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Oriental Trading Co. has growth in mind as it marks its 75th anniversary(Omaha World-Herald (NE) (KRT) Via Thomson Dialog NewsEdge) Jun. 21--That rubber chicken company from Omaha is on the verge of its next great expansion, its top executive says, with a new owner, a new distribution center and new ideas for selling fun to Americans. Oriental Trading Co., which today will dedicate its expanded La Vista warehouse operation and which will mark its 75th anniversary this year, has passed $600 million in annual sales, about half of that over the Internet. Chief Executive Steve Frary has spent the past seven years reinforcing what he says is now a solid platform for finding, designing, importing, marketing and delivering about 30,000 different products to 4 million customers a year. The next step, Frary said, is to expand Oriental Trading's sales into new markets -- school supplies, weddings, scrapbooking, for example -- and to take full advantage of Internet-based marketing. "We think our business has a lot of old-fashioned fun, with a new twist," Frary said. "We sell fun products for any occasion, and there's lots of occasions." Oriental Trading was founded in 1932 by Harry Watanabe, who imported goods from his native Japan. During World War II, he shifted to suppliers in other Asian countries, especially China. In 2000, Harry's son, Terry, sold the business to Brentwood Associates, a Los Angeles investment firm. Brentwood recruited Frary to assume management after Terry Watanabe left the company to concentrate on philanthropy. A Rhode Island native who holds a master's in business administration degree from Dartmouth College, Frary learned the catalog business as a co-founder of the J. Jill women's clothing retailer. He worked as a marketing consultant before joining Time-Warner, eventually running Time Life Books, Time Life International and Time Life E-Commerce. Last year, Brentwood sold a majority share of Oriental Trading to Carlyle Group of Washington, D.C., which manages nearly $60 billion for investors. The price was confidential, but industry sources had put Oriental Trading's value at $1 billion. Not bad for a venture that specializes in such things as $5-a-dozen kazoos, fake glasses, soap-bubble containers, chattering teeth, glow-in-the-dark skulls and rubber duckies wearing pink tiaras. The key, Frary said: "We offer more fun per dollar than anyone else." Oriental Trading has competitors in most of its product lines, but nobody covers as many lines of business simultaneously, he said. Hundreds of Asian agents represent the company, and more than 1,000 manufacturing plants turn out the products. The company's own designers, working at the modest company headquarters near 90th and Q Streets, originate 40 percent of the products, with the manufacturing farmed out to the Asian countries. At the new distribution center in La Vista and a warehouse in Omaha, employees unload as many as 100 shipping containers a week, usually routed by sea through Los Angeles and delivered by rail and truck. At a warehouse in Underwood, Iowa, workers handle home decor items for the Terry's Village brand. The new distribution center employs a new system to unpack and sort the goods, promising a 30 percent gain in productivity. Frary said the center can handle a $25 order and a $30,000 order simultaneously. The company expects to add hundreds of employees as it grows, he said. Customers receive 300 million copies of Oriental Trading's 40 different catalogs per year, some aimed at holidays like Halloween and Valentine's Day, some for specific markets such as beading and scrapbooking, some for events such as weddings and birthdays. . About 60 percent of last year's 1.7 million new customers made their purchases online. As Internet orders grow, Oriental Trading can narrow its catalog output, Frary said. For example, a catalog can have fewer pages because it can show samples of product lines and refer customers to the Internet to see other variations. On its three Web sites, customers can search for what they want and shop at their own pace, just as with catalogs. Internet sales also give Oriental Trading customized pipelines to customers. The company's growth plans were under way when Carlyle Group became the new owners. Carlyle executives sit on Oriental Trading's board of directors, and Frary said their experience and contacts in many foreign markets will be an advantage. Investment groups such as Brentwood and Carlyle typically own a company for a period of time and then sell it, distributing profits to their investors. Frary said it's premature to think about when that might happen with Carlyle, and he noted that Brentwood likes Oriental Trading enough that it kept a minority ownership. Carlyle was one of several groups interested in buying Oriental Trading because of its growth potential, Frary said. One advantage, he said, is that the company can test new products cheaply, so employees are encouraged to propose new ideas. New products can be put on-line quickly, and if the response is tepid, the company reduces the price and sells what's left, he said, usually making a profit because the margin on each item is relatively high. That gives Oriental Trading an entrepreneurial feel, Frary said. "You've never seen a business with a lower cost of failure." Four years ago, the company began selling school supplies, a field with many competitors. Because of its high-value reputation among teachers, the school-supply area turned a profit within six months. Sales are growing by more than 10 percent a year. And although Oriental Trading specializes in goods with "low price points," many of its customers have high incomes. That means the company could try some higher-priced items as long as the value -- what buyers get for the dollar -- remains high. Said Frary: "There's a lot of room for growth." To see more of the Omaha World-Herald, or to subscribe to the newspaper, go to http://www.omaha.com. Copyright (c) 2007, Omaha World-Herald, Neb. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. |