An interesting article and discussion on the merits of free Wifi in an Internet Cafe’ – they are concerned with how to move squatters along so real turnover of regular paying customers occurs. But is this really a problem lacking creative solutions? Free WiFi spawns cafe backlash and the discussion. Seems they want to charge for Wifi and offer free coffee? An argument for adding wifi is here.

Many coffee shops are owner operator affairs and are the ones that seem to struggle the most with this problem (Starbucks may be good for its own separate discussion). They attempt to generate more traffic by offering free internet access. During non-peak hours it’s good for the shop as the booths are filled. Customers doing work are usually looking for a get-away that is somewhat quiet fitting perfectly with off-peak hours – most are polite enough to vacate when tables and noise levels are filling the up the shop. Filled seats are visible from outside the store which encourages other people to flock into the store since people seem to equate store activity with food quality. The problems arise during peak hours when the store really wants to increase its “manufacturing inventory turns”.

An example middle of a block retail space in a nearby small upscale mid-western town I was looking into for a project was running at $40,000 per month or $20 per square foot per month rent (while four miles away an off-the-beaten path strip mall space was available at $3). Obviously, a corner location amongst a major retail center in New York, Los Angeles, or Chicago will be much higher, but so should the location’s sales. Doing the spreadsheet calculation thing with customer space consumption (small table+chair for laptop, backpack/briefcase, and of course a coffee cup at ten square feet available eighteen hours a day) results in a $0.40 per hour base cost to the store. That’s to cover just the lease space and doesn’t include the cost of the non-seating areas nor the other overhead items that the store owner must pay to remain a viable business. Many stores have seating in only half to two-thirds of the store. So a chair and small table for a lone Internet user rapidly approaches $1 per hour in cost. If the coffee shop owner or investor group hopes to get a return on their capital that is at risk (owning a business is much more risky since the business is less liquid to get out of than stocks or a bank deposit and subject to the whirlwind whims of land-lords, city taxes, and the cost of beans, water, electricity, and labor).

So what to do? I would recommend against charging for the Wifi access or making hourly purchase requirements and otherwise getting mean with customers. Rather than seeking to re-cut the existing pie into smaller portions, try making the pie larger.

Work with nearby stores to gang internet providing – ubiquitous availability means fewer squatters at anyone’s paying tables. A larger purchasing pool can negotiate better with an internet provider for a lower cost on faster access so everyone is better off.

Try advertising – canvass the local retail shops and work out arrangements for advertising on the main coffee shop wifi login screen. Create accounts for the advertisers to self-update their information so the coffee shop does not have to (the flower shop next door uploads their own graphics and announcements to not forget Mother’s day – timely and finely targeted for everyone involved).

Put a sign up that at peak hours (listed) request limiting Wifi use to make tables available for larger parties with a goal to ’shame’ those camping out – but do recognize that campers are useful in the non-peak hours to show ‘consumption’ to other potential customers.

Have only 25% of available tables marked as available for mixed use by regular parties or laptops/Internet users (paint the table rims gold and have power cord drops over them so it’s obvious which tables are to be used for long-term use). This will encourage Internet users to avoid the other tables. Also be aware that most coffee sales end up being consumed outside the retail store – the store seating does more of the muffins and cookie and sandwich meal sales – the coffee is the highest margin “sku”. So a comparison of the non-coffee sales should be done to evaluate the seating/squatter problem and the store sales mix. Maybe pairing some of the slower moving and low profit skus will be worth more management time than Wifi policing.

Ultimately free Wifi is good for these stores – charge for the coffee and creatively give away the Wifi.

Cheers!

Plastic automotive parts are expensive. The cost of raw plastic feed stock keeps going up. The engineering involved. The application and durability testing. The lead time. Even importing from China or India becomes expensive. Cost cost cost! So what to do?Change your paradigm.

Take a walk through a toy store. Really look at some of todays toys. These toys represent the automotive suppliers of tomorrow. Japan started with toys in the 1950s and 1960s then started shipping car parts and cars to the world. China has been making toys for years, now car parts and cars. Turn over your kid’s toys and see where they are made.

Maybe you should find out who makes these toys and get ahead of everyone else?

There is more involved in making toys than the general automotive engineer may believe, without a snicker or two.

Here’s a scenario to consider:
Name brand (Fisher-Price) dinosaur toy sells retail for $10. Typically retailer’s cost from the manufacturer is 50% of that (clothing industry tends toward 30% of retail price). So what do you get for $5? Compare your last automotive part against these offerings..

Multi-part vacuum mold display container with 4-5 color printed die-cut cardboard backer and insert (that are case & pallet packed for retail shipment).

Toy complete plastic weight 12oz x $1/lb = $0.75 total raw plastic cost. The plastic feed stock has to be a pure color since many of the parts will have unpainted visible surfaces. There are requirements for bite strength (so a two-year old can’t bite off a claw), the parts can’t shatter (causing choking hazards), and the plastic must hold paint durably enough to play outside on rocks and concrete. There are probably additional safety requirements that a toy manufacturer needs to incorporate into the finished product as well. So the plastic may actually be slightly more expensive, maybe $1 in plastic.

Engineered fits are required between the parts so they snap together, articulate, and have mechanisms (this particular dinosaur has a lever that makes the front legs slash and claw at pretend opponents as well as movable thigh and knee joints, two tail joints, a movable head and a jaw joint). The caveman has dual-swivel arms and traditional single swivel legs. These parts require high unit volume injection molding tooling and compensation for shrinkage and flow cooling distortions.

The dinosaur has 15 different molded parts. The caveman has 7 and there are three other loose parts – a dinosaur saddle, a spear and the caveman’s bone armor vest.

The dinosaur is finished with 8 different colors. Some hand painting, some pad printed, some silk screen or mask printed. The caveman has six colors, his saddle has two colors, the spear is made with two colors, while his bone armor is a single unpainted color.

There is a complete assembly process to build the dinosaur designed with snap fits to avoid fastener costs. Functional requirements of the toy prohibit single direction stacking-type assembly processes that can better facilitate automated assembly machines (hind legs and tail require snapping in from their three separate directions).

Then there is the breadth of the product line – currently over 50 different main products (all in the $10-$15 retail price range) and a few under $3 and $15+ kits. Very few of the products seem to share parts (T-Rex and Triceritops dinosaurs do not resemble each other enough to assist in sharing details). The likely production run for any particular part might last three to five years before being discontinued or replaced. Some probably appear and vanish over the holiday buying spree.

So with approximately 25 parts in this example $5 toy set the manufacturer is averaging around $0.20 revenue for each part, not including packaging. Or $0.15 if the cost of plastic is removed. That’s covering all the tooling amortization (25 different tools per finished retail part number), plant and facilities, production workers, engineering, marketing, and management pay, debt recovery, and some sort of profit for the investors.

Maybe there is a reason all those dinosaur toys look so angry?

Then again, these toy manufacturers are in a competitive market that are building the skills that will enable them to enter automotive. At least that is the historical progression. So next time you are lamenting the cost of your automotive parts or trying to engineer an elegant solution to your HVAC or engine or interior problem take a break and tour the toy store isles. You might find a useful idea, a good benchmarking example (might be hard to pass through an expense account!) or at least a new manufacturer to add to your quote sourcing solicitations.

Cheers.