An in depth discussion about the benefits of manufacturing at home and why it’s important for aspiring entrepreneurs to find their niche
By Luis Fernando Arce, Chief Interviewer
Arbitrage Magazine recently had the pleasure of speaking to Paul Crawly, President of NetReturn™. He discusses the reasons his company finds that it is more cost effective to manufacture their product domestically, and what the future will look like should this trend catch on in other sectors. Paul also offers some advice to aspiring entrepreneurs, specifically about the importance of finding a niche and taking advantage of the internet.
ARB: Can you tell me your name and about your company and product, please?
Paul Crawley: My name is Paul Crawley and I’m president of a company called NetReturn™. We design, manufacture and sell high performance sports-training nets.
How long have you guys been around?
We started the business in 2007 and we began selling product in 2009. We’re based out of New Jersey.
So why did you like the idea of manufacturing products in the U.S.?
Well, when we began the company we were led to believe that the best choice for us would be to take the product offshore and get it manufactured overseas. And we attempted that early on; we looked at it, and we didn’t like a) the quality we were getting back on our nets, which are very much precision-made products; and b) then we looked at the turn-around time – what we could do from a rapid prototyping perspective and in terms of getting product to market, design modifications – we felt that it would be best to do here in the U.S. And not only from that perspective but from an economic one, it’s been wonderful.
So you’ve actually discovered that it’s more cost effective to manufacture your product in the U.S. as opposed to any other third world country or Asian country?
You said the quality of the product is a lot better; do you think that can be said of most products or does that specifically refer to your nets?
I think it’s specifically in regards to sports-training nets. I couldn’t speak for other products – I just don’t know enough about the different industries.
Can you tell me what factors are making it more cost effective to manufacture it in the U.S.? I ask because it’s common practice to outsource…
Well you know that’s the [fault?] answer…But to give you an example, in terms of aluminum, our nets are made of aluminum, and aluminum is a commodity. The price you pay per pound of aluminum is relatively the same around the world. Our netting is polyester, which is very much similar around the world in terms of the commodity price. Our nylon sleeve is nylon, so again a commodity. So when you look at that and we take, for example, a truckload of aluminum…which is actually based here in New Jersey, that cost, not [always] from a bending…hole-punching perspective – there’s a process that goes on with that too – from a cost perspective it’s a little higher than we would see coming from overseas. But we make up for that in terms of the time that we get it to our production facility and can turn it around and get it out the door.
We also have a significantly reduced…transportation costs associated with that product. So you may have a slightly higher production cost here in the U.S., but when we look at the other factors – in terms of turnaround time, less cost in regards to transportation, the ability to hold smaller quantities of inventory – it just makes sense.
Do you expect to see this trend growing for other products?
I would hope that the trend grows just as our country begins really waking up to the fact that if we are going to compete on a worldwide level – and wake from a manufacturing perspective – our products and our investments in the manufacturing processes really have to become world-class. And in order to do that, I think we can learn a lot from these other countries that have been very successful with theirs, since we have somehow lost our way. But we also lost our way in the 1970s in terms of automobiles, and we have found our way back.
…now you can go out and talk to not only your local community but actually to the world at large.
Since you mentioned the automobile sector, I think it is still traditionally accepted that German quality cars are much better quality than American cars. What do you think of that?
I guess that’s certainly debatable but that’s the overall opinion when you compare a BMW to a Chevrolet.
I ask because, while I do see what you are saying about needing to step up the domestic manufacturing sector to compete in the world market, at the same time, I think there are certain sectors that already have their strong foothold. For example, the electronics sector: the Asian countries are leading there. I guess what I’m asking is, do you think it would be hard for consumers to start buying products made in America after having bought products made overseas for so long with good results?
Unfortunately, you have to look at each product category and the competition in each and the pros and cons of each. But if you look at it, the U.S. consumer has been trained over the years that when they walk into a store, they may, for example, buy a shirt for 9 dollars at a Wal-Mart. And that shirt may be made in Indonesia. What our company is doing in terms of particular affairs is we are saying we are going to be the best in the category. So, for example, if you take a net that’s made overseas, and you purchase that sport net – that’s probably a product that’s going to have a very a short life cycle, for the most part. We’ve designed a product to make sure that it’s the best in the category and that at the end of the day, it’s manufactured here in the U.S., because we can control each process with that particular product. So, the real key is…that the American consumer has many decisions to make and many of these are commodities-based. But more and more of these decisions are going to be based upon brand and quality. Because I think over the course of time, a lot of people have gotten tired of disposable products. And that’s unfortunately a lot of what you get when you talk about pricing.
When you look at something that goes through a traditional retail model – if I make something for a dollar and it ends up on the shelf at a retail store for four – if you insert the internet in there and you eliminate much of what has gone on in retail, you really can have a direct facing conversation with that consumer and a purchase now where you don’t necessarily have to make that product for a dollar, but you can make it for two and still deliver it at four. And the internet now allows that to happen and that puts pressure on the channel and the consumers are demanding more and more quality, ultimately at that purchase point, which is critical. And that’s a game-changer specifically due to the internet.
Do you see this trend having direct effects on the economy in any way? What is the major benefit to the economy that you see in having more domestically-manufactured products?
It’s important because it becomes a community thing. So an employer spends within the community – whether that’s a restaurant, or a local food chain – the money tends to ripple out from the fact that they happen to have a world paying job, at that. And that’s important. And at the end of the day, it isn’t just the company that is raking the money. It is the entire food chain that’s supporting that company. If you look at it from our perspective, it could be our netting people, our aluminum people, the restaurants around us, the mall couple miles away, right down to the UPS driver. All of these people are touched by a successful company and are able to go out and create jobs through big products, innovative ideas. And in today’s market, it is very hard to beat the market.
We’ve designed a product to make sure that it’s the best in the category and that at the end of the day, it’s manufactured here in the U.S., because we can control each process with that particular product.
Who are your major competitors right now? Domestic companies or foreign made products?
90% of our types of products are made overseas. So you’re talking about a category where something gets produced for $25 and is sold here at retail in the US for 179 or 200 or something like that. But by the time the distribution channel takes its cut, the retailer takes its cut, and that product is sold to that customer, they’re paying a significant price in terms of what the true manufacturing costs were.
Can you tell me what your (manufacturing) costs look like?
All our sports-nets traditionally are around – we retail the most popular product…at $395. And our cost of it sold is in the neighbourhood of 130 or something like that.
Have you had any difficulty getting clients?
NO. Not at all. For us it’s a matter of being able to meet demand in the market place. We have shipments all over the world and within the United States. And for us, it is a matter of keeping up with demand and being able to scale our backend systems to meet that.
Are you in any way worried or concerned that if the trend continues to catch on and more of your products are made here at home, you’ll have too much competition and will somehow be affected?
Not really, it’s really a global market-place. Competition exists…around the world. You had better damn well better make a great product, find a niche within that particular product category and you must establish a loyal customer base and build the brand out. And with today’s internet, there is no hiding that fact.
Sorry, I was supposed to ask at the beginning but it skipped my mind. What is your business background experience like?
I’ve always been an entrepreneur at different companies. Prior to this, I had another company which is a network consulting company. We design, manage, monitor computer networks, backend systems, routers, firewalls things like that.
Do you have any suggestions for young entrepreneurs out there wanting to make it in the market?
Yeah. I think it’s very important to niche. You have one chance, one opportunity to really bring your product or brand to the marketplace. Don’t blow it, because the internet has a very powerful voice. And leverage sells as much as you can, as much as possible through the internet. And the wonderful thing about that is now you can go out and talk to not only your local community but actually to the world at large. And we’re relatively a small company here in the U.S. and we sell all over the world with the help of the internet for a very low price per conversion. So if you’re an entrepreneur looking to get into the business, really find your niche, something that you can be great at, and drive that particular variable and I think you’ll do very well – no matter whether you’re in recession or great times, there’s just no better time to start a business than today.
Can you tell me anything particularly rewarding or difficult about running this company?
Our freedom [is the most rewarding thing]. As soon as I hit the floor in the morning when I wake up, I’m free to go and do those things that interest me. And I think it is hard to put a price on that. When you look at other entrepreneurs looking to start up and so on, they’re going to have to be willing to sacrifice. But at the end of the day, it is all worth it. So for all entrepreneurs and start-ups out there, know that there will be a tremendous amount of sacrifice, but at the end of the day you are placing all your bets on yourself. And there’s no better individual to place your bets on than yourself.
Thank you very much for your advice and for providing The ARB with some of your time. Wish you the best of luck.
Business News with BITE.
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