Business Owner Story #70 – Biaggi

Business Owner Story #70 – Biaggi

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Stephen Hersh believes that luggage should be very functional, practical and durable when you’re traveling. He also believes that when you’re not, you shouldn’t have to take up precious room in your closet or garage to store it. And that’s why he founded Biaggi, a company that makes unique luggage that folds neatly into a storage bag when it’s not in use but otherwise functions like traditional fully structured four-wheel luggage.

Hersh recently spoke with us about his experience founding Biaggi and the lessons he’s learned after selling a successful handbag company and starting over again with a startup.

Note: This interview was conducted before Biaggi’s appearance on Shark Tank where they were offered a deal! Read more about the deal here.

The Start

How did you get started with your business?
My family had a very successful company in the handbag industry. We sold the company in 2006. Our handbags were very innovative at the time. We were the first company to make a real organizer handbag, the first to put a cell phone pocket on a handbag, and the first put a light inside a bag so when you opened it at night you could find your stuff. We were always at the cutting edge and understood the value of an item.

In the meantime, our partners in the Far East were working together with us to come up with something new and unique. We have a very strong product development team from the previous business. We came up with this item that tackles the storage issue that luggage presents. We loved it immediately, we saw the value in it and we brought it to market.

How did you fund your business?
We were self-funded from the beginning by just the partners. Our business has gone through a lot of trials and tribulations, but we’ve always been self-funded. Going forward, we might explore some sort of alternative funding sources, but at this point we’ve been entirely self-funded.

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Running the Business

How did you learn to run your business?
When I was a teenager, my dad started a handbag company out of our kitchen. It was in my blood, you could say. I lived it and breathed it every day. My siblings and I were surrounded by it. We got front row seats to see what it takes to succeed and build a company from scratch – the time commitment, the stress, the travel and the potential rewards. I always wanted to have my own business. It never occurred to me to go work 9 to 5 in corporate America. It didn’t appeal to me at all.

Who was your first customer?
Our first customer for this product was Dillard’s. For a department store to bring in a new line, a brand that’s never been in their luggage department before, means that they really believe in it. It’s going to take up floor space and that’s a major investment for a department store. They measure success based on their sales per square foot. For them to take in an entirely new luggage line is a very big deal, so it meant a lot to us.

What’s the biggest mistake you made in the first year?
We made huge mistakes, critical errors that almost sunk the company.

No. 1 is we had success with a business right before this one. Sometimes, in that situation, you forget when you start a new company that it is a startup, regardless of what you had going on before – from the size of the company to the office to the people who work for you. A startup is a startup and you need to be able to pay for your overhead out of the proceeds from sales as soon as possible. We tried to take a shortcut. We started with a pretty sizeable team, high overhead, expensive office, and that was a very big mistake.

No. 2 is inventory management. Luggage is very different than handbags. Luggage is a commodity. It’s something that people buy and it lasts them an average of 6-7 years. A handbag can be an impulse buy. A woman sees a handbag she likes and she can buy it right then and there. Luggage isn’t like that. If you already have luggage, you’re not looking for new luggage. We brought way too much inventory in from the get-go. That was a big mistake.

Finally, this is a really key mistake because it shaped where I took the business from that point: Our product requires demonstration. We make foldable luggage. It’s not something that you know it does just by looking at it. The idea to go straight into department stores and get our sales high right away wasn’t necessarily the best idea. Our product isn’t a product that you can throw on the floor of a department store and expect people to know what it does. We sold very well in catalogues, online and in stores that have salespeople around all the time who can explain the product well.

What’s the smartest thing you did in the first year?
We created some great marketing assets. We got an inordinate amount of PR for a new company. We started to really learn e-commerce and gained some very valuable lessons about how to build a business online.

And, also, the product itself is smart. We make a very high-quality piece of luggage. We have the most innovative luggage on the market. Luggage is a space that can be a bit boring, but we made it exciting.

What’s the most rewarding thing about running your own business?
You’re creating something and figuring out what your customers like. Your job is to bring your customers the products they like at the price points they want them at. You learn that as you go. You try to figure it out, but you can never be 100 percent accurate unless you’re in the game. I find it rewarding to bring a viable, valuable product to the marketplace for my customers.

What’s the most challenging thing about running your own business?
The same thing that’s rewarding about it. Figuring out what people want and what they want to pay for it. Some of our most successful products were products that we really didn’t think much of. Everybody’s different and that’s a big challenge to figure out what people want. Just because you want it and you like it doesn’t mean you’re going to sell a lot of it. You have to be very objective and have an open mind, and that’s a challenge.

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What business owner or entrepreneur do you admire most?
Lori Greiner. I’m a very big admirer of hers and have always been. She’s brought over 100 products to the marketplace. What I love about being a business owner is giving customers products they want. In the United States of America there are very few people who have done that as many times as she’s done it!

What I’ve Learned

What do you wish you had known before you had started your business?
I wish that I understood a little more about the luggage industry. Luggage is really a commodity. It’s like your refrigerator to a lesser degree. It’s not an impulse buy. You have to understand that and we didn’t. We looked at it as apparel. Luggage is actually in the housewares spec of most department stores, which you wouldn’t think because it’s made of fabric, nylon. It has functionality like pockets, which a handbag or a piece of clothing might have. But the truth of the matter is that luggage sells with pots and pans and appliances.

What advice do you have for others starting their own business?
Really think things through. If I could do it all over again, I would have done focus groups and gotten a variety of opinions on the product end.

I would say try to sell directly to your customer. It’s important to sell through retailers, of course. But in today’s day and age, there’s no reason that you can’t sell straight to your customers as well. You can make better margins that way and you can get really creative with it as well.

And PR today is tremendous because of the explosion of the Internet. You can’t put a high enough value on PR.

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About the Author — Ashley Sweren is a freelance marketing writer and editor. She owns her own small business, Firework Writing (http://www.fireworkwritingonline.com/), located in San Jose, California.

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