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Welcome to Econosystems'
Small and Home Business Market Monthly eNewsletter
Published by Anne Ramstetter Wenzel
http://www.econosystems.com

July 17, 2001

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HELLO AND MARKET TIDBITS FROM ANNE
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Welcome!

How are things going in your industry this summer? Are your sales higher or lower than last year? If your company is in start-up phase, your frustration over slower than expected sales growth may be related to the slow economy.

Retail here in Silicon Valley is going through a bit of a shake out. I was in downtown Menlo Park for the city's "Sundaes on Sunday" event (free ice cream sundaes in the park!) and decided to do a bit of shopping. My husband and I found out that my favorite local business supply/stationery store was going out of business and was having a "25% Off Everything Sale." We plopped our groceries in the car and did some impulse office supply buying. It was great - I got a solid wood computer worktable for about $80 -- but I felt a bit uneasy. What caused this business to suddenly close its doors? Was it a rise in rents? Competition from the online OfficeDepot.com or OfficeMax.com? Turns out the parent company, US Office Products, filed for bankruptcy in March 2001, sold off a large portion of the company to Corporate Express in May, and eventually shut down their McWhorter's Office Supply division. So the trouble had been brewing a while.

Plunkett Research, Ltd. points out some emerging trends that retailers (and companies selling to retailers) should watch out for:

1) Weakening consumer confidence
2) Growing numbers of store closings
3) Decreasing levels of consumer household wealth due to stock portfolios and 401k plans that have seen huge losses in the past year
4) Consumers with record high debt levels are defaulting on credit card balances
5) Significant continued layoffs at larger corporations
6) Slowly increasing unemployment

The good news for retail:
1) Low personal savings rate = high personal expenditures
2) Low interest rates
3) Very low inflation
4) Unemployment is still low by historical standards.

Well-run small businesses actually survive well, and some even prosper during downturns. Small and new businesses are more flexible and quick to respond than many established businesses. According to "Entrepreneurs" with Judith Krautz at About.com, "Not only do they have excellent employee choices after having just labeled that as their number one growth problem in June of 2000, but as other areas of the economy tighten, many larger businesses are outsourcing services that small business can step in to supply."

So don't let sales and earnings disappointments of the surrounding businesses get you down. Look for your opportunities in the current slow environment. One hot growth area, the herbal supplements industry, is highlighted below in our "Market Brief."

And please e-mail me if there's an industry you'd like to know a bit about OR if you have your own "Marketing from the Trenches" story you'd like to share with us: awenzel@econosystems.com

Enjoy summer, and I'll "see" you next month!

Wishing you the best life has to offer,
Anne Ramstetter Wenzel
Principal
Econosystems
http://www.econosystems.com

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MARKET BRIEF
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AMERICANS TURN HERBS INTO A MULTI-BILLION DOLLAR INDUSTRY AS THEY SEEK LONGER, HEALTHIER LIVES

By Anne Ramstetter Wenzel

Americans are increasingly turning to herbal supplements* to enhance their health and well-being. Health magazine (July/August 2001 issue) reports that 12% of all adults - that's 12.8 million people - take herbal supplements daily. And one-third of American adults take herbal supplements regularly. The growing industry had $2.6 billion in sales in 2000. The Freedonia Group (Cleveland, OH), forecasts that the U.S. market for herbal and related extracts will grow more than 7% a year over the next several years - pretty healthy growth considering the U.S. economy overall is barely growing this year.

Herbal supplements sales growth is driven by emerging scientific evidence of health benefits of certain herbal supplements, and the rising overall popularity of alternative medicines. Unity Marketing, Inc. (Orlando, FL) points out that aging Americans are increasingly concerned about inadequate diets and a medical system that may fail them at some time in the future. U.S. Bureau of the Census figures show that the number of Americans aged 25 to 39 has fallen by 6% since 1995, while the number of Americans aged 40 through 65 has increased by 17%. Aging Americans are increasingly engaging in preventive self-care in the quest for longer, healthier lives.

The most popular herbal supplements are garlic (a natural antibiotic, cholesterol fighter and heart health aid), ginko biloba (a circulatory stimulant and memory enhancer), ginseng (normalizes body systems, helps reduce stress and improves stamina) and Echinacea (an immune system stimulant): sales of these four supplements alone account for almost half (47.5%) of the market. For a list of the most common herbs and their uses see http://www.realhealth.co.uk/herb.htm

The industry is not without its problems. Several people have been taken seriously ill by ephedra (a.k.a. ma huang), a natural weight loss supplement. Many dieters and athletes see ephedra as an easy way to lose weight and boost energy, but it is a brain and heart stimulant that has generated more than 1000 complaints of heart attacks, seizures and psychotic episodes. The U.S. Food and Drug Administration must prove that herbal substances are dangerous before they can be banned, difficult to do since many people taking ephedra were not healthy to begin with.

Suppliers of herbal supplements should work with reputable companies to assure safety and quality for their customers. Quality is an issue even when adverse health effects are not a concern: the amount of the herb actually present in herbal supplements varies greatly from manufacturer to manufacturer.

Health and natural product stores sell about half of all herbal supplements. Mass merchandisers (such as WalMart) and drug stores (such as Long's) each sell just of 10% total herb supplements consumed by Americans. Catalog and Internet sales combined account for an additional 5% of total herbal supplement sales. Direct sales companies are the second largest herbal supplement suppliers, with 18% of the total annual sales.

Direct sales companies such as Watkins (Winona, MN) sells herbal supplements as single herbs such as Balanced Ginseng and Garlic Oil (which contains a bit of parsley) as well as herbal blends: Brain Plus, which contains ginko biloba and Brahmi; and Mood Plus, which contains St. Johns Wort, Rhodiola Rosea root and a blend of Passionflower, hops and skullcap.

Linda Sikut, independent Watkins representative and founder of Moms Helping Moms Stay Home (http://www.helpingmomsstayhome.com/linda), gets a lot of wonderful feedback from her customers. One customer "has painful hip joints because he has arthritis and his doctor thinks he's headed for hip replacement. Once he started Linimax (a blend of glucosamine hydrochloride, Bosweila, Curcumin, and whole grapeseed extract with Watkins' bio-activator blend) he began to notice a difference. His joints are no longer as painful. Since Glucosamine has cumulative effects we are hoping the he will not need hip surgery. At least for now, it's on hold." Watkins' Skin Hair & Nails supplement contains Green Tea Leaf and the Chinese longevity herb Ho Shou Wu: another of Ms. Sikut's customers took it for hair loss. "One month ago she called me to tell me that her hair has all filled in and she no longer has bald spots."

Despite enthusiasm for the benefits of using herbal supplements and strong industry growth, Internet retailers account for only 2% of industry sales. In order to gain a competitive advantage in the industry, herbal supplement e-tailers must have the ability to offer one-on-one customer service and expert advice via e-mail or telephone service. Once customer service is perfected, Internet suppliers' sales will be buoyed along with their customers' rising interest in improving the quality of life through herbal supplements.
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*An herbal supplement is a product intended to supplement the diet that contains an herb or other botanical, and is ingested as a capsule, powder or other form that is NOT represented as a conventional food or sole item of a meal or diet.

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MARKETING FROM THE TRENCHES
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ADRIANA COPACEANU of ABC GIFTS & BASKETS SWEARS by 3 MARKETING RULES FOR INCREASING SALES:
1) Follow up, 2) Follow up, and 3) Follow up Some More!

Ms. Copaceanu's friendly persistence led to the sale of 40 gift baskets for "Employee Appreciation Week" - even though the company claimed six weeks earlier they didn't celebrate the event! Here's her story:

In March I called a local pharmaceutical company (Merck & Co) to introduce myself and see if I could help with their gift programs. Since Employee Appreciation Week was in the near future, this is how I approached them:

"I'm calling to see if you have decided yet: What you're going to do for your staff during Employee Appreciation Week?"

The woman on the phone told me they don't do anything special for this particular week, so I asked if she would be interested in a presentation anyway, to see what I had have to offer for other occasions. She agreed, and a week later we had a meeting, to which she also invited her boss. They were impressed with the many gift-giving ideas I presented to them (birthday programs for employees, employee of the month program, holiday, marketing ideas, promotional help, etc.). I left some tasting samples with them, but I didn't make a sell that day (first follow up: they tasted the treats after my departure).

When I arrived home, I sent them each a handwritten "thank you" note (second follow up).

Two weeks later, I called Merck & Co., "just to check if they had anything coming up that required any gifts (third follow up)."

Two weeks later, I sent them a flyer regarding "Employee Appreciation Week" (fourth follow up).

A week later, I called Merck & Co. to make sure they received my "Employee Appreciation Week" flyer, and got the order on the spot: 40 gift baskets for the occasion -- even though originally they said they didn't celebrate this holiday!

You are building a relationship with each of the people you market to. Think of passing one of them on the street: if you have done your job right, they will stop to shake your hand along the way, knowing very well who you are. When they need a gift (or whatever it is your business has to offer them), they will call you, because visually, thoughts of your relationship with them will pop into their head. If you have made just the presentation, but let it drop after that because you had too many things to do, they will simply keep walking, thinking that they know you from "somewhere." But they won't remember where.

If we want our "SEEDS" to grow, we have to continually water and fertilize them! We water and fertilize our customer relationships by following up.

Adriana Copaceanu
ABC Gifts & Baskets
Affordable, Beautiful, Creative Gift Solutions
Don't waste your time looking for the perfect gift! We are only a phone call away
and we'll custom design your gift for any occasion. http://www.abcgiftsandbaskets.com

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FUN SPOTS
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Backyard Beauties has a random drawing for set of handmade All-Occasion greeting cards containing handpicked flower seeds from owner Nancy Hayes' backyard flowers, and her unique Seed & Spearmint Packets. The winner is drawn at the end of each month and notified via e-mail.   Go to http://www.backyard-beauties.com/ to enter.

The HampsterDance has moved! Yes, remember those adorable dancing creatures? You can see them dance at http://www.hampsterdance2.com/hampsterdance2.html. They've added other dances, too! You'll be proud to see them do their graduation dance at http://www.hampsterdance2.com/graduation.html OR their stage dance at http://www.hampsterdance2.com/stagedance.html.
Ah, life's simple pleasures.

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Copyright 2001, Econosystems. All rights reserved.

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