How Retailers Sort Through the Good, Bad, and Ugly Products

At Retailbound, it’s my job to find products that have the potential to establish or scale out a retail presence in today’s super competitive omni-channel market.

It’s not about being the newest tech or having the best PR firm – there’s lots of factors retail buyers, reps, distributors, and people like myself look for.

  • Financially stable company able to meet obligations
  • Positive reviews / fully tested product
  • Marketable and unique selling proposition (price vs features)
  • Enough margin for multiple layers of distribution (reps, distributors, retailers)

Financially Stable Brands

Even if you’re the next Apple on the block, it doesn’t matter if you go belly-up. Financing purchase orders is important, but there are a lot of nuances regarding marketing expenses, logistics, cost of goods fluctuations, packaging redesigns, etc.

Brands trying to transition from Amazon into more brick-and-mortar stores often have the wrong expectations for retailers. Retail is a different game. For example, setting aside $20,000 for promotions is quite small at retail – relatively speaking.

Brands should not expect retailers to move quickly taking on new products. We’re not talking a couple months. Be prepared to look 6-12 months ahead of the buying cycle for many well-known retailers.

Negotiating terms and filling out vendor paperwork alone can take a couple months if you let it.

We’ve also seen young brands get hundreds of thousands of dollars worth of demand from retailers both large and small, yet a lack of inventory due to production costs and lead times can quickly equate to misaligned expectations and a decline in retail partner relationships. Never promise what you can’t deliver.

Positive Reviews & Fully Tested Product

Having positive reviews is obviously important in these omni-channel times; however, most think of reviews as a means to only draw in more end-customers. Reviews are a quick way to gauge a product’s readiness at scale for retail buyers.

The first place a retailer will look is Amazon.com for reviews, content, copy, sales velocity, etc. That’s become the norm.

Working out bugs / defects is crucial. For the most part, retailers don’t want to be the first to jump in head-first on a small, unproven product. If customers are complaining of product defects and making too many returns, you can bet it’ll come back to bite your brand’s chances of a long-term retail relationship (and word spreads fast between retailers).

Marketable & USP

Competing on price alone is not a great strategy in my humble opinion. Bluetooth speakers, mobile accessories, dining utensils, and the like. Just like that sales rep who has a “deep relationship” with a retailer, they’re a dime-a-dozen these days.

Competitor analysis and market research in the early-stages (and ongoing) should not be underestimated. Wouldn’t it be terrible if you spent months / years creating a product only to find out that retailers (or consumers) aren’t really interested in what you’re selling?

Build it, and they might not come.

In what ways, and how much money are competitors putting towards marketing efforts in retail accounts that you’d like to be in? Research competitor promotions, events, how long your competitors have been selling with each retailer, check out their in-store packaging / displays.

These “small” details matter. Small details quickly snowball when you’re trying to scale up sales operations through retail.

Competition also moves quickly, perhaps most obviously in tech:

  • Many smart home products are commoditized (based on price) already. Light bulbs, cyber security products, Nest, Ring, smart home controllers, etc.
  • Edtech / smart toys is getting crowded (although glad to see market awareness of these products)
  • Connected pet products are nothing new – feeders, cameras, trackers
  • Bluetooth trackers are everywhere – Tile and TrackR have grabbed up most general market share – variations include wallets, pets, vehicles, hospitals
  • The list goes on…

Understanding where, how, and when to market your product is another challenge altogether. It’s easy to spend tens of thousands of dollars on Facebook ads, but maybe customers need to hold your product to really understand the value.

I look for brands that will have a quality product road map (future complimentary products) and products that can’t be copied too easily. Retailers do the same.

Marketability is subjective of course, but seeing hundreds of products on a daily basis helps sift through the fluff vs innovation – especially when every Founder or Co-Founder believes their product is amazing.

Enough Margins for Retail Players

The longest distribution chain you should have is between yourself (the factory), a distributor, sales agent, and finally a retailer.

Here’s a great article for seeing this visually as well as other information on product distribution — https://www.repsly.com/blog/consumer-goods/everything-you-need-to-know-about-product-distribution

There’s no point selling to retailers if you’re not generating a profit, selling at retail does not take away from your more margin-filled Amazon sales (in fact, a retail presence often boosts Amazon sales).

Brands often get caught up in the 35% – 50% margins that comes out of retail sales which then causes them to stick to solely Amazon. Amazon / D2C sales is the most margin friendly and probably safest way to test early-stage operations; however, it’s a very crowded channel.

There comes a point when generating greater sales volumes justify pursuing other sales channels that eat up more margin. Knowing which channels and when to approach them is something more brands don’t get right.

End Notes:

If you’re a brand trying to get inside the head of your retail buyers, perhaps our team of ex-large retail buyers can help. You only get one chance at a first impression with retail partners after all. Feel free to reach out to me – Benjamin Ertl – at bertl@retailbound.com