The majority of my three years at Retailbound have been spent talking to smaller consumer product manufacturers and startups about the challenges they face bringing new products into the US/North American market.
I’ve had hundreds of conversations with C-level executives as well as overwhelmed, yet ambitious business developers looking to beat the odds in retail. This blog post is designed to give you lessons that I’ve learned from seeing the collective struggle, failure, and occasional breakout success of being a new product manufacturer (or hardware startup) launching in retail.
Facing Facts — Most Products from Start-ups Never See Retail
Retail is a zero-sum game. Retailers only have so much space and budget (online or offline) to bring on new products. The vast majority of those crowdfunded products you see on crowdfunding websites or trade shows will never make it into a Best Buy, Brookstone, WalMart, Toys “R” Us, etc.
If you do everything “right” there’s still a possibility that your competitor will triumph. That’s one of the key mentality differences when switching over from manufacturing to retail efforts. Although extremely challenging, if manufacturing is done perfectly you’ll end up with a high-quality product; however, in retail there are zero guarantees even if you follow all the procedures.
Don’t lose hope. Switch your mindset. Retail is not about eliminating all risk and having guaranteed outcomes because ROI is not truly gained until a the consumer purchases your product. Minimizing risk means being knowledgeable and focusing only on aspects of retail you can control. Keeping this in mind we can move on to common mistakes new manufacturers make, and how to avoid them.
Minimizing Risk and Maximizing Opportunity
Every product and business requires a tailored approach to find traction and success in retail. People’s experiences, funding, product features, and situations vary greatly. So let’s discuss some important topics…
Underestimating the Preparation/Strategy Stage
If one phrase has rung true with manufacturing founders on retail it’s “you don’t know what you don’t know”. A lot of nuances exist in retail that can make the barrier-to-entry seem daunting — pricing strategies for various channels, retailer contract terms, sales rep agreements, packaging design, logistics strategy, and a plethora of other topics.
Developing a complete retail strategy for many new manufacturers is a very time consuming process because of the learning curve. Many startups and small manufacturing companies consist of mostly engineers, designers, or developers. Googling for information will only get you so far. Eventually you’ll find that your product and company require a specific approach tailored by you.
In an increasingly competitive retail environment, resellers and distributors don’t have time to talk to manufacturers who aren’t 100% retail-ready. If they have to guide you through the process, they’ll see you as a tough vendor to manage and may decide you’re not worth their time.
Rather than risk costly mistakes and burning bridges with potential buyers, your time is better spent finding someone who has manufactured and sold products into retail to assist you. Even before you start looking for commission-only or performance based salespeople, you should already have a well-defined strategy in place.
No amount of retail “connections” are going to hide your unpreparedness.
Being Paralyzed by Planning
On the other hand, some manufacturers tend to dwell on strategy and preparation for too long. Doing so can lead to missed opportunities and competitors establishing a better foothold in the market.
While planning your retail strategy is crucial, there’s a fine line between minimizing your exposure to risk and worrying yourself into paralysis. I’ve spoken with CEOs who were so concerned with deciding on which retailers to target… that they missed the buying cycle and had to wait 6 months for the next chance with those retail opportunities.
Acquiring new sales channels and POs (purchase orders) does not happen overnight. What many manufacturers consider to be the “launch” usually ends up being the “countdown” where meetings need to be scheduled, packaging updated, presentations, and negotiations. The lead-up time to a PO requires many months of work and communication.
Unless you’re comfortable around retail, this is another instance where reaching out for assistance from an experienced professional might cost you in the short-term but will reduce stress and save resources later on. And this doesn’t mean you have to hire an in-house employee for $70k a year with benefits — there are affordable options out there including consultants and contractors. Choosing the right option is a topic for another day.
You Get What You Pay For
One of the single most common mistakes for new manufacturers is relying too heavily on sales reps (or sell-in). The idea of having a “no cure, no pay”, commission-only sales force sometimes blinds manufacturing executives to the reality. Retail requires more than sales reps/agencies provide.
Retailers could care less how many products they buy from you. Buyers care about how you will drive traffic to their store or website, and how much time you’ll require to manage.
Unless you’re competing on price, you’ll want to compliment your sales force with channel marketing and channel management capabilities.
Having a good sales force is crucial — don’t get me wrong — but if solely relied upon for ROI you’ll end up waiting much longer (or forever) to see lasting retail traction. Especially when it comes to lesser-known brands, I’ve seen young CE hardware startups wait for more than 8 months after hiring a sales rep (even good ones) without any sizable results. Losing this amount of time can cost a ton of overhead money and lost opportunities.
Scaling Retail Revenue
Continuing on the theme of ROI, many manufacturers want to scale revenue but very few understand the implications and requirements.
Scaling product sales in retail/distribution requires a comprehensive means of controlling/growing all aspects of retail — not just performing sales pitches.
- Managing logistics: reverse logistics, accurate sales forecasting, timely delivery to retailers, managing communications.
- Multi-channel marketing: driving sell-through across online and offline channels to prevent channel “cannibalism”. It takes a lot of work and time to acquire a retail channel, so don’t lose it due to poor sell-through.
- Channel Management: Treat your sales channels as partners. Work closely on marketing programs, communications, and ways to achieve incremental growth.
- Sales Support: Your sales team or hire sales reps might be fantastic, but even the best sales people need to be properly equipped, managed, motivated, and supported. You succeed when your salespeople succeed.
Many manufacturers believe if they achieve placement with retailers or distributors all of their problems will be over. On the contrary, the hard work is just beginning at this stage. I’ve seen manufacturers spend 6 months getting into a new retailer only to be kicked out after 2 months of slow sales. That is A LOT of wasted time and money despite using the “commission only” or “risk free” approach.
Sales reps open doors and create opportunities. It’s up to you as the manufacturer to take advantage of these opportunities or ruin them.
Summary:
- Retail is very competitive and you can’t eliminate all risk
- Knowledge is power. Those who fail to plan, plan to fail.
- Don’t let planning act as a crutch to cause launch hesitation.
- Retail has many moving parts — all of which are important.
If you found this blog post helpful, many others could probably use the same help. Please share and help a fellow inventor, product entrepreneur, or manufacturing friend. If you need help in launching your product into retail, contact me (Benjamin Ertl) at [email protected].
