Getting into the retail major leagues is something many entrepreneurs dream about. Have you ever envisioned your products on the shelves of a big box retailer but wondered just how to get your company ready for the prime time?
According to experts–and some entrepreneurs who’ve already made the leap as vendors or suppliers–there are some basic principles that can help guide you through the process. If expanding into the retail big leagues is your goal, these eight steps can help you get placement for your product.
Before you even think about becoming a multiunit chain's vendor, you need to make sure you can build a reasonable profit margin into your product's wholesale price. Plan for a manufacture cost that's one-fifth the retail price--or less. Then build the cost of packaging, commissions, marketing and distribution into the wholesale cost of your product. Check the retailer's guidelines for other fees as well that you'll have to build into the cost of your product.
A discount retailer will trim profit margins to the bone to squeeze those famed low prices out of products--but there are some advantages for vendors willing to go lean. In the case of Wal-Mart, for example, there's the sheer power of numbers that goes along with exposure to the world's largest market.
Retired retailer Martin Lehman, a volunteer with SCORE , a national organisation that provides business counseling for entrepreneurs, says companies wishing to sell to big discount retailers need to closely examine their bottom line. If a widget costs $1 dollar to make, and the retail price is $4, and the product wholesales to boutiques at $2, a big box retailer may only offer the manufacturer $1.25--just 25 cents over the cost to make it. 'They're a tough buy,' Lehman says. 'A manufacturer has to ask, 'Can I make enough with that quarter?''
If there's an application process, be sure to read the guidelines thoroughly before submitting the paperwork necessary to apply to become a vendor for that company. Once your material's been submitted, give the buyer at least a few weeks before you follow up with a phone call or e-mail to ask for an appointment for a presentation.
The bigger the chain is, the more specific their vendor requirements will likely be. A company like J.C. Penney , for example, requires vendors to be listed with Dun & Bradstreet and able to raise the capital needed to supply their purchases. The successful J.C. Penney vendor also will be able to obtain $2 million in insurance, do business electronically, commit to labour law and product safety compliance, and to meet production delivery and lead time deadlines. (Whew! And you thought this would be easy!)
Call the buyer or category manager who handles your type of product and determine when and how frequently they look at new products. Be sure to ask about their policies and procedures for carrying new products. If the buyer expresses an interest in meeting you, set a time for a presentation, which will be on their turf (meaning there may be some travelling in your future).
Some companies, such as pet supply retailer PETCO , have monthly, quarterly or annual open vendor days, where prospective vendors can schedule appointments for a 30-minute meeting to present their merchandise. In most instances--that's if the meeting goes well and they want to do business with you--vendors are expected to be able to supply the chains with product within 30 days of the meeting.
Make sure your paperwork ducks are all in a row before you meet with the buyer. familiarise yourself with the industry standard for the terms that will be bandied about, such as conditions of sale, discounts, credit, shipping and allowances. Sales trainer and author Alan Zell offers sample outlines of terms and conditions of sale on his website to help you bone up.
In addition to mentally preparing for the meeting, here's a list of some of the things a retail buyer may expect to see at your presentation:
- A sample of both your product and its packaging, including a barcode and pricing. Packaging is of huge importance to buyers--your product's packaging should take its cue from things already on the store's shelves and racks.
- A product brochure that provides thorough information on the product
- A price list or catalogue that includes wholesale and retail prices, discounts, credit, shipping, allowances and conditions of sale
- A list of retailers currently selling your product
- Your marketing and promotion plans, including such things as in-store demos, point-of-sale displays, advertising and publicity
- Proof of the potential for a large sales volume
- Manufacturing information that includes proof of your capability for handling large production runs
- Your business history
- Your business card
According to product and invention consultant Matthew Yubas , one important point you need to get across at the sales presentation is your commitment to product marketing. 'Retailers really want support from the vendor,' says Yubas, who's based in San Diego. 'They want in-store demos, they want point-of-sale displays, they want advertising and promotion--they want any type of support you can give.'
Awhole new retail market for your product will mean a whole new volume of production for you; both you and the retail buyer need to know--and believe--that you're prepared to ramp up the numbers. And you need to know that your manufacturer can handle that volume while maintaining quality.
It took Michael Marrin a year and a half to get production set up to meet the volume needs of chain customers for his etchable, disposable Etch-It Party Cups . With a million cups out on the shelves, Marrin got a shock: The first generation of bags were popping open on the shelves, and there were wrinkling issues with the labels.
'That killed us, and it was almost to the point where I gave up,' recalls Marrin, who's based in Aliso Viejo, California. But he survived by solving his production problems then finding a manufacturer that was willing to build the manufacturing machinery, run it, warehouse his product and fulfil big orders, all at one turn-key cost.
Getting production and delivery running smoothly isn't only essential to customer relations, but to your business's bottom line as well. Some retail contracts will specify fees that penalise vendors for not getting the merchandise to them exactly on time.
If you're looking to hit the big time, you can. By thoroughly assessing your prospective marketplace, preparing carefully for production, and taking full advantage of existing resources available to help you grow your business, your dream of seeing your product on a multiunit store's shelves doesn't have to remain a dream.
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