Brendan says, “Our customers don’t come here the same way they go to the market to buy a loaf of bread. They’re coming to create something … we’re not selling products, we’re selling an experience.”

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