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COVER STORY
East Meets West
Exporting or importing,for Storch International Inc. globalization
is a
good thing..
by Howard Shingle
Say “China”
and most people think “competition.” Say it to
Richard Storch and he thinks of a rapidly growing consumer
market with the potential to outgrow the U.S. market over the
next two decades.
Storch has 28 years of international business experience—26
in the
window coverings industry and 19 as Storch International Inc., Madison,WI
— and most of it has been focused on Asia, specifically Hong
Kongand mainland China. He has been developing this market not as
a buyer,but as a seller.
“Whenever I talk to people for the first time and they ask
me where
do we do business and I say our primary focus has been Asia, and
in particular China, their first comment is, What are you buying
from them?
And I say, Well, up until this point we haven’t been buying
anything.
We’ve actually been selling,” Storch says. “I
say we’ve been selling very high-end U.S.-, Canadian- and
European-made window products to thenewly growing, upper elite,
young entrepreneurs in China.”
This is the market Storch has been working as an agent representing
U.S. window coverings companies or as a wholesaler by supplying
raw materials to fabricators to make all types ofblinds and shades.
He has firsthand experience atgauging its potential.
“You can’t forget, it’s still a communist country
and you have to deal with all the issues that are involved with
that in terms of all the policies and requirements to export to
Hong Kong and China. But there is a fast growing, and I mean a very
fast growing, market of newly developing and developed small companies—the
entrepreneurial
young men and women who are educated, who see opportunities —
because China has been a void in terms of entrepreneurial opportunities.
There’s just a huge area to be filled right now, and all of
these young people with ideas are now starting to fill this void.
Now when you go to Shanghai or you go to Beijing or you go to Guangzhou
you
see skyscrapers everywhere, BMWs and Mercedes everywhere, and
that is the new young Chinese who are developing wealth on their
own.
The Chinese government knows that economy exists. It knows that
it has to let that economy grow on its own. It’s the fastest
growing part of the economy, not only in China but in the world.
“Those people are the ones who are buying our particular high-end
products. We have identified fabricators and distributors in Hong
Kong and mainland China who cater to that type of clientele. They,
then, are focusing on that high-end market and they’re bringing
USA-made goods and Canadian goods and European goods to these newly
wealthy Chinese. There is a fast growing market for the export side
to China andI think it has potential, it has nothing to do but grow
upwards.”
Potential? Even though China manufactures similar products on its
own, many achieving European standardized ISO 9000 quality?
“There will always be, in my opinion, a demand for the imported
product,” Storch answers, “because it’s simply
a matter of status and
styles. Styles and status are two very important things for this
high-end clientele and that’s what we contrive to bring on
a regular basis to our clients in China—the style and status
of having a foreign-made product hanging in their house or apartment.”
“The globalization of the world is not a bad thing,”
he adds. “It’s a
good thing.”
THE NEW FRONTIER
Storch has focused on international business since his college years.
Having lived 17 years in Spain and other parts of Europe no doubt
had something to do with it. But it was as export manager to Latin
America for Springs/Graber 26 years ago that Storch got his first
practical experience.
From there it was on to Beijing, China.
“At the time people were still actually walking around in
Mao suits,
everybody was dressed the same. They were riding bicycles and you
rarely saw cars,” he recalls. “I felt there was a tremendous
opportunity there that was long-term future growth. I asked, Where
is the new frontier?
Where is the new potential growth area long-term? And I was convinced
25 years ago that it was Asia.”
What gave Storch the incentive and the courage to start his own
company was receiving the President’s “E” Award
while at Springs. Presented by the U.S.government, the “E”
Award recognizes persons andcompanies that make significant contributions
to increasing U.S. exports.
Storch International Inc. started out 100 percent as an exporting
company simply representing various large companies as their export
department overseas and making a commission on those sales. Along
the way he worked with Comfortex, Joanna, Vertisol and Levolor Kirsch.
Some companies were not interested in selling overseas directly
because many didn’t know about the international arena and
didn’t want to take the financial risk, he explains. They
wanted to sell to Storch domestically and he then sold the products
overseas
and invoiced the customer directly. “They gave us a
competitive price and we turned around and sold overseas,”
he says.
Slowly over the years, Storch built a portfolio of from three companies
originally to 16 and in 2000, Storch International was named Wisconsin’s
U.S. Small Business Administration Exporter of the Year (see D&WC,
April 2000). Meanwhile, the line of products he sold grew, too.
“Some of my customers were calling and asking me for certain
products that the existing manufacturers that I represented did
not have—for example, one of the first ones was Kirsch drapery
hardware. One of my customers in Hong Kong asked me for Kirsch drapery
hardware and I wasn’t carrying a drapery hardware line at
the time, so I thought what do I have to lose? I ended up calling
the Kirsch export department and asking them if I could buy from
them and sell for them into Hong Kong and they said yes. So we started
a relationship as a wholesaler.”
“We are a supplier of the raw materials to make all types
of blinds.
That’s essentially our business,” Storch explains. “Today
90 percent of what we do is as a wholesaler and 10 percent is still
as a commission agent. We work with manufacturers, many of them
on an exclusive basis.
“Some of the companies we represent on a regional basis—like
for
Asia, or Latin America. So it’s a hodge-podge or a mix of
different
relationships that we’ve built depending on the manufacturer’s
needs in terms of where do they have a void to fill on the export
side and if Storch can fill that void, and then we enter into a
relationship with them for that particular market.”
Initially, new products were added if they fit into the lines Storch
had. “One of the things that was very important in the initial
success of our company was that every manufacturer that we represented
or distributed for in the beginning was for complementary products—they
were not competing with each other.
“Some of that has changed today simply because of the nature
of the
international marketplace,” Storch says. “There is so
much competition out there and so many customers requiring similar
items.”
NUANCE AND SUBTLETIES
Operating internationally is a complicated and complex business
and
is unlike doing things in the United States. Perhaps above all else,
it
requires patience. To get into mainland China, for example, Storch
International began in Hong Kong where most of his Asian customers
originally were based.
“We slowly developed the relationships with strong Hong Kong
customers and these fabricators eventually moved their operations,
fabrication facilities and their factories to mainland China simply
to take advantage of the lower cost labor, then realized there was
a growing market [there],” Storch says.
“From what I’m learning and understanding about the
U.S. market is
that we’re much more straightforward. We’d rather just
talk about the
deal and then move on. In foreign countries there is a lot of extra
things that get into it—a lot of dinners, a lot of getting
to know you, feeling like you can be trusted, that you’re
a friend, that you’re reliable. If you’re going to do
business with somebody in the United States then you would expect
those things to be in place. In other markets they expect to learn
those things about you as they meet you.
“In Hong Kong, from the time I made a first call on my most
important customer today to his first order was five years. Most
companies wouldn’t take the time to keep calling on somebody
for five years. But that particular customer is my single largest
customer today,” Storch says.
There were many practical matters to work out as well. Things like
how do you get goods into China? How do you get paid? “We’ve
figured out ‘the system’ and we have managed to successfully
get into the market by establishing relationships with some of the
stronger Chinese-based fabricators,”says Storch. “It
has been an
interesting 19 years.”
Storch has applied much of what he knows to working with customers
in other parts of the world, such as Latin America. Most people,
he says, think of Latin America as one market and
that it’s all the same whether the language is Spanish or
Portuguese.
“It’s a multiplicity of markets,” Storch explains.
“You have Mexico and you have all the different countries
in Central America, then you have Columbia and Venezuela and Argentina
and Chile and Brazil. All of these are truly different—the
cultures and influences. Every market is different and what sells
in Columbia may not necessarily sell in Argentina and what sells
in Argentina may not necessarily sell in Chile.
“One of the keys to exporting is understanding the nuances
and the
subtleties in the differences between the cultures and in the way
they
do business and in the way they would accept you. You have to approach
them in different ways and learning that takes time.”
More recently, Storch has been eyeing the potential of the market
in
the United Kingdom. He has met with some large customers there and
is currently working with them. “We have product that is interesting
and unique and different and competitively priced. It has opened
doors pretty quickly and I have to go after it,” he says.
Still, Asia by far is the biggest market for Storch International,
representing 55 to 65 percent of its total volume. Over the last
10 years Storch has seen an exponential growth of fabricators and
distributors there—people who see there are many opportunities
within the window coverings industry. “With all the buildings
and apartments and houses that are going up . . . everybody has
windows and they have to cover them and it is the fastest growing
market and will be for another 20 years in my opinion,” he
says.
This growth was the motivation for Storch International opening
an
office in Hong Kong. Storch made a commitment to display product
in a professional manner, so he took out a 2,000-square-foot showroom
on the 14th floor of a building with a nice view. The warehouse
is just a few buildings away.
“All eyes should be on China in terms of the potential China
has as
a consumer market,” Storch says. “Right now what we’re
doing in terms of the export side to China is only one-tenth of
what it really is going to be 20 years from now or sooner. China
is a major factor
today, and 20 years from now it’s going to be four, five times
bigger than it is today in terms of the economy.”
THE MOVE FORWARD
In an important sense, Storch hopes that his 26 years of export
experience becomes only half of the story. Now, for the first time,
he
is turning his business toward importing.
“It was a natural evolution,” he says.
“Through relationships with many of our customers in Korea,
mainland China and Canada I was able to gain an understanding
of what their plans were and what their growth ideas were and what
their targets were. I watched them slowly grow as suppliers, then
came a time when they got big enough and asked me if I
would like to help them sell into the U.S. market or into the European
market or the Latin American market.
The private label Storch International product lines carry items
such as roller and pleated shade fabrics for U.S. companies distributing
in Asia and other parts of the world.
The suppliers, the products and the marketing tools are ready to
bring new products to U.S. fabricators’ attention.
“We’ve been able to put together a range of products
that I source
from Korea, from China, from Canada and from Europe that we feel
will give us an edge in terms of exclusive relationships with suppliers
and different designs—ones that I feel will be good sellers.
“My whole challenge was to build an infrastructure to develop
the
market in the United States. We are now identifying top fabricators
in
the country and we are going to be approaching those fabricators
with
our products.”
The import business was officially launched last month at the
International Window Coverings Expo in Tampa, FL, but it’s
an idea that has been in the back of Storch’s mind for the
last three years or so.
“We’re a small company. We did not have the resources
to focus on developing something as big as the U.S. market,”
he says. “Now we are in a position—we have the relationships
with the suppliers, we have the products and there’s no reason
not to move forward.”
The new venture is basically the same thing Storch International
has
been doing, only in reverse. And it’s not like he’s
starting from scratch, either. Storch has been in the industry for
26 years, has gone to nearly every trade show, and has seen the
exhibits and knows who the major fabricators are. It’s just
that the quickly expanding markets in Asia have kept him very busy
there.
Storch knows importing might be slow at the start, but he has the
patience—remember that five-year span between first meeting
and then delivering his first sale to his biggest customer in Hong
Kong? He also knows to stress quality products and customer service
and not to compete on the low-end of the market.
One of Storch’s first products to be introduced to the United
States
responds to an area that is becoming a top-of-mind issue for many
homeowners: sustainability.
“It’s a movement that started almost 20 years ago, but
the U.S. market wasn’t ready to listen at the time—the
world wasn’t ready to listen at the time! There were some
window blind people who were pushing the concept, but it never really
took until just the last couple of years,” Storch says. “We
feel that it is important. More and more people ask us about it—particularly
architects and decorators.
“One of our products is PVC-free, it doesn’t release
gasses into the
atmosphere, there’s a lot of recycled material used in the
product — we’re going to push that story with a product
that we’re carrying from Europe that is called Novoscreen.
I think that now people are more aware of the issues, aware of energy
savings and the environment and this is just another step in the
right direction toward which our country should be going.”
Storch International continues to grow internationally because it
is small and quick to react to changes and market developments.
Now it is turning its years of experience onto the U.S. market.
ADVANCED TRAINING
Richard Storch has been thinking globally most of his life. After
spending his early years on Long Island, NY, he lived for 17 years
in Spain and other parts of Europe and attended the University
of Maryland, Munich campus. He returned to the United States to
finish his bachelor’s degree in business with a focus on international
trade.
In the early 1970s, following military service and a tour of
duty in Viet Nam, he attended Thunderbird, The Garvin School of
International Management, Glendale, AZ, graduating in 1975 with
a master’s degree in international management with a focus
on
finance and marketing.
Thunderbird is the oldest graduate management school in the
United States focused on preparing international business leaders.
Ranked among the best in the world by Financial Times,
U.S.News & World Report, The Wall Street Journal and
BusinessWeek, the school's curriculum is based on the principle
that to do business on a global scale, executives must not only
know the intricacies of business, but also understand the customs
of other countries and be able to communicate with different cultures.
“What was nice about that school was that the professors
were not simply academicians,” Storch says. “They purposely
hired people from industry—private industry and big industry—
and they came to teach and taught us young students all of their
experiences in international trade and international business. So
we had experienced people who could bring stories to the classroom
that made it extremely fascinating.”
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