Cover Story (July 2007)

Smart is as Smart does

It's refreshing to see people dedicated to the industry and their company.  
It's even better to know that they're having fun doing what they love.

Smart Industries is an anomaly in the coin-op business. Founder Gordon Smart didn't set out to sell enough products to ride off into the sunset sipping on a margarita, satisfied that he had met his goal.

Gordon and Jeff Smart>

His purpose in the beginning hasn't changed for 22 years: Make products that will earn operators enough revenue to operate successful businesses. Quality games, exceptional customer service, distinctive and unique games, and long-lasting revenue streams for operators make up the solid foundation of Smart Industries.

Gordon never followed the path of least resistance just because it was always done that way. From the beginning he wanted his business to be fun and if it ceased the be a pleasure to go to work every day he knew it was time to move on.

Thankfully, the coin machine business is still enjoyable for him. Gordon still mans the Smart booth at trade shows talking to established customers, welcoming new ones, and always greeting them with the biggest smile in the industry. His wife Mary is right there alongside him passing out brochures, jelly beans, and mixed nuts.

It's not the norm to find the owner/partner of a company spending the while day in the booth showing product and answering questions, but then again Gordon isn't the norm. His place is where the customers are. His partner, son Jeff, is likeminded about the business. "If you can't find the time to talk face-to-face with those who come to trade shows, then why should we expect them to find the time to buy your games," Jeff asserts.

In the beginning

Gordon Smart began his coin-op career after he left the real estate business, claiming it just wasn't fun anymore. He followed the state fairs, setting up 8,000-square-foot arcades at the fairs, carrying over 200 machines in 18-wheelers with a crew of 12. By his own admission, he traveled over 9,000 miles per year from Canada to Louisiana. Jeff, just a toddler at the time, went along with his dad until school intervened. However, as soon as he graduated from college he was back, this time full-time.

<Vice President of Sales Jim Dupree

Gordon explained that Jeff has been his partner since 1957 and Jeff agrees that he was born into the business and it's been in his blood all of his life, except, of course, during school. An interesting story really shows the dedication of the Smarts not only to the business but to their

employees: Since the state fairs were held during the summer, Gordon explained that he didn't want to have to let his crew go. So during the winter months Smart kept them manufacturing games and running a street route.

In 1974 just after the Pong phenomenon began, Smart became partners with Adventureland theme park and set up three arcades in the amusement park, retaining ownership of them. Two years later Smart added the carnival games, gun games, and Skee-Ball alleys in addition to the arcades.

Gordon picks up the story: "We did this through 1978 and we were making too much money so Adventureland bought us out through a buy/sell agreement we had. We split as friends."

Smart then concentrated strictly on fairs and the last season was 1985. "As I mentioned before, during the winter we manufactured games such as foosball and handwriting analysis machines to keep the crew busy. In 1985 we realized that we had to make a decision: buy a carnival or get into manufacturing full time," Gordon recalled.

Although we now know what he chose, at the time it was a big decision. Jeff noted, "We knew everyone from the fairs and carnivals and thought we wanted to pursue that the rest of our lives. However, in August 1985, we bought some three-claw cranes and introduced them at the Iowa State Fair that year and, I'm not exaggerating, they did over $1,000 per day!"

Gordon quipped that the decision wasn't so hard after that. "We were already in manufacturing, we had a smattering of experience, and we looked at things from an operators point of view."

Cranes

Smart was still running its street route and planned to operate cranes in truck stops from Minnesota to Houston, Texas. However, the demand for cranes was so high they simply couldn't get enough of them. The expression says that "necessity is the mother of invention" and so it was for the Smarts. They needed cranes so they would manufacture them for their own locations.

It sounded like the perfect idea but it turned out a bit differently, as Gordon explained, "We never got a chance to put even one crane out on our own because it seemed like everyone wanted to buy them from us. We were backed up eight weeks as word got out."

He continued, "We exhibited at the Amusement and Music Operators Association (AMOA) show at the Sherman Hotel in Chicago, Ill., and never looked back.  Our three-player Bear Claw crane has now become a brand name."

It was no wonder they got backed up; they were building the Bear Claw cranes in a 6,000-square-foot building. It wasn't long before they knew they needed more space so they rented 50,000 square feet and at one time had 214 employees. They were building cranes like there was no tomorrow, running three shifts in the factory, building for everyone in the industry.

Gordon boasts. "We still have employees who were young fellows then and have matured a little but are still building product!"

While the space was adequate, Gordon hated paying so much rent on a building he didn't own, so he invested in his own facility, building equity in the building and property. The new facility was 57,000 square feet and in 1992 Smart added 42,000 square feet to that building.

Basketball

Now that Smart had as much space as it would need to add to its product line, Smart was the first manufacturer to introduce a basketball game, Shoot to Win, and it was an instant hit. So popular was the game that at the next trade show there were no less than two dozen basketball games. How did Gordon feel about that? "I didn't like it but what could I do?. That's good ole American entrepreneurship. However, what I could do is make sure I had the highest quality, best basketball game on the market. At the next show, the number of basketball games had plunged."

Shoot to Win still has fans in even the most unlikely of places. For instance, T-Mobile bought six games to use in a national promotion commercial. The commercial is slated to begin airing in the fall.

And, that's not all. The College Basketball Hall of Fame has purchased six games to place in the museum. Visitors will be able to try their hand at realistic basketball after checking out all the statistics of their favorite stars.

Both the Hall of Fame and T-Mobile chose Shoot to Win because of the customization offered by Smart. "The fact that we can take an artist's rendition and translate it onto the game makes us even stronger. Our reputation is behind us and we can deliver," added Jeff.

For younger players

Nita Lipiec, Parts Department Manager>

On the heels of the tremendous success of Shoot to Win, Smart looked toward the younger players market and began developing games especially for them.

There were games for children but usually it was an adult game simply made smaller. "We wanted to offer kids something developed just for them," Gordon said.

When Big Bertha came off the production line, with her flaxen braids and red checked dress, the game won the hearts of children all over. Even today, Smart builds Big Bertha on request. Gordon added, "The only reason we don't keep it in our line up is because of cost."

And, along with Big Bertha came the cutest bear that would also capture the hearts of kids, Buddy Bear. Jeff said that it was built for McDonald's to play catch with Ronald. Keeping up with the times and what kids like, Smart introduced its T-Rex game for kids. It had a similar goal as Big Bertha but players tossed balls into the dinosaur's mouth. It came out in conjunction with the hit movie "Jurassic Park."

Photo booth

The photo booth became one of Smart's most popular products in the '90s and still is today. At first it was a black and white model, but that would soon evolve into what it is today.

Why a photo booth? Jeff explained, "We were looking for new markets and in the '90s there weren't any good paper printing photo booths. The ones out there had harsh chemicals that were coming under scrutiny by authorities. It became commonplace to need to be licensed to use the chemicals and ink.

Plus, the machines and supplies were expensive. I think it's safe to say that the Environmental Protection Agency (EPA) put them out of business."

Gordon interjected, "Jeff thinks like Steven Spielberg when he's looking for a new movie idea. He doesn't discount anything. Jeff seems to have an innate ability to focus in on a product that he feels operators will be able to make money with."

Jeff continued, "We wanted to make a cost effective photo booth so operators could make a profit. Our first one had a cost of 29 cents per print. Not bad on a $2 vend! We are still building photo booths with updated technology and now the cost is 28 cents per print! Our photo booths, like our other products, give operators the best opportunity for profits."

Technical support Assistant Manager James Chitty 
(14 years with Smart)>

Gordon and Jeff call the 3-in-1 Hollywood Photo Booth, which can be programmed in four languages, the Cadillac of the industry. They explained that it offers every option seen on any photo booth plus even more and it costs less. It offers three types of prints: the standard strip of four poses; a customized background (like the Empire State building or their favorite family entertainment center); and a chance to see what they would look like as a fireman, baby, etc., as it imposes the player's head on another body.

One more feature that makes it unique is the video message e-mail feature. A player can record himself delivering a message ("Having a great time, wish you were here") and e-mail it to his friends anywhere in the world. Jeff said that it is popular in any number of locations such as malls, FECs, amusement parks, some bars, and all types of tourist attractions.

In fact, in Joliett, Ill., there is a Route 66 museum, with all things related to the famous roadway that spanned the country before interstates.

The museum has one of Smart's photo booths so visitors can take a photo and e-mail a movie with audio to their friends and family.

Self redemption

Smart prides itself on seeing the need for a self-merchandising machine as early as 1990. They developed the VRC back then and has updated it with new technology and it evolved into the Prize Center with a data base.

The key here is that it's the ideal example of Smart's reputation of being ahead of its time. In the early '90s when Smart began the conception of a self-merchandiser no one else was looking that far into the future. However, it was a time when operators had a better idea of how to merchandise but the only way to do that was with a redemption counter and that included extra labor costs.

Vice President of Sales Jim Dupree said, "Operators in this business are always looking for new avenues for profit. The Prize Center is offering them new opportunities that weren't available before.

"The Prize Center is in such demand that it's a topic of our discussions every morning. It's typical for us to discuss it for over 15 minutes because we just can't get them out fast enough. Operators are finding locations that never would have allowed redemption with extra labor and the space for a redemption counter are now able to do it. The Prize Center has grown legs and it's doing now what we predicted it would do back in the '90s."

The Prize Center's data base is a technological breakthrough for operators.  A player can save tickets and redeem them for large prizes. He might win 20 tickets one day and he gets a receipt with his own personal identification number (PIN). The next time he can add to his ticket count with whatever he wins that day.

Jim continued, "The player is in effect opening a bank account, like starting a savings account. The PIN number is exclusive to that player. If he redeems 800 tickets, 800 tickets will be drawn out of the player's account. The fact that the machine is tracking players' tickets makes ours head and shoulders above others."

There are four cabinets that can be linked. For instance, one might hold small items in capsules, another could have larger prizes. One modular cabinet controls all the linked machines. Operators can select their own configuration.

Gordon added, "The thought process on our part was that redemption had been around long enough that operators' store rooms were starting to get full of used, second grade redemption machines. With the Prize Center they can put these machines in locations like bowling centers since they won't need to pay for extra labor."

Across the ocean

As the new century dawned, the climate in the coin-op industry was changing.  Gordon observed, "In 2000 the United States was no longer a country all to itself. Imported products were becoming commonplace. We used to export about $3 million worth of products and now it was manufacturer vs. manufacturer.

It was getting difficult to compete. There were products coming in from the Asian market at much lower prices. Of course, the quality wasn't near what we offer but some people buy simply by price and are not as concerned about quality."

He continued, "We started working with a manufacturer overseas but we were plagued with problems in consistency and quality, two things that we vowed from day one to offer our customers. That didn't work out so about a year ago we opened our own factory in China. We manufacture different products over there such as 12 games we produced for Indonesia. We took the manufacturing practices we established here to China."

Some of the products manufactured in China include Pile Up, the Punching Bag, etc. and we sell them to the rest of the world. Smart sells about 50 percent of the products in the United States and the other half overseas.

"With this factory, we can offer a greater variety of games to our customer base. However, there are still major operators who will only buy domestic Smart products and are willing to pay a higher price for them," said Jeff.

Smart not only manufactures products in China it has set up a research and development team over there as well as keeping one active in the United States. "We will develop new products in both factories," noted Gordon.

The cranes that Smart imports come from Feiloli in Taiwan. They cost less because the labor costs there are so much lower. "There's a bright side to this," said Jeff. "Our competition is not able to overcome problems from imported products as easily as we can. Since we have a factory over here we have the machines, paint, sheet metal, and more. If anything has to be fixed we are set up to do it. We can fix our imported cranes like we do our own.  The key is quality control. These games are traveling by boat, railroad, and trucks; they might get damaged. Stuff like that just happens in shipping. That's why we have such an advantage."

Gordon noted that the imported cranes are sold mostly to new people coming into the business or those adding cranes to their routes. "It's like owning a taxi company. If you have 200 Chevrolets your repairman doesn't want you to add a few Fords, even if they are reliable. The new operators will buy the imports and stick with them."

One of the most important things the Smart staff emphasizes is whether it's an import or not, the company's reputation follows it into the market.

Distributors and operators

Gordon and Jeff do not hesitate for a minute when asked about the role of the distributor not only for Smart but also for the industry: "We absolutely will not sell direct to operators, and believe it or not, it's for their own good.

"Distributors can offer advice, parts, refurbishing, location reviews, and a number of things a manufacturer cannot do for them. I know that some manufacturers are trying to sell direct but I really don't think that will ever work in the coin machine industry. We need distributors as well as operators. If one link is taken out it's a much weaker chain."

Here are some candid comments from two of Smart's distributors and a satisfied operator.

Bob Boals of Betson Enterprises had this to say about Smart: "We have been dealing with Smart for probably 20 years or more. Gordon and Jeff have always gone out of their way to help with customers. They are very good to work with. They make a great quality product. Customers rave about the way the products work and the back up support we receive. We have many customers who like to have products done with custom graphics related to their locations and Smart is very accommodating. We worked for years with Mike Smith and he is really missed by our people."

David Capilouto of Greater Southern agreed, "Why would we not buy Smart products? Gordon Smart has always been very supportive to the industry and has a unique niche in the market. Gordon and Jeff continue to build quality products at the lowest possible price. Low prices continue to drive the street operators wallet. We have always found Smart to stand behind its products whenever we have any problems."

Operator Clarence Mabe of S&M Amusements said, "I know Gordon and Jeff Smart and they stand by their equipment with great integrity. That, along with the fact that their equipment is very profitable makes operating Smart equipment a smart choice."

Conclusion

<Smart employees with the company for at least 15 years, back row (l-r ): Chuck Scribner, Electrical Engineering Tech, 20 yrs.; Marshall Cope, Mechanical Assembly, 14 yrs.; Donny Reinig, Supervisor Wood Shop, Paint, Shipping, 20 yrs.; Vic Wilson, Metal Shop Supervisor, 10 yrs.; and Jim Sankey, Final Assembly Supervisor, 17 yrs. Front row, (l-r): Van Nguyen, Assembly, 15 yrs.; Rita Praska, Purchasing/Logistics Manager, 15 yrs.; Tony Pane, Technical Support Manager, 20 yrs.

Smart Industries has positioned itself to be a leader with hard work, a keen sense of the industry, a commitment to quality, loyalty to its customers, and something else: customer service.

Jeff said, "If you don't have exceptional customer service nothing else will make up for it."

Operators have said that Smart is number one in technical help and parts.

Gordon unabashedly added, "Yes, we've heard that we are the best in parts and service and I'll agree that we are the best or at least in the top two companies that are conscientious about helping our customers, shipping parts fast--very fast, and listening to what our customers have to say.

He continued, "The main reason we can stay as close to what operators are doing is because we were operators before we were manufacturers. We know what it's like to be in the mud, blood, and beer every day. We went through it and we manufacture our products so operators don't have to experience some of the things we did. We think like operators and that's a very good thing."

For more information, call Smart Industries, (800)553-2442; Web (www.smartind.com).

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