It was the kind of challenge for which Carol Herzing never had any preparation as an Easter Seals telethon coordinator.
With $2 million in sales and just four full-time employees, she was cobbling together a plan that would instantly inject another 50 percent to her top line. After years of having her licensed novelty merchandise for Major League Baseball, the National Hockey League and the National Football League produced domestically, her Brooklyn Heights-based Custom Edge Inc., was now about to layer in a whole new tier of complexity by sourcing the new merchandise overseas, from a plant in China.
The idea was ambitious even for her, but it wouldnt surprise anyone who has known Carol Herzing for long. After all, she had the moxie to land a coveted NFL merchandising license when her company consisted of herself, her basement and a scheme to market a Cleveland Browns Christmas card, capitalized by a $5,000 loan from her mother.
So in late 97, Herzing convened a three-day meeting of her board of advisers to discuss a new line of plush toys, Coolbeans, which would capitalize on the Beanie Baby craze by adding clothing associated with her sports-league partners.
Were only about a two-million company, and were trying to put together a project thats about a million dollars worth right from the beginning, she says. I had my accountants and everybody trying to figure out how to come up with over $800,000 to give to China to pay for the first shipment.
She pulled it off, though not without complications. While she sold about $1 million worth of the toys in 98, she had to tear up another $1.3 million in contracts simply because the factory couldnt produce the items quickly enough to hit the demand window. That was kinda tough to take, she says, wincing.
She also encountered problems in expeditiously clearing U.S. Customs. In business, shes found, as soon as you think that youve gone through the learning curve, you venture into something new, and then you find a new learning curve.
But in the end, it seemed well worth the headaches. Her ability to source internationally as well as domestically gives her an edge, says NFL Properties Leo Kane, director of licensing for non-apparel products and the gateway to one of Herzings best customers.
Custom Edge arose from exceedingly humble circumstances. Herzing had been an Easter Seals fund-raiser for 13 years, when she got the idea about 11 years ago to produce a Christmas card, designed by a friend, around a Cleveland Browns theme.
Somebody suggested she call the Browns for approval. The team referred her to NFL Properties, the leagues licensing and marketing arm established in 1963 by Commissioner Pete Rozelle. It accounts for about $3 billion in business, according to industry estimates.
She was sent a questionnaire, which she filled out honestly. Someone from NFL Properties called and said, Are you some little person out there? And I said, yeah, and she said, I cant believe it we really like this idea.
The caller asked Herzing what her point-of-purchase display looked like. I said, Well, you tell me what a point of purchase display is, and Ill tell you.
Nevertheless, she won approval to produce ceramic mugs as well as greeting cards. So now Im licensed to do ceramic mugs. I have no idea how to make it, what to do with it, how to get it on the market or anything, Herzing says. She began taking wild stabs, cold-calling companies and getting nowhere. They thought I was nuts.
She attended trade shows, where she connected with a breakthrough opportunity. Her first account was a coupon distributor.
They ordered $5,000 of coffee mugs, and two weeks later they ordered $49,000 of mugs. And two weeks after that, they ordered, like $70,000. It was hard to figure out where I was going to get the money to make them and ship them.
Herzings background in the resource-challenged nonprofit arena helped. It was great training for starting a company with zero money, she says.
Undaunted, she convinced a bank to lend her operating capital and set up shop in a condemned building on Pearl Road. (Shes since moved to an equally scenic industrial park in Brooklyn Heights).
From mugs and greeting cards, she added beer steins embossed with team logos. So that smoothed out the curve, Herzing said of the highly seasonal business, but its still [heavily weighted to] fourth quarter, because we sell to retail, and thats when they sell.
Herzing added licenses with the NHL and Major League Baseball. Today, Custom Edge produces 17 distinct itemsshot glasses, candles, etched frosted mugs and the like carrying logos of each of the teams in the three leagues. More recently, shes begun branching out to do business with NASCAR. Her products are sold in more than 4,000 locations across the United States, including Wal-Mart and J.C. Penney stores, and major league team shops.
But it hasnt all been wine and roses. Custom Edge was rocked by the Browns sudden departure to Baltimore. Customers stopped buying products with the team logo and returned some they had bought.
Similarly, the business almost didnt survive the Major League baseball strike of 95. Herzing had landed the licensing agreement with the league only months before, in October 94, and looked forward to capitalizing on it. Instead, she says, demand for baseball merchandise collapsed. It almost put me under.
To scrape by, she sold a one-third interest in her company to a distributor of her mugs. About a year ago, she bought it back. Many of her counterparts werent so lucky. Before the strike, there were approximately 400 MLB licensees. By the time it was over, only about half remained in business.
When she started, Herzing wasn't alone among licensees in running a modestly-sized operation selling largely through specialty stores. In the interim, though, the market for licensed sports novelty products has come to be dominated by large companies that distribute through nationwide retail chains.
""Now, it's Mattel and Hallmark and Nike and Reebok,"" she says. ""So you have to get your sales up real fast"" in order to reach the minimum sales figures now required of major league licensees.
A lot of people would love to say theyre an NFL licensee, but its not that simple, says Herzings lawyer, Baker & Hostetlers Deb Wilcox. You have to have a really high quality product, you have to be very consistent, you have to have good distribution.
But its Herzings high octane charm and energy that really seem to drive Custom Edge. Those who have done business with the company inevitably remark on her 1,000-watt enthusiasm.
She just oozes it, doesnt she? says NFL Properties Leo Kane. Shes always enthusiastic, always challenging us to do new products. And she shows a real knack for growing her business. Shes got her finger on the pulse of whats hot out there.
No doubt because of that reputation, the league refers a lot of would-be licensees to her for advice. Its pretty hard to get an NFL license, Herzing says. These people have tried and they cant get one, so the league tells them to contact one of us. And for some reason, theyll give out my name a lot.
But the referrals arent limited to modestly-sized entities. To her amusement, shes also been contacted by giant public companies, looking for advice on how to get started in the sports novelties market.
Somebody from Owens-Corning called, and said, We want to talk to you. Come on! What can I tell Owens-Cornin g? They said its their first time in the sports market, but come on!
While the league doesnt like to make an issue of Herzings gender nor, for that matter, does sheit clearly doesnt hurt in doing business with the NFL. An NFL Properties official points out that 44 percent of the leagues television audience is female, as is an even larger proportion more than 70 percent of those who purchase licensed merchandise. That demographic profile perhaps explains why the league installed a woman, former MTV president Sara Levinson, as president of NFL Properties.
On the other hand, Herzing is eager to make an issue out of the fact that having children has helped the business. Starting when they were infants, she systematically capitalizes on their radar for promising new items.
I think the thing that helps me the most is having kids, she says of her 10-year-old daughter and 12-year-old son. Thats probably our best marketing tool. Before we even do most of our products, especially kid-related, Ill take them to my kids schools. The teachers probably think Im nuts. Ill go in and say, Can I see your first-grade class? I walk in, and if the kids go nuts, then I know its a good idea.
The sports novelty business is appropriately named. Rest on your laurels with products that were hot one year, and youre sunk the next. Steve McKeever, a national buyer for J.C. Penneys, says the retailer last year sold about 110,000 of Herzings Coolbeans toys in about 600 of its stores nationwide.
This year, he predicts, its going to be a lot less, because the bloom is off the rose. So Im looking forward to meeting with Carol real soon to talk about some new products.
These days, shes most excited about a 16-inch talking NFL frog, which would retail for about $25. But there are also a few old dependables items that function like annuities for her. I mean, theres been an NFL bear out there for 13 years, and it keeps selling, says Herzing.
And the client base for these toys isnt as limited by age as one might think. We have tons and tons of 68-year-old guys calling and saying, I have the raccoon and rhino for the [Denver] Broncos, but I cant find the hippopotamus, she reports.
And always, there is the not-unimportant factor of her kids input, which routinely launches her down new product paths. Her son Chad never tires of lobbying for her to get involved in his favorite pop-culture items.
I think she should do monster trucks next, he says. The American Hot Rod Association does that.
Chads enthusiasm for television wrestling has led to the latest product line for his moms company. When she was in New York for a toy-industry trade show, Herzing stopped by the offices of World Wrestling Federation, to discuss a deal to produce WWF-licensed skateboards. Shes lined up a factory in China, under Korean management, to produce them.
Whats it like doing business with the rough and tumble colleagues of Jesse The Body Ventura? shes asked. She rolls her eyes, dissolving into laughter. Now, theres a different group of people."