You’re severely limiting your hardware (physical product, widget, consumer good) business if eCommerce is your only sales channel. Even though eCommerce has been rapidly growing in the past decade, it is still only a small portion of possible total retail sales.
Data from the Census Bureau of the Department of Commerce in the US estimate that eCommerce sales in the 3rd quarter of 2014 equaled $78.1 billion dollars. No doubt this is a huge sum, but it only represents 6.6% of total retail sales, which was estimated at $1,185.1 billion.
Ignoring retail means you’re ignoring a big chunk of the pie. Not to worry: this Newbie’s Guide to Going retail will help you pave the way to success.
LAYING THE FOUNDATION
Doing your homework and preparing ahead of your pitch is critical to success. Outlined below are the major points to consider and work on.
As with most things in life, having the right relationships help you to succeed. If you’re not sure how to do this, or just want to take your relationship building to the next level, read the 2nd best selling book in the world: How to Win Friends & Influence People by Dale Carnegie.
Some tactics to implement specifically to connect with retail buyers:
The fastest way to find the decision maker is to pick up the phone and call the retail store. Talk to the staff and ask for information. After a few transfers and calls to different branches, you’ll have a pretty good idea who the buyer is.
Once you discover the name of the buyer, search for them on Linkedin and see if you can get a referral through your existing network.
A great way to build relationships with buyers is to add value. Start a blog and build an audience or guest post your way to publications like Forbes and The Wall Street Journal. Then, ask to interview the buyer and write a piece for the publication. You’re adding value to the buyer’s professional brand and career, which is awesome. This way, 6 months later when you’re pitching a product, you won’t be a cold lead.
Send samples to potential buyers. Send samples to the retail employees of the store. Be persistent and followup via calls and in person. After some time, both the management and ground staff will know who you are. If the employees like your product, they might even recommend it internally to the buyers.
Can You Eat?
Opportunities from big retailers can be very exciting, but you need to carefully look through the numbers to make sure your business is making enough of a margin to survive. Know exactly how much margin is needed for a healthy business. If your strategy is to get the deal first and then reduce your cost through volume production, make sure you have enough cashflow to survive.
“Companies wishing to sell to big discount retailers need to closely examine their bottom line. If a widget costs $1 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.” Martin Lehman, Retired Retailer
$0.25 is not a big margin!
It’s a mistake to assume your product will sell itself once it goes into stores, and the onus falls on you to make sure the product moves. This is especially important at the beginning, when you need to build a strong sales record to use as leverage with other retailers.
Create a marketing plan and include items such as:
- Pop-up banners
- Display racks
- Free samples and bonuses
- Bundled discounts and deals
- Demo kits
“Retailers really want support from the vendor, 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.” Matthew Yubas, Product and Invention Consultant
Already know the store you want to get into? Make sure to keep their requirements in mind as you produce and distribute your product. Compliant product and packaging will save you valuable time, money, and energy later on.
For instance, Walmart has a page dedicated just to this topic:
The most important thing retailers need to know is whether your product can sell or not. Build a strong sales track record before you pitch. For instance, you can run a crowdfunding campaign on Kickstarter or track your eCommerce sales growth over 3 months. You’ll want a graph that looks like this:
If you do not have any online presence, start with your local mom & pop stores. Use those stores to build a sales record that you can then show to bigger retailers.
“Ideally, you should have existing revenue or pre-orders. If you can show that your product is selling well, you greatly increase your chances of getting in.” Eric Corl, Fundable LLC
“One thing entrepreneurs should bring to the table when trying to get a new product into a large store is solid proof of a reputable track record.” Andrew Schrage, Money Crashers Personal Finance
Your pitch deck is like a resume when looking for a job. It quickly shows buyers and store managers the information they need to know during a meeting. Include items such as:
- Sales track record
- Media features
- Social media presence
- Demographic match with the store
- Understanding of the retailer’s existing inventory
- Your story
- Market trends beneficial to your product
The objective is to demonstrate that you’ve done your homework and understand their business, as well as to show data to prove that your product will sell.
Unless your one product is mega successful, beef up your product line to have at least 3 different products. Retailers are more likely to take you on as a vendor if they can sell multiple items from you. The administrative process is the same, but with more items retailers have more opportunities to make money.
GETTING YOURSELF IN
With your groundwork completed, it’s time to get the product into stores. You can either use a distributor, broker, or yourself.
Rather than selling one by one to stores, you can choose to move your products through distributors. They will stock the shelves of many different stores, which makes the administrative process easier for both you and the retailers. However, in order to get a distributor to carry your product, you need to show them that the product is profitable and can sell. Use the pitch deck you prepared above.
- Sometimes retail stores don’t want to deal with you directly, because they don’t want to manage a whole bunch of vendors. The retail stores will instead choose to work with a handful of distributors, which means that’s your only way in.
- Distributors will already have relationships with retail stores that you do not have access to.
- It’s also easier from an administration perspective for you, working with and selling to one distributor rather than multiple stores.
- Distributors will take a cut of the margin. Typically retailers will buy the product at 50% off retail price. Then the distributor will take another 10% to 30%.
- The relationship with retail stores isn’t yours, which means you are at the distributor’s mercy.
To find distributors, try to:
- Call up the stores you want to be in, and ask if they work with any distributors.
- Attend networking events in your industry.
- Attend trade shows in your industry.
“The key is to remember that distributors evaluate your product using criteria different from your eventual customers’. No matter how exciting or innovative the product is, if your company will be a pain to deal with and, more important, the distributor can’t make a profit, they won’t buy from you” – Jeff Haden, Speaker & Linkedin Influencer
Manufacturer’s Agent (Broker)
An alternative is to hire a manufacturer’s agent, or broker. This is a great option if you can’t afford to hire an in-house sales person.
- Most work only on commission and operate independently, so you don’t need to pay for health and retirement plans.
- Great for penetrating new markets in a different physical location (another state, for example).
- Low risk way to test for new markets.
- Results will vary drastically depending on the skill and motivation of the broker. You have very little control.
- The relationship with the retailers isn’t yours, so you’re at the broker’s mercy.
- Another layer off your bottom line. Typical commission rates run between 5 to 25 percent of sales, according to the Manufacturers’ Agents National Association.
To find an independent manufacturer’s agent, check out websites like:
You can also call retailers and ask for recommendations.
“If they give you a recommendation, you can be pretty sure they are doing business with them already, and you can be pretty sure that they enjoy working with them and the way they do business.” David Hoffmeister, professor at Chicago-based DePaul University’s Center for Sales Leadership
Do It Yourself
Often times, we find ourselves looking for distributors and brokers because we don’t want to do the hard work ourselves. Because we don’t want to get rejected. However, the lessons learned from selling your product by yourself are extremely valuable.
Distributors and brokers remove you from the process. They build and profit from the relationships and you don’t. Also, by actually experiencing the issues associated with going retail, you get a much better understanding of how your product works, as well as how the product and business can be improved.
Start with Local Retailers
An easy, low risk, and quick way to get started is to sell to your local retail stores – before going for national chains or larger establishments. Learn from the experiences and tweak your product, packaging, and processes so you’ll be better prepared for bigger stores.
Try offering your products on a consignment basis to local stores. In a consignment agreement, the retailer only pays if your product sells, which means they don’t need to prepay for inventory and have no risk. Get your foot in the door, start selling, and use the feedback to improve your product and business.
National chains will often offer diversity programs in their local stores, which will give you an advantage if you qualify. Start with their local chain and focus on getting the process right in just that one store before moving on.
For instance, Whole Foods says on their vendor website:
“Due to the diversity in the customer base amongst our different geographical regions, we review products for approval at the regional level. Each of our regional offices have different review procedures, which require that information and product samples be submitted in very specific ways to key individuals.”
Guarantee sales in stores. How? Head to the store, setup a demo booth, and sell the product until they are completely out of stock. Then, move on to the next store. This is much better than trying to get your product initially into many stores, and ending up having lackluster sales across the board.
“Companies don’t care if you have a product into 100 stores, they care how well your product has sold in each one individually. Don’t focus on broad distribution until you’ve nailed your proof of concept and know exactly how you can make it successful in one store.” – Brendan Synnott, Bear Naked
Attend Trade Shows
Trade shows will cost you, but can be effective channels to expose your product to already interested buyers. You might want to go to trade shows as an attendee first, to scope out the crowd and understand the competition, before setting up your own booth.
In a paper published in the International Journal of Research in Marketing, researchers discovered that,
“Through a field study with a group of industrial distributors, they demonstrate that follow-up sales efforts generate higher sales productivity when customers have already been exposed to the firm’s product at a trade show.”
Make sure to setup a wholesale application form on your website. You want to capture the retailers and distributors who will invariably visit your website as your business grows.
With one of our businesses, Slip Stopper, on average 1 in 500 messages we receive is a wholesaler or retailer wanting to carry our product. Don’t miss these freebie opportunities.
Spy on Competitors
Why do all the hard work of finding potential retail stores when your competitors have already done it for you? Check out their websites and see which stores their products are being sold in. Then, just pitch to the same stores.
As long as your product is better in some way, for instance, it offers more margins, you will be in a good position. The retailers are more likely to carry your items because the concept has already been proven by your competitors.
Let me know which one of these strategies you’ll be implementing in your business.Also, can you think of a friend who can benefit from these retail tactics? Share with your friend by clicking on the social icons below.