International Journal of Business Management and Commerce Vol. 2 No. 4; August 2017 “Sayonara” Mr. Saito – Goodbye Business! Byul Han LIM College Manhattan, New York City, New York United States of America Herbert Sherman, Ph.D. Chair-Elect Department of Business Administration School of Business, Public Admin., and Info Sciences LIU-Brooklyn, H-700, 1 University Plaza, Brooklyn, NY 11201 United States of America Abstract This case was written to point out the importance of entrepreneurial marketing, particularly for small businesses, and the brand extension along with the product life cycle. This is an observational field-based case study, which focuses upon Sand by Saya, a micro business that designs and assembles sandals in New York City with a worldwide distribution network. Sand by Saya lost its biggest Japanese buyer, Mr. Saito, due to weak sales of its newest product line, a line that was lower priced and poorly manufactured. The case ends with the CEO of the firm contemplating how she managed to get into this predicament, how she might have avoided it, and then what actions should be taken beyond legal retaliation. Part 2 includes a brief teaching note that provides a short description of entrepreneurial marketing, brand extension and product life cycle. The concepts are then applied to the case in order to understand some of the problems encountered by the firm and possible solution strategies. “Sayonara” Mr. Saito – Goodbye Business! It was early May and Sayaka was on the phone with Mr. Saito and her voice was serious, and so was the speech coming out of the receiver. Mr. Saito and his firm Aesthetics, starting in 2011, had bought $100,000 dollars’ worth of sandals per year. Mr. Saito and his importing company in Japan “Aesthetics” had become the firm’s most important business partner, when his firm started receiving orders from big department stores for Sayaka’s sandals. Aesthetics sold those sandals at summer pop-up stores in every major department store such as Barneys in New York, Japan, Isetan, and Hankyu. Mr. Saito bought sandals at a wholesale price from around $15 to $30 per pair and marked them up for a high profit margin (almost 300%) due to high tariff rates and shipping fees. This was Sayaka’s main buyer, her “Wal-Mart”, and she had to keep him happy. A call from Mr. Saito was always treated with the utmost care and received the greatest attention from the entire staff. When Mr. Saito talked everyone listened! Even though Sayaka was speaking softly and deferentially in Japanese, everyone in the room noticed that something was wrong regardless of seeming pleasantries. The translation of the phone conversation was approximately the following: 10 ©Center for Contemporary Research www.ijbmcnet.com Mr Saito: Anata niwa hontou ni shitsubou shimashita.1 I am very disappointed in you. We have been doing business for several years now and I have risked my name and reputation on you and your sandals. This year my sandal sales were quite weak and much of the inventory you sold me was not distributed. The reason for the poor sales my buyers tell me has been poor product quality as compared to a high price point; my buyers and their consumers tell me they no longer are getting their money’s worth and will not do business with me. My reputation with my buyers has been soiled and I have lost face! Now I have 500 pairs of your sandals sitting on my shelves with no takers. What am I to do with them? Sayaka: Moushiwake gozaimasen deshita.2 I am so sorry. Please accept my deepest apologies. We were forced to use an alternative manufacturer for our sandals because the celebration of the Chinese New Year made it impossible to meet your orders for our new sandal lines, as well as our other customers’ orders, in a timely fashion. Clearly, their work was substandard and this will never happen again since we have fired this supplier. Of course, we will take back the sandals with a full refund and our sincerest regrets. How else can I make this up to you? Their discourse continued for almost an hour. Sayaka finally hung up the phone with a polite voice yet with trembling hands. In a very calm demeanor, Sayaka talked with her two full-time employees Tsugumi and Asuka very fast in Japanese. Then she turned to Karolina and Eugene, her part-time employees, and broke the news in English “Saito will not order with us this year. He has decided to discontinue our contract and seek other more quality-conscious suppliers.” The room was already silent – and now people in the room had a very good reason why. In the Beginning …. Company Background Sand by Saya is a New York based women's luxury sandal brand that sells flip-flops with glamourous embellishment sewn on the top. According to Hoovers, this is a non-public firm founded in 2011 in Astoria, Queens. It maintains two full time employees in a location of approximately 2200 square feet. Annual sales were estimated at $112,000. (Anonymous, 2017) The firm as of 2017 was located at 37W 39th St, Manhattan, NY 10018 between Avenue of The Americas & 5th Avenue. Operating hours are 10 am – 6 pm Monday through Friday. (Anonymous, n.d., a) The CEO of Sand by Saya is a Japanese entrepreneur named Ms. Sayaka Fukuda, who obtained a design degree from the Parsons School of Design. She directed every part of business from product design to sales. Her main employees were Tsugumi, the office manager and accountant, and Asuka who was in charge of design and production. Eugene, a college intern from Korea, was the assistant to Asuka dealing with design and production while Karolina, a French Intern, was the assistant to Ms. Fukuda working on marketing and sales part-time. Ms. Fukuda CEO/Owner Karolina Asuku Tsugumi Mrktg./Sales Intern Production/Design Office Manager Eugene Intern Figure 1 1 Tranlsation adopted from http://japanese-phrases.sakura.ne.jp/page76j.html, July 13, 2017. 2 Moushiwake gozaimasen deshita is a polite formal apology only used if someone has done something very wrong. The president of a company that has released a defective product might use it. Retrieved from http://www.japan- talk.com/jt/new/11-ways-to-apologize-in-Japanese, July 13, 2017. 11 International Journal of Business Management and Commerce Vol. 2 No. 4; August 2017 Organizational Structure of Sand by Saya Sand by Saya’s sandals have unique product line names since the names are derived from New York’s street or boroughs such as its best-selling item “Manhattan” and new collection “Greenwich” (see Figure 1). Figure 2 Sand by Saya “Manhattan” and “Greenwich” https://www.sandbysaya.com/collections/flat, June 7, 2017 Sand by Saya used to import sandals and embellishments from factories in China and assembled them in its New York office. Sand by Saya started separating orders by region that allowed wholesale manufacturing to be done in a Chinese factory owned by a Japanese importer Mr. Nozawa. This action was taken in order to better manage Asian and American orders in the New York office. Sand by Saya is sold at nine countries (see Appendix A for specific locations) as well as online. The main market of Sand by Saya is the Asia region especially Japan and China where Sand by Saya has contracts with major wholesalers and department stores. In the United States, the market channels are mainly their online website and consignment retailers such as Bluefly, Shoptique and Farfetch. Information about the firm from its own website appears below. 12 ©Center for Contemporary Research www.ijbmcnet.com Figure 3 Sand by Saya Self-Description https://www.sandbysaya.com/pages/about, June 7, 2017 There were 12 reviews on Yelp* from October 2013 until end of March 2017 and all of the reviewers gave the sandals a five star rating. Alex J. of New York, NY’s post most typifies what is written: These sandals are so unique and luxurious!! Comfy, stylish, nice for dress or casual! These are my go to sandals. Love them so much I bought another pair (different color and style) and also bought a pair for my sister. Anytime I wear them I always get stopped and complimented due to the sparkles and beautiful details. These are definitely a statement piece. I wear them during the summer and during beach vacations. You can dress them up or go for a casual look. https://www.yelp.com/biz/sand-by-saya- manhattan, June 7, 2017. 13 International Journal of Business Management and Commerce Vol. 2 No. 4; August 2017 Too Many Cooks Spoil the Broth! Asuka had been working in Sand by Saya for 2 years and she was in charge of design and production. Eugene recently entered the company as an assistant to Asuka providing part-time support in product design and production. Under Sayaka’s direction, Asuka and Eugene came up with numerous designs and samples. Since there were many products left over from the previous season, Asuka and Eugene had to select designs that were new and aligned with last season’s leftover sandals. After continuous meetings, Sayaka and the design team decided the on final list under the theme “Charm Collection”. Soon, Asuka and Eugene started sending samples to their outsourced (Mr. Nowaza’s) manufacturing factory in China to proceed with pre-production.3 Mr. Nozawa was an up-and-coming manufacture and a proponent of Sand by Saya. He was a Japanese Importer based in Shanghai, China and was passionate about introducing Sand by Saya to the Chinese market.