Nama: Joshua Partogi Hutauruk

NIM: 21S18052
Kelas: 13MR2
BUSNOV

Umbrella wars: GustBuster® and senz°

A group of friends studying at Delft University of Technology (TU Delft), developed a new
type of umbrella in an attempt to build a successful business. At the time, however (2004),
there was already a unique umbrella on the market called the GustBuster® and it was winning
design awards and customers. It was launched in 1995. The GustBuster® was designed and
developed in the USA and its website featured a clear message: GustBuster’s award-winning
design is patented and wind tunnel tested, providing the best protection against the elements
that an umbrella can offer. All of our umbrellas are constructed of the finest quality materials
and backed by a limited lifetime guarantee.

Given this level of competition, it seems surprising that a group of MSc students would decide
to enter a mature, extremely competitive market 10 years after the launch of the GustBuster®.
This case study shows how the students built a successful business.

Introduction
The senz° umbrella business is one of the success stories of the YES!elft incubator. Initiated
by TU Delft and the City of Delft, YES! Delft offers university spin-outs and hi-tech start-up
companies a comfortable working environment to develop their business from idea to
commercial product. It is located on the university campus with easy access to the excellent
TU Delft R&D facilities. It also affords to its residents: low rents, flexible contracts, active
business coaching and many start-up peers nearby. In addition to Senz, there are almost 100
companies currently within the YES! Delft incubator programme, with many others that have
already grown out of the incubator and are now stand-alone companies. Together with the other
technological business centres in Delft, the YES!Delft incubator performs an important role
for the economy in southwest Holland as a cradle for knowledge intensive companies. What
makes this story additionally unique is the development of a new business in this industry sector
that was, and still is, viewed as distinctly low-tech rather than high- tech. The umbrella business
is hardly new. The word umbrella is derived from the Latin root word umbra meaning shade
or shadow, hence it was originally designed as a method of protecting oneself from the sun.
Umbrellas have been in use for over 4,000 years, originating from Ancient Egypt, Greece and
China. Today, the leading global players include: Totes Isotoner (USA); GustBuster® (USA);
Fulton (UK); Fox Umbrellas (UK) and Blunt (New Zealand). However, there are many other
low-cost manufacturers. Most of these firms manufacture their products in China, largely in
the provinces of Guangdong, Fujian and Zhejiang. For example, Shangyu, in Zhejiang
province, has more than 1,000 umbrella factories

GustBuster®: the leading umbrella

In 1995, the GustBuster® umbrella was launched. The umbrella was based on the simple idea
of a release valve. So, as with a boiler, if pressure builds too much, a valve releases pressure;
the same principle is applied to the umbrella. It has a dual canopy designed to relieve wind
pressure, so it will not flip inside out. The GustBuster® has two vented tiers attached with
elastic secured to eliminate the potential for leakage. Fibreglass spreader rods connect a
specially patented ‘silver wing’ to provide strength and flexibility. GustBuster® argues it
developed the world’s first unflappable, unleakable umbrella. In testing, the firm revealed that
the GustBuster® stood firm against 55 mile per hour winds. This generated a lot of media
interest, as it also makes good television pictures. Everyone from CNN to The New York Times
and the Fox News Channel wanted to see the umbrella in action. In addition, the firm hired the
College of Aeronautics at LaGuardia Airport in New York to perform professional wind tunnel
testing. Sales soared and were further helped when Arnold Palmer chose it above all other
umbrellas on the golf course. The entire golfing industry, which plays rain or shine, began to
take cover under the GustBuster® name. In 1998, the Gustbuster® won the ‘Breakthrough
Product of the Year’.

The senz° umbrella

Whilst umbrellas have been around for centuries, until very recently, the simple design has
remained largely unchanged and was much the same the world over. The traditional design
retained various design flaws, such as turning itself inside-out in strong winds, breaking easily,
poor visibility whilst in use and having dangerous metal tips. The senz° umbrella was designed
by three students at Delft University of Technology (TU Delft) – Gerwin- Hoogendoorn, Philip
Hess and Gerard Kool. Their backgrounds are in product design, product development,
innovate on management and business administration. The three founders have skills and
expertise that complement each other, providing a mix of design, engineering and commercial
insight. They addressed many of the design flaws in traditional umbrellas to develop a new
type of umbrella. Its aerodynamic form means that the senz° umbrella always finds the best
position in the wind, making it more comfortable to use. The umbrella’s design means that it
can withstand winds of up to force 10 or 100 kph. The unique shape also gives the user better
visibility and the specially designed ‘eyesavers’ make it safer. The final finished product is the
result of a two-year development project utilizing facilities and expertise within the
Aeronautical Faculty and the Industrial Design Faculty at TU Delft. In addition, the student
start- up was one of the first to enter the TU Delft incubator in 2005. This incubator was a joint
collaboration with the City of Delft and was called Young Entrepreneurs in Delft: YES!Delft.

Asymmetrical design
The basic idea came from Gerwin Hoogendoorn in 2005, who was then a student of Industrial
Design Engineering. He came up with the idea of using an asymmetrical design. The rear of
the senz° is longer than the front. When a conventional round umbrella is caught by the wind,
it will immediately tip so that the wind turns it inside-out. With the senz°, the shorter side
always turns to face the wind, meaning that it will actually catch less wind. Another advantage
is that the ribs are hinged at the tips, meaning that the ribs cannot break and the strength of the
wind is distributed better. At first glance, the shape looks odd, but it has logic. The cab forward
aerodynamic shape does two things. First, it keeps rain off your back, an issue prevalent with
traditional umbrellas. This shape also channels high winds across the surface and behind. The
drag coefficient is significantly less, which helps in resisting gale force winds. This is the first
umbrella to incorporate aerodynamic principles. The senz° won the American International
Design Excellence Awards in 2008, a prestigious American design prize, placing it in the same
league as the iPhone from Apple. Earlier, the senz° umbrella was crowned with the Red Dot
Design Award and two Dutch Design Awards.

Product Development
After over a year in design and development, where numerous materials and different
prototypes were built, the selected final design required manufacture. The development of
prototypes used local skilled craftsmen and engineers, but scaling up production to thousands
and hundreds of thousands of products required careful consideration of costs and margins.
The young start-up was well aware that to the production cost they would need to add
distribution costs, retailer costs, advertising and marketing costs plus their own business’
overheads. They also wanted to deliver a profit and this would need to be between 10 and 20
per cent. This led to some necessary rethinking of the business plan. In particular, they needed
to study gross margins. This is the percentage of profit derived from a transaction. (Both the
manufacturer and the retailer will expect their own gross margin.) To get retailers and
distributors interested in taking the product, the start-up had to make it financially attractive to
them. This meant allowing them to have a healthy profit.

Distributor and retailer mark-ups and gross margin

Distributors are companies that typically buy products (and store inventory) from
manufacturers and sell them to retailers. They are commonly used by larger retailers that handle
a large volume of products, such as grocery stores. Distributor margin requirements vary by
product price point, industry, segment, country and size, but 20 to 40 per cent is not uncommon.
The start-up soon realized that they needed to know a retailer’s gross margin. This is because
retailers often have minimum margin requirements; this helps determine what price you need
to set. Although minimum requirements will vary widely, depending on the type of retailer, it
is not uncommon for a retailer to expect a minimum gross margin of 50 per cent. Often, this is
referred to as a ‘keystone’ mark-up. Thus, Senz had to double its wholesale price. For example,
if it sold its product wholesale to the retailer for €5, the retailer would need to charge the
consumer €10 to achieve a keystone mark-up. Retailers also have large overheads and wages
to pay, as well as rents and other costs. The apparent 100 per cent price increase allows the
retailer to cover costs and deliver a profit, as shown below: Gross margin = GM €20 retail price
– sold by retailer to consumer (retailer GM = 50 per cent); €10 wholesale price – sold by
distributor to retailer (distributor GM = 30 per cent); €7.00 distribution price – sold by Senz to
distributor (manufacturer GM = 40 per cent); €4 – cost to produce product.

The start-up could begin by analyzing its own costs and simply add the necessary gross margins
of those in the supply chain but, in the world of fast moving consumer goods firms, they tend
to start with a price point. That is, a price that they believe consumers will be willing to pay for
a product. Suddenly, the business plan did not look good. The market price of a good quality
umbrella was €20 but, to achieve such a price, the start- up would need to produce the product
for €4. This was impossible. The unique design and carbon fibre frame meant material costs
alone were almost €4. Furthermore, there was already a best- selling dominant umbrella in the
market – the GustBuster®. This had a retail price of about €30. The challenge was to try and
achieve a price close to this. Manufacturing in The Netherlands was now extremely unlikely,
given the pressure to achieve such a low manufacturing cost. The start-up turned to China
where manufacturing costs are notoriously low. Eventually, Senz found a production partner
able to deliver the product to the specifications set. This producer was experienced in
manufacturing umbrellas and produced quality products for other umbrella brand owners.

Growing the business

Initially, the branded senz° umbrellas were available exclusively at www.senzumbrellas.com
and large numbers were sold in and around the TU Delft campus. Unsurprisingly, the unusual
shaped umbrella caused heads to turn on campus and this helped give the three student’s
confidence that their idea would, indeed, succeed. In May 2006, Senz Umbrellas signed an
agreement with the fashion brand Mexx to introduce the senz° branded umbrellas under the
Mexx brand in England, Scotland, Germany, The Netherlands, Belgium, France, Austria and
Sweden. Senz° approached Mexx because their core values (optimistic, non- conformist,
inspiring and fun) and its target group match the senz° brand. Additionally, it provides
senz° with new and specialized distribution channels. The senz° umbrella is now available in
a range of options: foldable umbrellas include senz° smart (€29.95) and senz° automatic
(€54.95); and stick umbrellas include senz° smart (€34.95), senz° original (€54.95) and senz°
XXL (€64.95). The umbrellas have been designed for both men and women. Senz has now
established a separate company Called Senz Technologies to try to develop and apply their
expertise in design to other products. Senz Umbrellas is a 100 per cent daughter of Senz
Technologies. The plan for the future is to develop new products that can be introduced under
the senz° label.