Reference no: EM132241248

1. What do you think makes the Glassbaby product unique. Why would (does) someone buy their $44 container?

2. What was their reason to expand to New York and what challenges did they face?

3. What do you think they should do to turn things around at the struggling store.? Discuss some options they presented in the case and create a new one of your own.

Seattle Firm Struggles in the Biggest Market

By JULIE WEEDSEPT. 28, 2011

Glassybaby is a creator and purveyor of small hand-blown glass cups used as decoration, vases and candleholders. Founded in 2001 by Lee Rhodes, the 97-employee company runs three stores and a glass-blowing studio in Seattle, as well as a store in New York City (the cups are also sold online). Ms. Rhodes projects that revenue for the company this year will be $6 million.

THE CHALLENGE Make the New York store profitable. Thinking it was ready to expand beyond Seattle, Glassybaby opened a store on Hudson Street in the West Village in the fall of 2009.

THE BACKGROUND In 1998 Ms. Rhodes, the mother of three young children, was fighting a rare form of lung cancer. One evening, her husband at the time came home with a small glass cup he had created in an art class that Ms. Rhodes had encouraged him to take. “We weren’t sure what to do with it at first, but when we put a candle in the cup and lit it, the effect was so peaceful and so healing,” Ms. Rhodes said. Her husband made more of the soothing little votives for her and soon friends were asking for them, too.

Spending time at the hospital receiving chemotherapy alongside other patients, Ms. Rhodes was struck by the struggles some encountered finding transportation to their appointments or paying for child care. When Ms. Rhodes’s cancer went into remission, she started the business of making and selling the votives she calls Glassybaby. To help patients like those she had met, Ms. Rhodes set a goal of donating 10 percent of all revenue to charity, primarily for cancer care that is not covered by insurance.

The first Glassybaby store and glass-blowing studio opened in 2003 and became profitable after four years. Along with selling the votives, the company rents them out for parties or lends them to serve as charity-event centerpieces. Today, Glassybaby sells 459 different colors of the $44 hand-blown glass containers.

In the last few years, the company has been on a steep trajectory. In 2009, sales increased 25 percent, and Glassybaby caught the eye of Jeffrey Bezos, the founder of Amazon.com — also located in Seattle — who bought 20 percent of the company. In 2010, Glassybaby sales increased 50 percent. Ms. Rhodes says she has given away more than $600,000 to charity.

With the success of Glassybaby in Seattle and the infusion of cash from Mr. Bezos, Ms. Rhodes decided in 2009 to expand to a new location. She quickly concluded that the country’s biggest market offered the best opportunity — despite the inevitable competition of other specialty stores.

In Manhattan, Ms. Rhodes believed she would be able to sell to millions of apartment dwellers in homes ranging from small studio apartments all the way up to multimillion-dollar condos. The city also had strong philanthropic traditions, so there would be plenty of nonprofit partners to work with, and she felt the story of her work as a cancer survivor creating something to help others would resonate.

The final factor in the expansion was the poor economy. At the time, Ms. Rhodes said, few other retailers were expanding into the city. She said she believed that New Yorkers still liked discovering new things — but there were not as many new things happening because of the recession.

The Glassybaby shop opened in the West Village in the fall of 2009. Last year, the store had $290,000 in revenue, but with rent of $9,000 a month, along with salaries and other expenses, it lost money.

Ms. Rhodes acknowledged some missteps. She said she believed that an attractive display of Glassybabys would draw people into the store and that, at $44 each, the price was right for an impulse buy, but the West Village location got far fewer passers-by than she had expected. “We didn’t pay to have a foot-traffic study done of the store location,” she said, “and that was a big mistake.”

She also realized too late that people wouldn’t be inclined to buy a dozen Glassybabys, the way they do in Seattle, because they would have to carry them home. “In Seattle, everyone had cars so we never thought about it,” Ms. Rhodes said.

Another misstep has been in training the sales staff. “We need to sell the story as well as the product,” she said, “and we didn’t really train our first set of New York staff to interact with the customer at that level.” She recently sent one of her Seattle-based managers to live in New York, manage the store and train the sales clerks.

THE OPTIONS Ms. Rhodes considered a variety of strategies to improve sales and become profitable. One option was to move the store to a location with more foot traffic from shoppers, commuters and tourists — an obvious but expensive solution. Moving would involve paying for a location study and the cost of preparing a new space. She is also considering opening a glass-blowing studio in New York to avoid the freight charges she incurs shipping the votives from Seattle.

Another option would be to try to build awareness of Glassybaby. For example, Ms. Rhodes considered approaching more restaurants: “Most restaurants can use lighting that is beautiful but isn’t overwhelming on their tables, and it’s a great way for customers to be introduced to our product.”

Another way to seed the product among potential buyers would be to lend Glassybabys to charity organizations for events — along with a small table card introducing the company and its philanthropic story. “We’ve done this in Seattle, and it’s a way to help make the function special,” she said. “It saves money for the charity and people see our products.”

In addition, Glassybaby could pursue a public relations campaign to try to place the product in more fashion and home magazines or local publications that would review or publicize the store to make it more of a destination and less reliant on passers-by.