Retailers lining up at your door. What a great problem to have, right? Maybe. If you are prepared. Let’s start with prioritization and then conclude with some preparation considerations.
You can help to prioritize who you do business with by examining a number of key factors.
- Know your target audience. If you know who you are trying to sell to, then you have a better idea of how to communicate to them (through packaging and marketing), how to reach them (marketing and distribution location), and what price they are willing to pay for your product (because you have researched their demographics).
- Partner with retailers who align with your pricing strategy (i.e. who will sell your product at your MSRP…and you know what your MSRP is because you have done market research to determine at what price your product will sell and how it needs to be priced against your competition).
- Study your competition. Where are they selling and where are they not selling? Both provide insight. If your competition is selling at certain retailers, maybe you need to be there, too, or maybe it’s too saturated at that particular retailer and you should go look for other possibilities where that retailer has little or no competing products but where you think you stand a very good chance of selling well (i.e. in more niche retailers and/or where your competition has yet to break ground).
- Spread out your distribution. There are many ways to accomplish this …online, in store in boutiques, regional retailers, and/or mass retailers, and/or internationally. Mix it up so that your business is not dependant on one or two accounts.
- Can you fund the inventory? Are you prepared to drive sales? Can you meet the demands of the retailer? Are your systems ready to go? … Read below.
Get Prepared – Questions to Ask Yourself
Do you have the inventory to fulfill demand? If not, you will likely have disappointed retailers. And disappointed retailers does not bode well for sustaining long-term relationships. Retailers are risk averse. Don’t put yourself in a position where you are unable to fulfill on orders. Additionally, some larger retailers assess chargebacks if you can’t deliver on those orders because they reserved shelf space for you and you are costing them money. Be honest with your retailers/customers on what you can and can’t do.
- Can you front the cash for the inventory that this retailer is requesting? You are likely looking at MONTHS before you actually get paid (i.e. timeframe considerations: from the start of manufacturing to delivery at your warehouse to delivery at the retailers’ DCs to the net 30, 60, 75 or 90 day net terms that they offer you).
- Do you have the systems in place to support these sales? For example:
- Do you have someone on your team who can manage the order fulfillment process from order acknowledgment to the actual fulfillment to the invoicing? Are you set up on EDI?
- Do you have product liability insurance that may be required by the retailers? What will this cost you?
- What marketing programs will you implement to drive sales and stay on the store shelf? And what will this cost you in time and/or cash?
- Are you prepared and educated in how to negotiate with these retailers? They speak their own language (ie. do you know what I am saying when I say “markdowns”, “TPC”, “UPSPW”, “POG”, “chargebacks”). Many large retailers charge a hefty noncompliance fee if you do not ship within the specified shipping window, if you are missing a label, the label is incorrectly completed. If you are not well versed in this retail lingo, are you going to hire a retail sales consultant &/or rep (you may need both) to help you navigate these negotiations to help minimize your risk and increase your margins, and actually seal the deal? That, too, costs money in sales commissions and/or upfront consulting fees.