Just six months removed from opening a new warehouse in Orchard Park, NY, it seems like the ribbon just hit the ground for Genius Tools’ third distribution center. Upon entering the U.S. market in April 2005, the company has been slowly carving away at its niche in the market by offering a quality product the company stands behind, and at a reasonable price.
A Unique Philosophy
Genius Tools isn’t exactly standing at the innovation forefront in terms of cutting-edge technology or ultramodern tool ideas. According to Vice President of Sales and Marketing Andrew Hwang, the Genius Tools philosophy is “a little different. Our company only manufactures products with a proven market and demand.” The reason they favor this approach? “We know there is a market for us.”
“Some companies will come out with a hot new item, and they’ll push it through the distribution channel as hard as they can,” Hwang says, “but there may not be a market for that product. You hear distributors say, ‘I bought 400 units and sold 20. What do I do with the other 380?’ We know there is a demand for the products we offer, so our distributors feel comfortable when they order those items.”
Many companies place a shiny new wrapper on a variation of something old. Then they send the revamped product to the consumer to buy. “I don’t think it’s very responsible. I can understand why they do it—because they have to continue to grow, sell and push product out the door.” But Hwang asks, “Are they really doing a service to their customers?”
Progressively Pacing The Market
How well and efficiently a technician works determines what he makes in wages. Tools can help improve on these assets. The downside? Technicians must continue to purchase these tools to further their capability to earn money. Therefore, techs are becoming more and more hard-pressed to pay a lot of money for tools. As a result, Genius Tools’ premise is value—a lifetime-guaranteed product at a reasonable price.
But Genius Tools distributors don’t feel any pinch: One of Genius’ corporate philosophies is to ensure everybody is happy: “We don’t want to saturate the market with our product, and we don’t want to cause pricing competition on the distributor level. Everyone in the distribution channel makes money or else business doesn’t happen.”
Being a privately held company, Genius isn’t bound to stock prices or shareholder sentiments. Thus, the company’s well-paced business practices may not reap the benefits of a fat bottom line now, but they are likely to build a sturdy foundation for the future. “The company doesn’t like to push product through the distribution system that doesn’t really need to be pushed out. All we would end up doing is cannibalizing tomorrow’s sales,” Hwang says.
While this philosophy may seem radical, Genius’ extremely low return rate is a testament to the company’s quality standards. In the last 18 months, there were just enough returns to fill three bookcase-sized shelves in their California warehouse. The company attributes the low cost of Genius Tools products to this unprecedentedly low return rate.
Coming To America With Global Roots And Vision
Genius Tools USA is new to the U.S. automotive aftermarket industry, but the company itself has been in global operation for more than 30 years. With global headquarters and a manufacturing plant based in Taiwan, and regional headquarters in Belgium, Lebanon and Canada, Genius sells $50 million a year to 75 different countries.
Coming to America was no easy task: Five years were spent in an initial attempt to tap into the New Jersey market, but the mission was quickly aborted.
This time, the Genius Tools USA team put three years into planning before they made the move to the United States. Even though this team had the history of being employed by a successful global operation, they soon discovered American buying habits are very different. Americans aren’t as price-driven, but they like value—they want more for their money, but they’re even more concerned about getting more service.
Leaving A Stamp On The Present Industry
Even though they had been in Canada six years, very little Genius Tools brand recognition trickled past the border. People knew whom they were in the Seattle and New York areas, but not far beyond, and finding distribution proved to be difficult for the company at first.
According to Hwang, “There are still guys who say ‘I’ve never heard of you, I’m not interested,’ but that’s only because they don’t know any better. If they do give us the time, though, we have a very high closure rate.
“It could always be easier, but for what my expectations were, it’s been so much more,” Hwang says. “Genius Tools USA values the people who took the risk and decided to help distribute our product. The commitments we’ve made to them, we’re going to work very hard to hold.”
Now some of the wary distributors are kicking themselves because Genius Tools product has been flying off trucks. Hwang admits he personally had to field many frantic phone calls from distributors who needed more product now and were willing to pay more to get it to them faster.
Distributors’ only complaints with Genius Tools have been about the retail prices of their product; they say they are too low. Hwang explains how it happens: “Distributors will put $1,000 worth of merchandise on their shelves and sell out in the first day they have it. When technicians use our products, they’re shocked by the quality of the tools.” And the cycle repeats.
In order to blast through shop doors, the company simply needs one shop technician to “take a tool for a week,” as the company says, and give their products a shot. “Once there’s one guy in a shop who uses our tools, the rest come in droves. We just have to get the first tool in the door ... Kind of like the first convert,” Hwang says.
Their Brand-New Stomping Grounds
The new Orchard Park warehouse in New York allows Genius Tools to supply their East Coast customers in a much shorter period of time. The company can now ship to the Northeast within one to two shipping days and to the Southeast within three or four. The location has also provided Genius Tools USA the capability to expand their inventory by 50 percent.
The company hoped to have the warehouse fully stocked by August 2006, but sales skyrocketed so fast Genius is selling product “on the water,” which means product is sold by the time it reaches the dock—let alone the warehouse. Full implementation should only be delayed by up to seven months, but the company still manages to maintain a 96-percent fill rate. “Our goal is to have 90 percent of the line available 90 percent of the time,” Hwang confirms.
Stepping Into The Future
Down the road a new Genius Tools distribution center may pop up in Texas and/or Florida to better service their customers, but for now the company doesn’t want to overstock. “Some tool warehouses have stuff they bought and haven’t sold in 20 years. We know what moves, and our forecasting model helps us to better predict what’s going to be on the street.
“Some times distributors have to take risks ordering certain items. If we can supply them with their orders in one or two days, it gives them a better ability to hold down their carrying costs,” Hwang says in regard to Genius’ 400 to 500 distributors.
“Let’s all make money. Let’s not cut the prices just to get people to buy more. Genius’ distribution is limited because we don’t want people to fight with each other just to move product out the door.”
While Genius’ present niche in the industry remains somewhat humble, the company exudes and promotes a kind of pride that’s not found just anywhere. That kind of pride is driven from the top down, which in turn drives Genius Tools’ commitment to their product and people—a commitment that’s guaranteed for life.
While Genius Tools USA steps into the future, the company can boast of being propelled forward by more than just a unique philosophy and a stroke of luck ... In fact, the company’s progress is due to something much more. Perhaps their success is better attributed to selective distribution and a stroke of genius.