Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.
With its meticulous hand-stitching and long list of customizable features, Passau Hockey Inc.'s made-in-Canada goalie equipment has won a loyal following among elite and professional hockey players in North America, Europe and Australia.
The 30-year-old Quebec company, which makes its products largely by hand in Chambly, southeast of Montreal, sells its goalie pads, blockers, trappers, chest protectors and goalie sticks directly to players. Passau finds its customers through its sales reps in the field, word-of-mouth and online through its Facebook page and website.
"We have a small room in our plant where customers can come in, make their product selection and get all their measurements taken," explains Hugo Beaudry, chief executive officer of Passau, which was founded 30 years ago by his father, Alain Beaudry, an industry veteran who used to adjust and repair goalie equipment for the Montreal Canadiens.
"If they can't come to the plant personally, then we talk to them by phone or Skype after they've placed their order online," adds Mr. Beaudry, whose company has about 20 employees. "We talk to the customer for about an hour, going over the order sheet together, and then we place the order."
Mr. Beaudry declined to disclose revenue figures for Passau Hockey but says high demand for its products – which cost around $2,500 for a complete goalie equipment package – has the company operating at 100 per cent of its manufacturing capacity.
Passau is looking to further expand its business, Mr. Beaudry says. He and his father have several schemes afoot, including a new line of lower-priced products for intermediate players. They are also looking to build Passau's market in Canada, which is concentrated in Quebec.
A question that's been nagging father and son for years is whether Passau should put its products in retail stores.
"From Day 1, we've been approached by shops who are interested in carrying our equipment," Mr. Beaudry says. "And I also know that our customers would like to see our products in-store."
Expanding into retail would allow Passau to quickly raise its brand profile outside Quebec, Mr. Beaudry says.
"But what scares us with retail is that our reputation can be destroyed very fast, because we'll be standing beside other products backed by big marketing dollars," he says. "The other concern is, will we be able to produce enough equipment to meet demand? It takes time to build high-quality goalie equipment, and scaling our production capacity would not be that simple. We need to find skilled stitchers, and they're not exactly running in the streets."
The Challenge: Should Passau Hockey start selling its bespoke hockey equipment through retail stores?
THE EXPERTS WEIGH IN
Jim Cruickshank, senior manager for advisory services, KMPG LLP, Toronto
Passau Hockey is already configured to sell online. They already have organization in place, and their distribution model is geared to direct sales. If they were to go to retail, they would want to consider a number of things. They're going into a market full of competitive players, so maybe they should start in a small geography.
They also need to make sure that, if demand for their product goes through the ceiling as a result of being in retail, they can keep up with that demand and still stay true to the quality of their product. They're making their products by hand – will they be able to pull in more people with the right skills as demand increases?
They also have to answer questions like: How do we distribute our products, what are the infrastructure costs, and what are the marketing costs? Because when you go into retail, you need to win on the shelf, so they need to figure out how they're going to display their products and how much it will cost them to buy shelf space.
Jim Danahy, CEO of CustomerLAB, a retail, consumer goods and health-science consulting firm, Toronto
It may sound strange for a retail guy to say, but my advice is to avoid retail for as long as possible. Do more of what has been working for the past 30 years to grow your sales profitably. Your current model of selling direct-to-customer is the most profitable business model; retailers will take 30 per cent to 50 per cent of your selling price.
Grow sales by taking a page out of the travelling bespoke road shows for business suits. Carefully vet and market to lists of high-potential customers in cities across the country and put on an entertaining event with refreshments, samples and educational content. Road shows also allow you to schedule production more efficiently than walk-in and online orders permit.
Your online presence is decent, although you need a good English translator and search engine optimization. Over time, you can make the transition from high-touch, in-person fittings to the ever-improving Web-based tools as the technology improves. To promote the new marketing strategy, try to boost your roster of professionals and highly touted prospects who wear your gear. Eventually you may be ready to pony up big fees to the NHL to allow your logo to be visible on TV.
Paul Dickenson, founder and owner of Udrum (Underground Drum Co.), a custom manufacturer of musical drums, Burlington, Ont.
I've been in business for 20 years and used to have my own retail store. I still sell my drums through music retailer Long & McQuade, but right now I'm going more direct. This goalie equipment manufacturer and I – we're kind of in the same boat in that we're selling to a very niche market. When you've established your name in a niche market, people who want the products will come to you.
If Passau's owners want to put their brands in retail, they should come out with a line of less expensive products, something that doesn't need custom fitting but still reflects their brand and quality. But Passau needs to keep in mind that the end price can only be so high, and the retailer still needs to take their cut, so that can take a real bite out of Passau's profits.
A better route to expanding outside Quebec would be for the company to go after hot goalies in different provinces and offer them their equipment. It'll be a bit of an investment, but once elite players start seeing the equipment on their favourite goalies, that will really do a lot to get their brand recognized.
THREE THINGS THE COMPANY COULD DO NOW
Consider a new product line
By selling a lower-priced line of products in stores, Passau can build greater public awareness of its brand without losing control of its premium, custom-made line.
Pursue product placement with high-profile goalies
Passau should approach popular goalies and offer to make their equipment in exchange for brand exposure.
Hit the road
Organize bespoke road shows – where customers come in to see your products and place their orders – in cities across the country. Market these events to high-potential customers, including hockey leagues.
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Special to The Globe and Mail
Interviews have been edited and condensed.