Vortex Grows By Departing From American-Made Label

Vortex Backpacks, a 6-year old, Salt Lake City, Utah-based, backpack
manufacturer, announced that company sales compared to 2000 were up 28
percent for the fiscal year ending Oct. 31. The company also reported
that it anticipates the 2002 report to be up 48 percent.

Being the naturally curious types, SNEWS® contacted company president
Bill Crawley for a little insight to the reasons behind Vortex’s
banner-waving growth.

“We have always had demand for our packs, but we were lousy
manufacturers in terms of logistics,” Crawley said. “Each year we would
get more orders from retailers and, in order to ramp up for growth, we
would place ads for $12.50 per hour sewers, and even then could not
find good folks. The few sewers we could find would come in, and then
we’d have to take our best folks off the line to train the new ones,
which would slow down production which in turn slowed down shipping,
and we’d fall behind on fulfilling orders. It was the worst kind of
bottleneck.”

Despite the challenges, word did get out about the company’s reputation
for quality, which earned a visit from Zion Bank and the investment arm
of that institution. Thrilled with Vortex’s “American-made” label, the
bank fronted Crawley investment funds which, he told SNEWS® , “We managed
to burn through $800,000 of that in only five months.”

Realizing things need to change and fast, Crawley took the last of the
investment money and, heeding the advice of friends from Marmot, headed
to Korea.

“As much as I hate to say it, that visit was the turning point for this
company in terms of being able to establish a growth position,” said
Crawley. “I knew that it was either head overseas or die.”

The factory where Vortex packs are now made is in Sri Lanka, and is
owned and operated by the Korean company he originally visited.

“The factory is spotless with on-site healthcare for all its employees
who are paid a wage that is well above the national average. There are
1000 employees at the factory currently with a waiting list to work
there. All this, and their payroll was still less than mine with only
51 employees,” says Crawley.

Still, the change from American-Made to overseas was not enthusiastically embraced by Vortex dealers at first.

“We got initial backlash from many of our dealers, although that
smoothed over fairly quickly. Vortex and Osprey were the last
American-Made strongholds. The market makes us who we are and if a
consumer is going to have to pay $620 for a pack, well, they just
aren’t going to do it,” says Crawley. “We have to respond to what our
dealers need too, and the dealers keep telling us that they want better
delivery and better prices with the same level of quality. They have
that now, but we had to go overseas to achieve it.”

Where Vortex once struggled to make a 35-percent gross margin, now it
earns a respectable 42 percent. Where it once wrestled with growth
issues and finding enough sewing staff to facilitate increased
production needs, it now simply sends a fax and more packs appear.

“By heading overseas for production, we are now able to concentrate on
what we know how to do very well, and that is design packs and sell
them,” Crawley said.

And that, essentially, allowed for the rapid growth numbers in 2001.
Until last year, Vortex was turning down 30 percent of the phone calls
inquiring about becoming a Vortex dealer. As soon as the factory in Sri
Lanka started production, Vortex was able to increase its business by
28 percent.

Crawley believes the company will continue its strong growth pattern
simply because “We have a good team of folks who have stuck it out for
six hard years, and because Vortex is not a commodity item.”

Backpacks a commodity? Crawley points out that the current retail
market supports the following brand mix: Dana Design, Gregory, Osprey,
The North Face, and Arc’Teryx with a sprinkling of MountainSmith or
other smaller brands thrown in for spice.

“Margins are dropping because retailers are more competitive, to the
point where you have several retailers in the same market forced to
push price to grab the sale. They have to because, essentially, every
pack manufacturer is now pretty good. Vortex offers a retailer a choice
of a good pack brand that is not carried by everyone else, so a
retailer is able to hold price and earn a better margin.”

Wait a minute — Crawley isn’t then pushing the party line that “Our
packs are best because…” ? He says: “I don’t think anyone can really do
that anymore. Our packs are very good, but the bottom line is that if
you ask pack experts which company makes the best pack, you’ll get five
different brands with five different reasons backing up each choice
from each expert. We excel right now because we are new to retailers,
and we are very good at establishing and maintaining relationships that
will help the retailer with their bottom line.”

Currently, Vortex is sold through 130 retail doors in the United
States, Canada, Japan, Hong Kong, Taiwan, Korea and, soon, Norway.
Crawley expects more retail doors to be added each month.