In the spirit of the modern, cut-throat world of retail.. let’s just get down to brass tacks. To be successful in retail, you need to be different. Different product, a different marketing approach, different perspectives. Even if it something as simple as using storage containers for seasonal retail surplus, this may make such a difference when it comes to working in an industry like retail. But even those who differentiate themselves in the market can overlook certain risks in retail.
While you can never fully eliminate risk, don’t be the company with the “next big thing” only to be bankrupt 6 months later. We’ve all seen plenty of horror stories or perhaps even know people who have experienced it.
This post will serve as a starting point for manufacturing/product-based businesses looking to eliminate as much risk as possible when trying to grow in retail. This list is by no means comprehensive, rather things that come up quite often during my day-to-day conversations with manufacturers.
No.1 – Picking Your Battles
For most hardware startups and smaller manufacturers having a good sales channel strategy is extremely important because it lays out your plan for growth in retail. Where is your product best suited?
Knowing which channels are appropriate to start targeting initially isn’t just based on your market (i.e. sporting goods, consumer electronics, etc). Does the buyer have similar products on the shelf? Are your margins appropriate for them? Can you survive the payment terms?
Too many manufacturers these day get caught up in the excitement of having retailers or distributors interested in purchasing their products. Showing interest is one thing, but going through the purchasing/negotiation process is much different as well as managing the channel once the order is fulfilled.
When you target the wrong channels you increase the risk associated with that channel including the investment you need to make with inventory, sell-through numbers, damage to your reputation as a reliable manufacturer, and other factors. The same thing can even be said for selling on Amazon if your product has many defects or quality issues… once those bad reviews come in.. it’s harder to bounce back.
We’ll talk about quality in a second, but for now remember that sales channel strategy is extremely important in planning your path to growth in retail. Without it you’ll find you’re spending more effort for less results.
No. 2 – Quality Control (or lack thereof)
We’ve had a number of clients who could have begun selling in retail months ago, but we decided that finalizing and further testing of their products would be best prior to fulfilling the orders we secured for them. This way we minimize returns, defects, or bad reviews which of course are not great to deal with.
Some manufacturers believe that so long as there is a (minimal) viable product that retail is an acceptable next step to gather market data and test out their market feedback. If you’re reading this you may be familiar with The Lean Startup by Eric Ries. There’s a difference between testing out your product on early adopters and sample audiences and bringing the product into retail channels.
The difference can cost you your business.
Because the difference between failing at retail can cause the retailer to either cut prices dramatically or worse have you buy-back inventory costing you thousands of dollars and months of wasted time. Also if your product is defective, you’ll be dealing with returns which can take a huge cut into your sales numbers.
Many people fall into this trap because they move too quickly into sales mode. Without fully testing for quality in the product and the supply chain a manufacturer will decide it’s time to bring on sales reps. Hooray! But the sales reps job is to simply sell and get the product placed, and that’s it. There’s no accounting for what you may or may not have done on the back-end of things including quality or marketing strategy to push end-consumer sales.
Speaking of end-consumer sales.. let’s talk about our third common risky mistake.
No. 3 – Selling to Retailers is only Half the Battle
This wouldn’t be a post by Benjamin Ertl if I didn’t mention sell-through as one of the most common factors manufacturers forget about to mitigate risk in retail. If you’re new to my posts, sell-through is the ability for the retailer or distributor to sell your products to the end-consumer.
Consumer demand is the life-blood of any consumer goods manufacturing company and if you don’t pay attention to that you may as well just close-up shop now.
I’ve spoken with hundreds of manufacturers who talk about “Which connections do you have in retail?” or “Can you guarantee a certain amount of sales?” and
the short answer is that none of that is worth discussing. For one, buyers change jobs all the time and so connections are less important than reputation for driving positive sales growth.
Let’s say I’m a buyer at Best Buy and I ask, “How will you help me ensure that I’m successful bringing on your products?”. My guess is that you’d start listing off your price advantages, special product features, etc. And while that has it’s place… it’s not quite what I’m looking for. I’m looking for ways in which you will help bring in customer to my store, how you will work with me to drive in-store sales of your products.
Because if you can help your buyers drive in-store sales, do you think they’ll strongly consider purchasing from you again in the future? YOU BET!!!
Don’t assume that just because your product is on the shelf that it will sell itself. Consumers, just like buyers, care about more than just purchasing the cheapest product available… this brings me to my next point…
No. 4 – Basing Competitive Advantage on Price
The idea that you should never compete strictly off price has been more outspoken than the others previously mentioned in this post; however, it’s still worth noting.
The idea behind selling based on price is that you’ll be able to offset your lack of profits by the volume being sold as a means to push out competitors, increase awareness, or reduce loss of depreciating products.
Keeping a price point low can be an advantage so long as the margins make sense for you and your potential buyers. On the other hand, if enough consumers are willing to purchase your product at a higher price, then you could be missing out on a lot of potential revenue.
You should almost always try and strive to be unique with new features, designs, technology, etc rather than simply cost less to purchase. I’ve spoken with plenty of CEO’s who wanted to get into retail but couldn’t without losing money based on their low price point and margins for profit.
No. 5 – Trying to Do It All
Especially if you’re a fresh, new hardware startup the idea of being awake for 23 hours a day can seem exciting and romantic but the truth of the matter is that finding the right people to be on your team is extremely important towards future growth.
Often times I’m approached by CEO’s who also help with the product development & design among many other roles. At a certain point in the life of your business you need to decide which roles are best put into more experienced hands. Retail can be a complex area of the business to cover even for someone with several years within the retail world.
Identifying your specific needs are important. Are you looking for a salesperson? Or someone to develop and manage your channels and marketing programs? Maybe both? There’s no need to pay someone a large salary when you’re first getting started and you’re still working on becoming established.
One of the best parts about living in this modern-age is the ability to hire outside help full or part-time to take care of retail or most other needs you have. Many companies grow quickly for years simply using an “outsourcing” model. The key is to find the right company to partner with based on a myriad of factors like track record, experience, covered tasks, communication skills, etc.
Retailbound’s clients are accelerating initial and repeat PO’s because we make your BUYER’s job easier by promoting sell-through and active channel management. Interested in learning how we can help you get into retail. Contact Benjamin today – email@example.com