Enterprise -- International: ADVENTURE
WHEN PUSHING THE RIGHT BUTTONS ISN'T ENOUGH
The Japanese love Buz Lewis' gizmos. But profits abroad come tougher than he thought
If Edward D. "Buz" Lewis, president of Buztronics Inc., had any doubts about whether his product would appeal to the Japanese, the reaction in Tokyo in April dispelled them. For three long days, the Buztronics booth at the 13th International Premium & Incentive Trade Show was mobbed with visitors. "They blocked the aisles," Lewis says. "It was wild."
The Japanese were buzzing over Buztronics' blinking buttons--flashy little freebies that companies use to promote their products. As silly as the things are, people love 'em. Miller Brewing Co.'s Japanese subsidiary gave them out as a promotion at the U.S. Embassy's July 4th party, and even the stuffy diplomat types went for them. "Everybody had them on. They were craving them," says William Shin, Miller's director of marketing in Japan.
AMONG FRIENDS. Lewis gave away some 2,000 samples during his 10-day stay in Tokyo. He went to parties with his pockets stuffed and left empty-handed. At restaurants, he passed them out to waiters and even pinned them on people at nearby tables. Lewis may not have a command of the Japanese language, but by the time his visit was over his buttons had made him plenty of friends.
He's hoping to make a lot more. Since Lewis started producing the buttons in his garage in 1989, sales at his Indianapolis company have soared--going as high as $6.1 million in 1994. His very success drew competition: Six years ago, Buztronics had just one U.S. rival. Since then, the field has widened to five. With U.S. sales leveling off at around $5 million to $6 million, Lewis decided to seek growth overseas--an uncommon move for manufacturers his size. "Maybe ten percent of the guys in that range export," says E. Martin Duggan, executive director of the Small Business Exporters Assn. "And half of them fall into it by accident."
Even fewer tackle Japan, one of the world's toughest markets to crack. But it isn't Lewis' style to overanalyze. He just meets challenges as they arise.
Take Buztronics itself. Lewis didn't harbor a lifelong ambition to create flashing buttons. In fact, he started out in 1986 co-founding a company that made industrial air-pressure valves that he and two partners invented. But after a power struggle forced him out, his lawyers advised him to do something unrelated until the court fight was over.
His restless mind turned to... flashing badges. The ones he had seen before had big, clunky on-off switches. Lewis, a natural-born tinkerer with a degree in automated manufacturing technology, figured he could do better. He bought some circuit boards at Radio Shack and invented the "pin-switch," a low-tech stroke of genius. If you're wearing it with the pin closed, it's blinking; if not, it's off and the batteries don't run down. Buztronics was born. "The buttons were just supposed to be a bridge to get back to air-pressure controls, but we sold way more blinking buttons than we ever sold air valves," says Lewis.
To keep prices down, he wanted to purchase batteries from one of Asia's low-cost electronics makers. Knowing exactly zilch about doing business in Asia, he knew he would need a guide. An electronic-products directory led him to an importer who agreed, for a cut of the first few sales, to help him find a partner. Thus did Lewis begin the first of his excellent Asian adventures.
It wasn't easy. Lewis and the partner visited Hong Kong and China four times and tried at least nine different companies. "Everybody says: `Yes, yes, yes. We can do it,' but then you get junk in the mail," Lewis says.
After more than two years, he found happiness with a Hong Kong-based company. Soon it began getting requests for the buttons locally, but Asian customers wanted lower prices than Buztronics could afford. So the partners decided to build a local button factory, creating Electronic Promotions Inc., a joint venture in China. "If someone's going to knock us off, it might as well be us," Lewis says with a laugh.
Buztronics staffers went out to help set up the 26,000-square-foot factory in Shenzhen. To Lewis, who hadn't traveled much before, it was "a wild city," where taxis dodge open manholes (their covers get stolen) and passengers use remote controls to honk from the back seat. Local partners plied him with shots of snake-blood wine (color: green) and weren't happy when he turned over a fish at dinner to get at the flesh on the other side. That symbolizes death, they told him. But they forgave his gaffe.
LOCAL CONTACT. Today, the Hong Kong partners oversee the Chinese operation. The plant's 50 workers supply the tiny batteries that power the lights--and produce buttons for local clients. Assembly for U.S. clients, along with printing the face of the button, is handled by the 47 production workers at Buztronics' Indianapolis plant. Buztronics supplied all the equipment so the two operations would be compatible, and Buztronics employees visit about three times a year to give technical assistance. "We've really struggled getting the technology to work in China," Lewis notes. "These guys make a buck a day, and a lot of them can't read."
If the Chinese lack the knowhow for complex button-making, it's questionable whether Lewis himself will have the sophistication to sell in Japan. What drew him there in the first place? In part, a childhood friend, Robert Marshman, who was in Tokyo working as a translator and English teacher. Marshman agreed to serve as a local contact for a modest retainer and a cut of the action. He has no experience in marketing or sales.
When the Japanese subsidiary of longtime client Miller beer bought 30,000 buttons in January, Lewis decided the timing was right. After all, many suppliers follow their big domestic customers into new markets. Marshman set up an office in his typically cramped Tokyo apartment, and they printed up 1,000 business cards.
Six months after the trade show, Marshman is still fielding requests for price quotes and sample designs. But actual sales are minor league. A few thousand through Dentsu Inc. for a Japanese telecom company. A few thousand for an amusement park retailer. That's small change after moving 4 million buttons last year, most in lots of several hundred thousand. "It's going slower than I expected, given the excitement at the trade show," says Buz. "There have been surprises and pitfalls."
The biggest surprise has been the difficulty getting paid. Lewis figured customers would just send a check. But Japanese generally move money electronically, and checking accounts are rare. Marshman is simply a local liaison, not an employee or official agent of Buztronics, so he's not permitted to handle money directly. The company isn't registered in Japan and doesn't even have a local bank account. Japanese companies so far have refused to wire payment directly to a U.S. bank account--an out-of-the-ordinary route they resist. One client paid with a credit card. Miller Brewing pays through its U.S. office. In other cases, however, payment seems to be a problem, even after delivery.
Lewis wasn't completely unprepared. He visited potential clients in November to find out what they wanted. That led him to include shipping in every order by Federal Express. He also determined his pricing and delivery times. But he hasn't yet decided what, if any, licensing or distribution agreements he's willing to make, or how much he'll spend to crack this market. So he's waiting to see how it goes. "We think there are some big deals out there. But if the sales don't come in, when do you pull the plug?" Lewis says. "Is this going to work like this, or do I need a Japanese sugar daddy with a sales force?"
Even if Lewis does succeed in jump-starting his Japanese sales, he won't escape the same competitive pressures that have crimped profits at home. With the Japanese economy still in a funk, customers are driving hard bargains. "Buyers sit around analyzing the cost of each component, and anything we show them they'll get a quote on elsewhere," says Shu Ashida, associate producer at Dentsu. Still, Ashida is sticking with Buztronics because he finds the quality and delivery so reliable, even though he could probably get cheaper buttons from Taiwan.
Lewis' other great asset is, simply, his personality. Energy and enthusiasm, it seems, translate into any language. "I don't think he really understands the Japanese market," Ashida says. "But you meet this guy, and you just know he's not going to lie to you."
Japan is a faddish place, so if the buttons catch on, they'll soon be everywhere. By then, Buz may already be on the road to his next excellent adventure. Marshman has a contact in Thailand--an Australian lawyer he met in a bookstore--and he says Lewis "is really keen" on the country. "He's not sure where it is yet," Marshman quips, "but he's sure the travel agent will be able to get him there."By Edith Hill Updike in Tokyo