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Starting a Company with No Demand for the Product?

Michael Perry cofounded Rocket USA in 1997 with a personal interest in 1950s-era toys and the knowledge that 10 years earlier, a vintage Japanese toy robot had sold at Sotheby’s for $79,000, setting the auction house’s record for toys. Rocket USA began distributing, packaging, and eventually manufacturing toys without any established demand or marketing, Perry told the Entrepreneurial Roundtable at Illinois Institute of Technology in Wheaton on July 18. “We did it the old-fashioned way: we will build it and they will come,” he said. “Toys are kind of a fashion business. Until you get the buyers who are willing to look at it in that way, you just have to take the risk.”

With that in mind, Rocket USA eschews Wal-Mart and other larger retail outlets and focuses largely on specialty stores such as gift shops, Perry said. Rocket USA learned from a friend at a larger toy company that higher volume of sales does not always translate into higher profits, he said. “The owner decided, ‘Let’s go to Walgreens. Let’s go to some of the big guys,’” Perry said. “Suddenly their sales doubled but their profitability actually dropped 25 percent. This guy kept saying to the owner, ‘More sales, less money?’” In addition, the smaller specialty accounts typically receive credit lines of no more than $1,000 from Rocket USA that are usually repaid before new orders are shipped, he said.

Rocket USA does not traffic strictly in small business. After five years of negotiations, it recently landed a contract with Cracker Barrel’s 600 gift stores. “They’ve been recycling so much of the same product for four or five years,” he said. “They’ve been told to go find new vendors and suppliers.”

Rocket USA got perhaps its biggest break in 1998, when 20th Century Fox contacted Perry to say Matt Groening, creator of The Simpsons television series, wanted Rocket USA to produce toy robots based on his new show, Futurama. After successfully launching Bender the robot, Rocket USA won a contract to produce toys from The Simpsons, including a bowling game and several versions of the lovable loser character Homer.

 Phil Rockrohr