by Gigi Wood
NORTH LIBERTY – The party might be over, but business is still hemming along at Bagolitas.
Bagolitas is a North Liberty-based handbag company started in 2005 that achieved success by selling its products through direct sales, or the home party market. After selling 130,000 products through its home party and online businesses, the company is altering its pattern.
Janice Baldes, the company’s owner, started the company when she was trying to decide what to do with some unused fabric. With that fabric, she made her first handbag, and began selling them at home parties, similar to Tupperware and Avon get-togethers. During her first year, she had one sales consultant and $37,000 in sales. By the end of 2008, she had 130 sales consultants and $1.5 million in sales.
Escalating overhead costs, a sour economy and a bloated, yet declining home party industry led Ms. Baldes to cut the purse strings on the home party business and focus almost solely on selling handbags online.
She has shed her staff except one assistant and plans to keep her business in its 315 W. Cherry St. location for another six months. After that, she plans to move the operation to warehouse space. In February, she plans to launch new handbag styles on her web site. She is working to revamp her site and bulking up her social-media efforts.
“We’re ending the home parties part of the business,” Ms. Baldes said. “In my opinion, the whole home party industry is kaput. In the 50s, home parties were it and they had fun doing them because (hostesses) didn’t have another job. The consultant profile has changed so dramatically.”
Bagolitas will offer its final public shopping events at its North Liberty location on Dec. 4, 17 and 18. The company informed its sales consultants at a retreat in August that the company was curtailing parties.
“I think home parties, it was a wonderful industry for us to get started in,” she said. “But with the economy and the overhead, I have to have customer service seminars, annual sales seminars; I have sales managers. The amount of work it takes to keep them going, I couldn’t keep up.”
While the parties brought in large sales figures, a lot of that went right back out the door.
“With direct sales, for every $1 that came in, 30 percent went to consultants, plus another 10 percent for management positions, plus another 10 to 20 percent for hostesses and another 10 percent for donations,” she said. “We never had enough money to operate on.”
Another high overhead cost was the local seamstresses Ms. Baldes employed to produce the bags. Bagolitas are exclusively made in China now. Production in the United States is too expensive, she said.
“The U.S. is absolutely killing us. Our prices would keep increasing every six months, and sometimes by as much as $1 a bag,” Ms. Baldes said.
With the down economy, shoppers are on the lookout for deals and discounts. Trimming the company’s costs will allow Bagolitas to offer more of those.
“The demand is for cheaper product and price discounts and with lower overhead, we can finally get there,” Ms. Baldes said.
As the company has grown through the years, it has tried its hand in several markets to find its best fit for sales. Bagolitas for a time tried selling at retail stores, including one in Cedar Rapids and another in Iowa City.
“The store in Cedar Rapids did way better than the store in Iowa City, and that could be who’s walking around downtown, it’s not exactly our demographic,” she said. “I’m glad I tried it because I know it’s not for us.”
Offering Bagolitas bags at upscale retailers is not the answer either, she said.
“I don’t want to sell to upscale boutiques because you have to go to retailer trade shows and sell to the owners,” she said. “You have to go to a show for a weekend and we didn’t have time for that with our business.”
Bagolitas has found, for now, what works best for the company.
“When we saw the economy going down, we tried lots of different things to see if there would be a difference,” Ms. Baldes said. “I’ve decided that online is the best, most affordable, economical, low-overhead model for us.”
Bagolitas is focused on its next chapter, its online efforts and reducing its six-figure debt.
“Our goal is to pay off our debt and continue our web presence,” she said. “I think the main thing we want to do is communicate to our customers that we’re not going out of business. We’ve changed but we’re still here. People can still get Bagolitas.”
The company will soon offer a “Facebook frendzies” application that will allow customers to post on their Facebook page when they buy a bag from the Bagolitas site. The company will also launch limited-edition series bags that will be individually numbered and come with a certificate signed by Ms. Baldes. There will eventually be Facebook badges for customers and ways for customers to earn rewards for referring other shoppers.
“It’s all so our customers can feel that connection to our products,” she said.
Active blogs will discuss the Bagolitas product lines and changes. Bagolitas will extend its outlet, collegiate and corporate offerings online in coming months, as well.