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Apr 1, 2010
Doug Stein operated restaurants and night clubs in Asia for many years, and anyone who has ever been involved in that business know that it is exhausting. That's why, when he returned to the United States early in this decade, he needed a long break from the business. He and his wife, Marta, looked around for a new business idea. With all of his experience buying for restaurants and night clubs in Asia, the couple, living in Chicago, decided to open an Asian-inspired furniture and art gallery, and call it Asian Essence. Stein returned to Asia every 90 days on buying trips. The first gallery was such a success that the couple opened four more similar stores, from 2001 to 2004, for a total of five stores. Then in 2004, when the Steins were expecting a child, Doug Stein decided that he no longer had any desire to spend his time on airplanes and tracking around Asia.
The couple sold the stores, and for the second time in just a few years, they were again looking around for another business. "As we considered what to do next, what caught our attention were the beautiful handmade handbags from Vietnam that we had been purchasing since the Vietnam embargo was lifted in 2003," says Stein. "We were bringing back these handbags 50 or 100 at a time on our trips. We put them in our stores and they sold easily. Frankly, I never really saw myself as a handbag kind of guy, but it was something my wife was extremely interested in and knowledgeable about."
What about selling the furniture he had been importing? "Furniture is very bulky and takes up a big footprint in a warehouse. Handbags take up a small footprint. So we came up with the idea of starting an online handbag business and calling it MAD Bags, which is actually an acronym for Marta and Doug, or Mom and Dad." The Steins admit that the first year was a struggle. How do you attract customers on the web for handmade Vietnamese handbags with a five page catalog? "By the end of the first year, we had found some great rep groups that wanted to sell our line. We also found terrific groups in Canada and the U.K. who wanted to be distributors for us. In one year, we literally went from virtually nothing to needing a warehouse, for a lot of product and needing to do the various trade shows.
"We quadrupled sales the second year. We went to about 200 different pieces the second year, and added evening bags and some other bits and pieces. By the end of the second year we had 120 reps on the road, 14 showrooms and we were in 20 to 30 trade shows a year. We doubled the size of our offerings the third year, and more than doubled revenue the third year. We have been growing ever since. We carry about 800 pieces and a 28 page catalog, and doubled sales volume again. We have 5,000 retail customers across the U.S., and we sell to a lot of resorts and a lot in Canada and Hawaii." MAD By Design bags are in shops in large hotels and boutiques, as well as mom and pop apparel stores as well. "We are in our sixth year, and we cover about five categories, including handmade products from Vietnam, our silks and eco-friendly bamboo, and natural mother of pearl shell bags. We do an animal-friendly leather line, an eco-friendly canvas bag, which is a post industrial recycled canvas made from scraps in textile mills. We repurpose the scraps and make laptop bags, messenger bags and lunch boxes."
In the first couple of years, the MAD By Design website was responsible for only a small fraction of the business. It is now responsible for about 35 percent and growing. "We do not sell retail on our website because we avoid competing against our retailers. Buyers are moving strongly to the web, but even if this trend continues, there is still a great need for trade shows. At a trade show, the buyer can touch and feel the quality of the product and then place an order when they get back to the office," says Stein. Stein handles the website himself. "Up until recently, I thought a website was this difficult, technical thing that you had to hire someone to do. I am currently working to put more descriptive content into the website, and words which will be more searchable."
The Steins go out of their way to be fair to their reps around the country. They treat the workers in Vietnam with decency as well. "We spent a lot of time figuring out how to make these bags in Vietnam. At the beginning, we had four people working for us there. Now we have over 400 people working fulltime. We are the world's largest importer of mother of pearl and shell and horn handbags. For those 400 people, we pay above living wage, and we have no child labor. We have been there many times to check on these standards. There are a lot of bad things going on with labor in Asia, but we are not a part of that. It is very important to us." MAD By Design sells about 20,000 of these handbags a month. The crossover handbags are typical, and sell wholesale for $9.50 a unit and have a suggested retail of $21 to $23. MAD By Design has a minimum order of $200.
"We try to have a retail friendly plan," says Stein. "We try to break down all of the barriers of resistance, so we have a very low opening price. At a trade show, we have no minimum order. We want new accounts and we pride ourselves on shipping our orders within 72 hours." No customer will ever get stuck with a bag they cannot sell from MAD By Design, because the firm will take back a handbag within 60 days on an exchange program, as long as the bag is in resale condition. "What sells in New York may not be the same thing that sells in Boise, Idaho. Tastes are different. Since the catalog is so big, you can make some mistakes in your market. Therfore, if you buy ten to 15 pieces from us and don't sell them, we have the 60 day exchange policy."
MAD By Design has a free display program, with clutch displays, earring displays and ring displays. If a retailer places an order of a certain size, they receive the display for free. MAD inventories 30,000 bags in its Chicago warehouse, and back orders only rarely occur. "Retailers who order on the web are sensitive about the time it takes to get an order. They seem to go to their computers, place an order, push the send button, and then wonder why the doorbell hasn't rung."
For more information:
MAD By Design LLC
1900 N Austin Avenue, Suite 57
Chicago, IL 60639
Toll Free: 877-MAD-2247
Topic: Company Profiles
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