Whether you’re a manufacturer who’s having a tough time getting into your first or even 5,000th retail store, there may be a better way to approach this challenge than to simply look for that “connection” or special “in”.
If you follow our other posts here, then you might know where this is going. we hear from small manufacturers and larger manufacturers all the time that selling to retailers is the most frustrating and difficult aspect of expanding/scaling the business. Sounds about right, right?
Undoubtedly selling is difficult. You need to get the buyer’s attention, set up an appointment, know the product & company info inside and out, and understand how the retailer’s process works. What nobody really talks about, and what so many unsuccessful manufacturers fail to see…is that you’re really selling an investment opportunity for the retailer or distributor buyer.
Your buyer needs to have a reasonable assumption that they will make money off of your product. And this concept revolves around end-consumer sales or sell-through of your products in retail stores.
Your buyers already have a full inventory or portfolio of products on their shelves for the most part. Why would they take a risk buying your products? When you’re “selling” your products, you’re also selling the level of consumer interest to purchase your products – things like sales history, market research, reviews, margins, etc go towards conveying a strong potential for ROI for your buyer.
What can I do then to convey strong ROI potential?
If you don’t have a strong sales history in retail then that’s the first step that needs to be taken. Many companies start by selling online on third-party marketplaces like Amazon, eBay, Overstock, etc. This way you can build sales as well as gather reviews for your products (hopefully good ones).
Reviews can really make or break your online sales, which transfers to offline sales when that time comes. So make sure you’re paying attention to quality from the get-go. Encouraging reviews via promotions, email campaigns, or rewards will only help you in the long-run.
Besides reviews, let’s not forget about margins. Even if you can convince a buyer to buy 1,000 units, if they’re making too small of a percentage then it will unlikely be a long-term relationship. Sometimes retailers will ask for huge margins such as 40-70% – but be aware that retailers often ask high and come down much lower of their margin expectations to a certain extent. Have good margins but don’t be a push-over and lose money.
Retail costs money – are you ready?
Something that surprises us is the amount of CEO’s and VP’s of Marketing who think that getting into retail is simply a matter of getting the purchase order, buying inventory, and fulfilling the order.
We all know that inventory is part of the investment that goes towards retail – and if you don’t sell the inventory then you’re sitting on a depreciating pile of…well..products.
Retailers & distributors often charge money to put products on their shelves (essentially renting the shelf) which can cost a couple grand upfront. What if you pay the $2000+ to put your products on the shelf but only sell a few items?
Besides the cost of inventory & placing the product online or in-store, you need to have a marketing budget worked out to drive sell-through/end-consumer sales. To not include the marketing budget is to leave everything to chance. Unless you’re extremely confident that people will flock to buy, don’t underestimate this part.
Of course their are many other expenses from logistics, freight fees, packaging costs, etc. Working with a retail professional to solve the margins and costs of going to retail can be a reasonably quick but all too important first step that many fail to take.
Scaling the business, the right way
If you’re currently selling in retail stores or perhaps have decent online sales volumes, perhaps it’s time to start researching how to effectively scale sales and the business. If there’s one thing you should take away from this post it’s that you should start small and work your way up – both financially and with the supply chain.
As any intelligent business owner knows, your team behind the business is going to make or break your success. Many businesses choose to contract or outsource some of their activities that they otherwise don’t have experience in. Things like web design, accounting, or in this case retail. There are a variety of ways to contract-out retail activities – from sales reps to product management.
Deciding the level to which you’re looking to outsource work depends on your budget and needs. If you’re looking to get into your first store, perhaps you simply need a quality rep and some marketing efforts online. If you’re looking to expand into more stores while keeping costs down, perhaps having someone to manage and execute sales, marketing, and management activities would be preferable.
Employees are the ideal as you can have them physically located in-house and have a better sense of control; however, more often than not they cost more than other options (not always).
All in all, contracting or outsourcing is based on how you value your time and whether your time could be spent on more product/profitable activities.
Did this post resonate with you? Please share!! Also if you’re looking to develop your retail strategy or outsource all of your retail activities, shoot us a note at firstname.lastname@example.org.