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Small Business | LEARNING CURVE: A&A PLUSH INC.

Ebb and Flow : Toy Maker Has Seasoned Approach

December 17, 1996

As many as two-thirds of the sales made by stuffed animal maker A&A Plush Inc. revolve around three holidays: Christmas, Valentine's Day and Easter. Company owner Kwang-Sik Im and director of operations Allen Kim have developed strategies to minimize the risk of running a seasonal business and have learned how to take advantage of the slow periods. Kim was interviewed by Karen Kaplan.

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We sell stuffed animals to mass-market and gift stores. At Christmas we sell teddy bears wearing Santa hats, and for Valentine's Day we have teddy bears with hearts that say, "I love you." At Easter, we sell lots of bunnies and lambs.

During the slow period, our monthly sales are less than $500,000. But in September and October, our sales are in the $1.7-million to $2-million range.

Because seasonal items are limited to a certain holiday, we run the risk of getting an overload of inventory. If we don't sell all of the items, we have to hold on to them for a whole year, and that's pretty risky because it's expensive to store things in the warehouse.

We try to forecast our sales for each season. It's pretty tough, but we use historical sales data as a guide. We try to minimize our leftovers while at the same time trying to order as many items as we think we can sell. Part of the risk is that we can lose some sales if we underestimate the demand for an item and run out when our customers still want to buy more. We generally try to order a little bit conservatively because it is easier to get more supply than to have a lot of leftover inventory.

We prefer to take orders in advance because then we know how much our customers want, and we don't have to keep as much inventory. Our mass-market customers order in advance, but sometimes they insist that if they can't sell everything they order, we have to take it back from them and sell it at close-out. That means we don't want to sell them any risky items because it's our risk, not theirs. Still, if we didn't guarantee their sales, we would lose some of our customers.

If we have a product that isn't moving, we first try to get rid of it by reducing the price. If that doesn't work, we will sometimes hold on to it for another year if we think we can sell it then. Otherwise, we try to sell it at close-out prices. If you lower the price enough, you can sell almost anything.

We are pretty slow from April to July, and we use that time to catch up. We think of ways to improve our operations and discuss possible new procedures for the next season.

We would like to just be a steady business. That way we could budget more efficiently. During the busy season everyone has to work overtime, and we hire temporary employees who are not as efficient because they don't know the company as well.

We are trying to come up with different items besides plush toys that we can sell all year, such as coffee mugs. We want to bring down the proportion of seasonal items. We are also trying to add items for the summer since that is our slowest period.

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AT A GLANCE

Owner: Kwang-Sik Im

Nature of business: Sells, manufactures and distributes plush toys

Location: Compton

Year founded: 1992

Number of employees: 40

Annual sales: $9.7 million

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