If there’s one thing that the Craig brothers know about business, it’s that adapting is essential to succeed. Through their private equity firm, Craig Capital, LLC, Steve and Andy Craig have ventured into a number of industries, gaining valuable insight along the way that has made them the ultimate duo when it comes to salvaging companies in need of a reinvigoration.
In 2017, Michigan-based Nalpac — one of the longest running adult toy distributors in the U.S. that’s now been in business for close to 50 years — made the announcement that it was undergoing a change in ownership.
Our focus is on innovation and growth—personally, geographically and as a team.
The initial wave of shock within the biz was fleeting as the brothers connected with their new community immediately, making their introduction at the Altitude Intimates Show two years ago. With the announcement of their new ownership of Nalpac, Steve and Andy Craig assured their loyal customers and partners that everything they loved about the established company would stay the same, and would only get better.
Since then, Nalpac has stayed true to its promise, keeping the company’s longtime staff on-board, as well as their popular annual open-house event, while revitalizing the company’s operations, resources and tools for retailers.
At the crux of Nalpac’s reinvention is the feature-packed mobile app that debuted last year. The handheld resource empowers busy retailers to place orders directly from their mobile device, including while on the retail floor. The app offers retailers numerous search functions, a blog and access to Nalpac catalogs, events and promotions.
The company has also modernized by embracing the YouTube generation with the launch of the company’s “Dicks With Don” web series, which perfectly captures Nalpac’s nostalgic appeal for today’s audiences. Hosted by Don Zerilli, Nalpac’s senior buyer of 16 years, the web series delivers useful information complete with animations and lots of humor. In short, Steve and Andy have transformed an aging business and turned it into a progressive, innovative, technology-driven distribution powerhouse.
The success of the company has not gone unnoticed — this year, Nalpac was crowned Progressive Distributor of the Year at 2019 XBIZ Awards, and Steve earned himself the title of Chief Executive of the Year at this year’s XBIZ Exec Awards. Crediting the entire Nalpac team for their success, Steve also dedicated the win to his brother and business partner Andy. For the tight-knit adult retail community, the Craig brothers bring the type of familial love that has resonated well within the industry.
In this exclusive interview with Steve and Andy, we explore the pair’s professional backgrounds and how they’ve evolved along with the company that they’ve successfully revived.
XBIZ: Tell us about your professional life before taking the adult retail industry by storm. What was your career like? And how, if at all, did it prepare you for your current role at Nalpac?
Steve: Prior to and currently, I manage a private equity firm with Andy, which invests in and operates businesses. Before that, I worked for several larger corporations including General Electric and practiced law. Each experience allowed me to learn and develop as a person and entrepreneur.
My career was and is exciting because I have the opportunity control my own destiny, but also is taxing for the same reason. My job requires me to identify and analyze acquisition targets, to look for growth potential and improvement opportunities. Ultimately, I use this analysis to develop and implement changes within the organization. While the business may change, our process and job remain the same.
Not only did my experience prepare me for Nalpac, but it is why I got involved. Each day at Nalpac is an opportunity to take one step towards our long-term goals.
Andy: Before Steve and I went into business, the last position I held was with one of the big three automotive manufacturers. I witnessed how the business was run and ultimately what led it to bankruptcy in 2009. I stuck with what became the new company and worked alongside several individuals whose primary goals were to identify barriers to our success and areas for improvement, develop and roll out solutions and rebuild through constant evolution. That’s essentially what I do at every business Steve and I are involved in, including Nalpac. In short, I saw what can happen when you don’t adapt to the environment — and then, I participated in rebuilding, restructuring and fully comprehending how things can be done in a better way.
XBIZ: In the two years since taking ownership of Nalpac, one of the most notable advancements that the company has made is the implementation of tech support for retailers. Why was it important to create a mobile app for retailers? How has it improved Nalpac’s service to its retail clientele?
Steve: Nalpac has existed for many years serving a wonderful group of customers and representing some of the best manufacturers of adult-related products in the world. But, the world has changed much in just the past few decades. As the world changed, markets changed, consumers changed, and successful businesses adapt to the new environment. Our firm has been successful by utilizing technology to help businesses change to meet the demands of the new world. Of course, this applies to Nalpac.
Specifically, the app was created out of feedback from our customers, who were often short-handed in the stores. It is designed as a tool for retailers to order, review pricing, gather information, including invoices/order history while on the sales floor. We continue to develop features based upon user feedback. The app also allows customers to more easily interact with us and created a new channel for communication. Our hope is that retailers will find value in the powerful tools we develop, like the app, to improve their bottom line, allowing us to provide more value as a distributor partner.
Andy: I like to apply the logic: “How does technology help in my day-to-day life and how can we apply that same technology to our business model?” When it came to develop the mobile app, it was a no-brainer, especially when the tool doesn’t already exist in this marketplace.
I visit many of our customers’ stores and I’ve listened to the challenges our retailers of all sizes face. In a store there’s a lot of activity and it may be difficult for staff to sit stationary behind a computer compiling orders. The mobile app enables them to accomplish the same task while walking around the floor and taking care of customers. That was a big motivator in developing the app — understanding how we could make it easier for retailers to accomplish everything they need to be successful.
XBIZ: How else has Nalpac improved its retailer support, such as the “Dicks with Don” product education series, marketing, etc.?
Steve: In our first two years, we have spoken to many retailers and learned of the challenges they face. From their feedback, we are developing tools to provide support. We are creating various means to assist retailers with how to train and educate staff, how to reduce operational expenses, and improve sales. However, we are approaching this in a new way, by making the training more entertaining. It’s proven that training which is enjoyable, increases retention. Though we’re serious about business and the health benefits these products provide, we find it important to add levity to help capture audience attention. As an example, we have created a web series titled “Dicks with Don,” where [Nalpac senior buyer] Don [Zerilli] explores new products with an old-school sense of humor. We are also working on a new website and developing ways to help our customers market products to consumers, including social media content for stores. We will continue to leverage the newest technologies to prove to that in this industry a distributor is about more than price.
Andy: It’s a multi-faceted approach. What I’ve observed within this industry is that successful retailers have staff with strong product knowledge but are challenged by employee retention. Their staff obtains it through live training on a handful of products and online courses. Those can be effective methods of learning, but there are more ways to make it more efficient. It’s valuable to retailers if we can help solve this problem.
XBIZ: How would you describe your management style? What is your relationship like with the Nalpac team?
Steve: I like to think of myself as someone who’s inclusive, who provides an opportunity for our team members to get involved. I greatly appreciate their feedback. I value their contributions. I’m always asking, “What do you think?” and “How can we do this better?” I am focused on constant improvement and creating a foundation for the business to thrive. I try to empower my team to take ownership and make decisions on how they want to accomplish the goals we set. Our team has been through a great deal of change in the past two years and adapted well. Our relationship, like our business, is growing rapidly.
Andy: From my perspective it’s a very collaborative environment. I believe that for us to succeed, we must come together with a mutual goal that makes sense for both parties — the management side of the business and the day-to-day operational side of the business. Having introduced a fresh perspective, I try to provide a platform for our staff to share their ideas; especially if they might have felt those ideas were dismissed in the past.
XBIZ: How involved are you in the day-to-day operations of the company?
Steve: I’m here most days. I have business outside of just Nalpac; however, with all the improvements we’re making, I’m committing much of my time to this company.
Andy: I work in the Nalpac office every day. Because I’m so heavily involved in the day-to-day activities of the purchasing and operational sides of the business, I’m always looking to identify areas for improvement. I really strive to be involved and understand all the inner workings of the business. If that means I’m out in the warehouse to make sure our process is correct, then I do that. Or if it’s cutting a purchase order because I want to understand exactly what my team deals with every day, then I do that. I’m here, and I’m actively involved.
XBIZ: What is it like being in business with your brother? How do you complement each other working as a team?
Steve: I’m really lucky to have my brother because we are similar yet total opposites (laughs). I like to think my job is to create a vision and a plan and Andy’s job is to help execute it and ensure it’s rolled out as efficiently as possible. It’s terrific to have someone you can always count on and who’s loyal and committed in the same way that you are. We really chose to work together because we enjoy each other’s company. So much of our lives are spent at work — 60, 70 hours a week. You want to work with people that you enjoy.
Andy: Honestly, it’s great. To feel completely comfortable with your business partner and trust that every decision they’re making is in the best interests of the company — I couldn’t imagine a better situation. It really allows us to focus on our areas of strength. I don’t have to hear about the day-to-day of the finance side, which falls under Steve — or the day-to-day side of marketing, which he’s more involved in. I can focus on my areas of interest, specifically with purchasing and the operations. It allows us to get more done and be more focused on the things that really need our direct attention. We meet daily during lunch to review anything that needs addressed and we use each other as a tool. Two minds are greater than one.
XBIZ: What have you learned about the adult retail industry and its community since becoming a part of it?
Steve: I didn’t realize the industry was so large, nor have any understanding of the depth of diverse product. Remarkably, while it’s such a large market, the industry feels small and collegial. The industry is filled with some great people.
Andy: I think one of the largest things I’ve learned is product. Two years ago, I might have known what five or six products were. Now, daily, I’m reviewing around 15 different items and their materials and functions with my purchasing team. It’s like night and day. With regards to becoming part of the community, it’s been a very eye-opening experience to see the different aspects of human beings and what interests different people have. We’ve felt really welcomed by the community. It’s been all positive.
XBIZ: How does adult retail compare to mainstream?
Steve: At the end of the day, we buy things in large boxes and sell them in small. Business is business; however, there are special challenges in this market, including regulations and laws. The adult market is ripe with opportunity to apply more mainstream business principles. Society’s values have continued to evolve — making this industry and products more acceptable. I think it’s going to be a natural evolution whereby more outsiders enter the market. Once you’re educated on the products, you find the business is the same.
XBIZ: What are the biggest challenges that the adult retail industry is currently facing?
Steve: The biggest challenge is to evolve. Our culture has changed; consumers are demanding a different experience. We as a company and industry are challenged to meet consumer demands. To meet this challenge, we have overhauled Nalpac’s systems and processes to allow us to work on tools to help both manufacturers and retailers be more successful with consumers.
Andy: We’re always looking to understand how we can keep up with the ever-changing demands of tomorrow’s consumer. Today, we’re meeting the retailer’s needs, but how do we stay ahead of the curve and how do we innovate? How can we provide the best possible customer experience from our retailers down to the end consumer with demands and expectations being higher than ever? These are the questions we’re constantly evaluating.
XBIZ: Do you view Amazon as a challenge to adult retail?
Steve: Amazon is an amazing service that many of us, myself included, use every day, but it can have a negative impact on an industry. The key is to take control. Nalpac has developed software to help manufacturers protect their brands from third-party marketplaces like Amazon. The goal is to allow manufacturers rather than the third-party marketplaces to control its brand’s value; thus, helping retailers sell more of their products. In my opinion, there will always be demand for a physical store to experience, touch, feel and be educated about these products; Amazon cannot give this experience.
XBIZ: What are some of the most memorable experiences you’ve had in the industry so far?
Steve: I distinctly remember our very first trade show. I probably met 80 or so manufacturers that day. It was truly eye-opening to see the diversity of product categories that I didn’t even realize existed. I also recall our very first open house and having an opportunity to connect with many of our larger customers. It’s been a pleasure to build so many strong relationships with the Nalpac team, customers and manufacturing partners.
Andy: My most memorable experience has been getting to meet all of the different vendors and retailers — and getting to know them in a really short period of time. They are unbelievably warm, very approachable, and extremely helpful. It’s uncommon to feel such a warm embrace when you enter a business, but this business and this industry have been the exception. It’s almost like a family. It’s not just business; it’s people who are very passionate about every aspect of the industry. I’m sure that once people were able to meet us and get to know us, it felt less like, “who are these people?” and more like, “These guys are alright.”
XBIZ: How has the marketplace evolved over your time in the industry? How is Nalpac adapting to it?
Steve: I’ve only been in the business for two years, but even in those two years, I’ve seen continual progress and change. All businesses evolve. If they don’t evolve, they die. At Nalpac, we primarily utilize software and systems that were implemented to increase value for the manufacturers and for our customers — that allows us to help them evolve. We work with customers to craft social media content that helps them draw more customers into their store. We have developed an app that allows retailers to save an enormous amount of time by having all the information necessary to order product directly through their phone. They can also access invoices, historical activity, and past orders through the app. We designed it to help retailers do more in less time and of course, to save them money.
Andy: The big thing that I’ve noticed is the product innovations, even in the last two years alone. Products are becoming very technologically advanced and some very interesting products are coming to market. I’m also seeing a trend of transparency from the vendors and the manufacturers. Customers want to know all the relevant information about products; they want to be informed consumers. People have more access to information and they’re doing their homework when it comes to what they buy.
At Nalpac we plan to adapt through continuing to focus on technology, specifically with the app. We’re looking to address questions like: what features can we add? How can we build onto the foundational aspects of the app so that one day, it can serve as a training tool? We’re also investing heavily in a new website that we’re really excited about. As the business evolves we’re going to keep pushing the envelope and continue to focus on being the best in the business.
XBIZ: What kind of response have you gotten from your customers?
Steve: At our open house, all orders were placed through our app — which allowed us to functionally get those orders into our system and product out the door much faster. Many of our customers have downloaded the app and use it for a variety of purposes, from checking inventory to placing orders. The response has been overwhelmingly positive and we’re going to continue to make revisions and improvements. We welcome feedback as it often leads to changes we incorporate.
XBIZ: What do you like to do outside of work?
Steve: I love to travel, eat at great restaurants and work out daily. Every opportunity I get to spend with my wife and kids, I do — and the rest of the time, I’m usually here at the office.
Andy: If you ask my wife, I’m never not working (laughs). We put a ton of effort into our business. I sleep outside of work. My wife and I spend a lot of time with our families, including my brother. In the summer in Michigan — when it’s nice and it’s not snowy and 10 degrees — I like to play a little bit of golf.
XBIZ: What is your personal motto or mantra that you live by?
Steve: Adapt and change or perish. When you look at the world, from biology to business, everything successful is always evolving and adapting to their ever-changing world. If you stop looking for ways to improve as a business or as a person, that’s the first stop on your decline. The way we operate Nalpac is to always think of the future and seek innovation so that we can set the trends and be ahead of the curve. We’re going to make every effort to support our customers and manufacturers by developing new software and platforms providing added value. We think that 2019 will be a successful year for Nalpac and we encourage anyone in this industry to reach out to us to see how we can help you.
XBIZ: What are your goals for Nalpac this year and beyond?
Steve: Our overarching goal is to provide the best products and services to help our customers make more money. Our focus is on innovation and growth — personally, geographically and as a team. We have a lot of surprises in store and we’ll be able to provide more information in the coming months. But, today, I can tell you that we’re focused on being the best distributor for our customers.
Andy: My biggest goal for Nalpac is that we continue to improve through enhancing our operations, providing outstanding customer experience for our retailers, and strengthening our vendor relations through collaboration and strategic planning. We’re always looking for new and exciting product lines and vendors to fold into the Nalpac family. Essentially, our primary goal is to exceed the needs and expectations of our customer base.
