Bonus Material -- Online video course: How to Create a Brand Desirable to Retailers

By Vanessa Ting Docstoc (recently acquired by Intuit) invited me to present an online video course on How to Create a Brand. Watch this series of short, digestable videos at your leisure. Once you're done, you'll be armed with tools to scrub your brand and identify the juicy bits that woo retailers and their buyers ~ and, more importantly, your target consumer!

It's free to watch.  Docstoc.com is a treasure trove of online video courses to help small business owners learn any business topic they seek to educate themselves on, so it's worth checking out.

Here are some recommended videos below.

Watch the rest of the video series here: http://premium.docstoc.com/course/78/simple-steps-to-create-a-brand

From the Buyer’s Perspective: Do Retailers Want To See The Market Research I Have Conducted?

By Vanessa Ting

Buyers don't necessarily want to see the results of your market research, but rather, they want to know you have validated your decisions and the product itself. Decisions like product name and concept, packaging design, packaging copy, product claims, marketing messages, formulas and flavors/colors. For example, conducting in-use testing (a consumer takes your product home and uses it for a week, then answers questions about their experience) assures that your product delivers to the promises and claims your product makes. This helps reassure retailers that if they put your product on their shelf, customers will enjoy the experience thereby making their experience at that store favorable. No retailer wants to be known as a store that carries products that don’t work.

Market research is not a check box and it does not have to be formal or cost anything. Plus, it is actually helpful to your business! Just getting out there and talking to potential consumers to get feedback is the best kind of market research. Do it early, do it often.

When you can show a retailer you’ve done this kind of homework, whether it is communicated in a slide or bullet point in your presentation deck, it will give a buyer one less reason to say "No."

Other helpful ways of incorporating market research data into your retail pitch is using it to prove the market opportunity of your product. This is called market sizing. It’s looking at the potential population of consumers out there and determining what percentage of that population will buy your product. This reassures buyers that you chose your target consumer carefully and that enough people out there want your product. Another way to use market research is in building your volume forecasts. By buying market research data, you can learn the market size, how many people typically buy this type of product, and the market share each competitive brand owns, you’ll be able to figure out a good estimate for the potential volume of your brand in total and your brand in each of your retail accounts.

Have you conducted informal or formal market research for your product?  Did it pay off? Let us know!

For Market Research Tips on the Cheap, check out an older post http://www.retailtable.com/tips-market-research-on-the-cheap/

From the Buyer's Perspective: Do I Need to Hire a Sales Representative if I Want to do Business with a Large Retailer? Where do I Find One?

If you want to succeed, yes, hire a sales rep.  Here's why.

As a buyer, I was called on by the following three groups of people:  Sales account managers, sales representatives (also known as vendor reps or manufacturer reps), and proprietors of smaller product companies.

What is the difference between these three groups?

Sales account managers are typically employed by large manufacturers that have a pre-existing relationship with a major retailer.  These are companies like Proctor & Gamble, Munchkin, Hasbro or even lesser known names.  They have years (decades, even) of experience selling to large retailers and have teams dedicated to each retail account.  They usually have a satellite office near the HQ offices of major retailers so they can meet with the buyers at the drop of a dime.  They have data and resources dedicated to supporting that retailer's business.

Sales representatives resemble sales account managers in almost every way except they are not employed by the manufacturer.  Instead they are hired by the manufacturer and typically represent several manufacturers.  They key thing to note about both account managers and sales reps have the experience to know what buyers look for and can help develop sell-in strategies.

Proprietors of smaller product companies are probably folks like you.  They are just breaking into national retailers or figuring out how to.  They have a very lean sales support or do the sales yourself.

Did I work with all three?  Sure.  But who did I prefer to work with?  Account managers and sales reps.  Why? Because they know their sh....tuff.  They know retail lingo, timelines, processes, how to forecast and measure sales...and a relationship with the buyer that has been built over time.  I trust them.   I know they won't screw up our business and if they do, they will have the ability to get it back on track.   So for these very important reasons, I avoided working with rookies and people with no big retail experience - even if they had a great product.

But did I work directly with smaller product companies?  Yes, on occasion.  And after vetting out as much risk as possible.  And even then,  rarely were those relationships without grief.   Without prior big retail experience, smaller manufacturers are typically less able to understand buyer's needs, how to navigate the complexities of big retail, inventory management, and how to build strategies to grow sales at shelf.  The small companies who were successful did their homework, got up to speed quickly, and hired the necessary people and resources.  Like Romy!

So should you work with a sales rep?  If you want to stack the cards in your favor, then you absolutely should.  It's worth the investment.  It is also worth the investment to figure out how to position your product line to meet the needs of a buyer - which is the ultimate way of grabbing their attention and building trust.  Finding a sales rep is all about who you know and word-of-mouth recommendations.  There are a lot of dishonest sales reps out there, so be sure to get a referral.  And like Romy said, before contacting them, you should have your ducks in a row and be prepared to present to them as if they are the retailer.

FROM THE BUYER’S PERSPECTIVE: DO I NEED A PRODUCT LINE OR IS ONE PRODUCT ENOUGH?

By Vanessa Ting For a buyer, the ideal situation is one in which a manufacturer has one hero SKU with a strong sales history.  But in addition, that manufacturer would ideally have a line of other products in the pipeline ready to ship once a buyer agrees to add new SKUs of your brand.

One product is enough for the short term, but to build longevity with a retailer, you will need to offer a line of products that can make a strong brand statement at shelf.

This is an extreme case.  But take the laundry detergent aisle as one example. Detergents are brand blocked as far as the eye can see.  Tide, All, Gain are all merchandised in clear, vertical statements.

And while Tide has enough volume to warrant 4 facings of the same SKU, you will not at the beginning.  And building a brand block will require multiple SKUs of single facings.  But keep in mind, a buyer will not just accept any additional product you send his/her way.  Each new product launch has to build incremental sales (not cannibalize current sales) and offer unique benefits.

Also, as a buyer you work with many vendors.  For example, if I have 100 products on my shelf, I rather work with 4 vendors who can supply me with 25 products each, as opposed to 100 vendors who supply me with 1 product each.  4 vendors versus 100 vendors – which workload would you choose?  So for cost and time efficiency, buyers prefer working with fewer vendors with a robust line of proven sellers.

Readers, what kinds of decisions do you struggle with as you think about how to grow your line?

FROM THE BUYER’S PERSPECTIVE: HOW DO I KNOW IF I’M READY TO PITCH TO A BUYER OR MOVE MY BIZ TO THE NEXT LEVEL?

By Vanessa Ting You are ready to pitch to your first retailer when you can say “I've done it!” to the following:

• You have conducted market research with potential users and retailers to qualify the concept, price, product and packaging.  Potential users should consist of more than just your friends and family.  You want objectivity!
• Your product meets an unmet consumer need and delivers product benefits in a unique way.
• You have ensured your retail price is within range of your competitors, but also occupies a distinct price point to create differentiation.
• Your retailer markup is in line with retailer’s expectations.
• You have a product margin (your company’s margin) that is healthy and sustainable.  Get those cost of goods down (COGS) – even if it means producing overseas.
• You have tested your product with a "guinea pig" (also known as "Test and Learn") retailer to make sure EVERYTHING has been road tested – including your sales pitch, retail promotions, and shipping/fulfillment logistics.
• You have created a brand that is ownable and memorable.  And have built a multi-prong marketing plan to help build awareness and drive purchases at shelf.
• You understand the basics of inventory management.
• You have a retailer pitch deck. This includes sales history or a sales volume projection, and an explanation for how you will drive sales for your intended retailer.

Generally you know whether you are ready to advance to your next tier of retailers when you’ve been selling in your current tier for 6 to 12 months and have collected sales data that demonstrate steady sales growth over time.  If your sales are not growing in 80% of your stores, then it’s time to pause and diagnose the problem.  Until you figure out why sales are not growing, you are not ready to advance to the next tier.

A note about tiers: A good retail distribution strategy paces your retail growth into stages or tiers.  These tiers are specific to your business and designed to help you reach your ultimate dream retailer.

FROM THE BUYER’S PERSPECTIVE: WHAT IF THE RETAILER SAYS THAT THEY ARE NOT INTERESTED? THEN WHAT?

By Vanessa Ting Use a “no” as an opportunity to get more information to improve your pitch.

Never receive a “no” without following up to ask “what would you like to see done differently?”  Remember, a “yes” means that you have satisfied the buyer’s requirements in three areas:

1)      Product, pricing and packaging are all in order

2)      Your supply chain, inventory management and customer support operations are all in order

3)      You have a marketing plan for how you will build awareness and drive sales to shelf

So if you hear “no” then find out which of the three areas above need improvement.  Being mindful of the buyer’s limited time and with diplomacy, press on for more details on where your product and pitch fell short.

Be open-minded when receiving the feedback.  Don’t use it as an opportunity to argue or be defensive.  Just take it all in and take good notes.  At the end of the conversation, ask kindly if you can contact them again after you have investigated the feedback and have improvements to share.

Timing also matters.  There have been times I said “no” for 6 straight months and then one day, a spot on my shelf opened up or consumer trends shifted – and all of sudden that “no” became a “yes”.   Because timing is a driving force, it is important to stay on top of business changes occurring with that retailer and the industry.  Do this by reading industry news daily, talking with your peers and following experts on Twitter.  As the tide shifts, opportunity for your product may emerge.  It’s your job to recognize it, jump on it and use it to your advantage.  Romy is successful because she is good at finding relevant news-bites and business updates to create dialogue with buyers.  This keeps her brand top-of-mind with buyers so next time a spot opens up, they think of her first.

For more on this topic, you can stream an audio clip of an interview I gave on this topic.  Move the marker to 23:08 to skip straight to the juicy stuff, “What to do when the retailer says no”.

FROM THE BUYER’S PERSPECTIVE: DO RETAILERS CARE ABOUT MY PRODUCT’S PR EXPOSURE?

By Vanessa Ting It’s not just PR exposure that retailers care about, but your overall ability to build brand awareness and create demand for your product.  And PR is just one lever to use to create demand for your brand.

Romy offers great tips on how entrepreneurs can generate PR for themselves.  I will add to that by suggesting what you can propose to retailers to supplement your PR efforts, especially if you're on a limited budget.

If you're unable to drive customers to those retailers through PR, pull other levers at your disposal such as:

• Use that customer list you have built over time.  Offer to drop a direct-mail postcard or email announcing the launch of your product to your customers in your retailer’s geographic area.
• Leverage social media. Tell retailers you will create programs that direct people following you on Twitter or Facebook to their stores. Combine it with a promotional offer (as mentioned above) to sweeten the deal and get people running to those stores.
• Strike strategic partnership deals with complementary manufacturers who have the PR muscle for co-branding or cross-purchasing (e.g., coupons) initiatives.
• Focus on driving impulse purchases among shoppers already in the store. You can do this by making sure your packaging gives you a noticeable presence and clearly communicates what you're selling. Work with the retailer on giving you prominent merchandising space (may be hard if you can’t sweeten the deal with additional funds). Or use your limited budget to create distinct POP displays or shelf signage. Or create a promotional offer (that you fund, not the retailer) such as “Buy 3 and Save” or “Buy One Get One Free”.
• Show your sales history. If you can show these potential retailers that you have been achieving strong sales in your current stores, this may encourage them to give your product a try. Nothing speaks louder than a proven sales record.
• Get creative with solutions. If these retailers are reluctant to take a gamble on you, offer solutions that mitigate some of their risk and shows your confidence in your product. For example, you can offer consignment deals or a limited time store test.

FROM THE BUYER’S PERSPECTIVE: WHAT CASH FLOW CONSIDERATIONS SHOULD I BE THINKING ABOUT NOW VERSUS LATER?

By Vanessa Ting Selling to major retailers is a strain on cash flow.  There are many fees and charges you will be exposed to within the first 6 months of getting a “Yes” from stores like Target, Walmart, Costco and other national retailers.  These costs will be covered in more detail in a future post, but for now, here are the cash flow considerations you should investigate further.  Since Romy covered the risks to positive cash flow, I've taken the approach of suggesting cash investments you should make now versus later to increase your appeal to retail buyers (and improve your cash flow down the road).

NOW:

Invest in funding the “right” Suggested Retail Price

Avoid artificially high retail prices.  Many first time product entrepreneurs are unable to get favorable costing because of their small production orders.  As a result, they price their products (both retail and wholesale) artificially higher to offset the high production cost per unit.  Make sure you price your product strategically (e.g., good, better, best) and based on what the market will bear.  Obviously it is important to price for your own profitability too, but at the beginning, you may need to “invest” in your business by taking a smaller per unit profit.  This obviously reduces incoming cash flow, but if you are realistic about your breakeven point and manage your financials methodically, it will pay off.  You want to avoid having fluctuating retail prices in the market or artificially high retails that can hurt your sales volume, thereby making you less attractive to retailers.  And unless you have built a strong brand, often times your product cannot justify the artificially high retail price.

Invest in formal or informal product usability testing

Shop your prototypes around for feedback to as many consumers and retailers as possible before you commit to production.  Nothing is worse than bringing to market a product that has not received “buy in” by these two important stakeholders.  Getting as much input now will save you from the buyer rejection, the cost of consumer returns or complaints and the expense of unsold inventory.  Avoid relying on friends and family feedback – it will always be biased.  Leverage entrepreneur networking groups, stop shoppers as they walk out of your targeted stores, invest in focus groups, contact retail buyers for a “preview” (which will NOT hurt your future chances or ruin the “wow” factor – big misnomers!).  Get creative; there are many cost-effective ways of getting this input.  Major consumer goods companies spend a disproportionate amount of their budgets on product research and usability testing prior to launch.  Obviously you don’t have their big budgets, but you should take their cue and spend a little money up front to save you money later – and prevent blowing your first and only chance in market with retailers and consumers.

NOW (AND LATER):  

Invest in branding early and often 

To be attractive to buyers, you need to have built a brand that distinctly targets a consumer segment.  This is more than designing the colors and logo (visual brand identity), but having a brand strategy.  Building a brand effectively occurs over the span of time and cannot be rushed, so start now.

Building a brand requires a financial investment, both in defining your brand now  (research, strategy development, identifying key messages) and in executing the marketing tactics later (advertising, sampling, event marketing, packaging, social media, retail promotions).  Without an attractive brand that can drive store traffic and sales, buyers will find your product less valuable to them (and at worst to you, buyers will turn to a current vendor with similar manufacturing capabilities to knock off your idea at a cheaper cost.  Strong branding can prevent this!).  Branding is a large up-front expense, as well as an ongoing cash flow requirement throughout the life of your product(s).

LATER:

Hire Vendor or Manufacturing Reps

They are usually required by many major retailers.  And it is usually to your advantage to use them to help you make contact with buyers, sell in your products, navigate the new vendor set-up process, provide customer service, and buyer relationship management.  Often times, these reps take anywhere from 5% to 10% of net proceeds after you receive payment, which reduces your incoming cash flow.

Final thoughts: In general, all cash flow considerations “now” should strategic, forward-thinking, and prioritized by the potential payoff (the investment horizon will be longer).  Invest up front to avoid last minute changes or redesigns that can be costly.  Cash flow considerations “later” are more operational in nature with more immediate ROI.

From the Buyer’s Perspective: What are the Inventory Control expectations retailers have of vendors?

By Vanessa Ting I covered this in an earlier post so I won’t belabor the point much more except to say this:   It’s important to only ship as many units as the retailer can sell.  Always aim for a 95% sell-through.

Retailers, both small and large, expect you to help them manage their inventory levels.  They expect you to speak up if you think they have placed too large of an order.  They expect you to challenge back if they have placed too small of an order.  But how do you know what the right inventory level is?  Read about it this old post.

Making Inventory Management Mistakes are Expensive It is common practice for large retailers to ask for a concession when you miss your volume projections.  If your product underperformed, major retailers will chargeback the cost of the unsold inventory or worse yet, additionally charge you the margin dollars they lost when your product didn’t sell.  If your product oversold, and you couldn’t replenish inventory fast enough, the retailer may chargeback the loss sales based on a daily sales rate.

Not only is it important to get the right amount of inventory to buyers’ stores as mentioned above, it’s also important to get it there on time.  If your product arrives too early, your inventory will incur unexpected storage and handling costs.  In this case, a larger retailer may chargeback that additional expense.  If your product arrives late and the shelf sits empty, a larger retailer will charge you for those days of loss sales.

Smaller retailers are not in the practice of charging back for making inventory mistakes.  Mostly because it requires too much work on their end to enforce chargebacks.  Instead, they will cut your products out of their assortment altogether and not work with you again if your mistakes are costly.

Inventory Control When Manufacturing Overseas If you are shipping product from overseas, managing inventory becomes even more unpredictable.  With ocean freight lead times, cargo capacity and shipping priorities, and/or customs clearance - sometimes your shipment will not arrive on the date your factory or expediter quoted.  This impacts the date product will arrive at retailers’ stores.  For this reason, it is advisable not to sell to retailers until you have product in-hand and in your DCs.  This is often times not ideal for small businesses, but it will help your vendor performance and help you achieve a high rating on your vendor scorecard.

Vendor Performance Scorecard Yes, in addition to sales performance, vendors are measured on inventory management and shipping performance.  Some inventory and supply chain measures include:

% on time delivery

% fill rate

% receipt efficiency

% shipping compliance

Here is a sample scorecard that covers the full throttle of vendor performance metrics:

By now, you realize that selling to retailers is not just about having a good product, strong marketing and sales support, and a strong financial rationale.  It’s also about delivering the product in the most efficient way.  The larger the retailer you sell to is, the more you are expected to be sophisticated with inventory control and supply chain management.  While you do not need to have an in-depth understanding of this when selling to independent boutiques and small chains, it will behoove you to start thinking ahead for when you do finally scale up.

From the Buyer’s Perspective: Will Selling at a Major .Com Help me Get Into Major Retailers’ Shelves?

By Vanessa Ting The short answer is no, except in one unlikely situation.

The long answer is....

Major retailers are more concerned with the sales traction you have built in other brick and mortar stores.  And the more established those stores are, the more impressive your sales results.  It is important to note that how a product sells online does not directly transfer to how it will do in-store.  This is why selling in the .com channel doesn’t do much to win over the store buyer.  Even if it is Amazon.com.

However, selling in a .com environment may be helpful in the following case:

Many large stores have .com sides to their business.  For example, Target has Target.com and Walmart has Walmart.com.   In these situations, it can sometimes help to first get into the .com side of the business.  By doing so, you can prove – using Target as an example – that Target shoppers (at least the online Target shoppers) have an appetite for your product.  It’s a little easier to translate sales performance from Target.com to Target stores than it would be from Amazon.com to Target stores.

Once in a while, those Target or Walmart store buyers will scan the list of  their company's .com products to find hot-selling items that are not being carried in stores.  In exceptional cases, they will bring those items into their store assortment.   Stores buyers are typically different than .com buyers, but they do communicate.  So in this scenario, it is conceivable that you can win a place at shelf by selling to .com first.  But this is more so the exception than the norm, so I would not recommend this as part of your sell-in strategy.  Your best sell-in strategy will always be to prove your sales in other stores first before approaching the top-tier stores.   

Ultimately, selling at .com will not hurt you - as it helps drive your company sales and profitability.  Romy makes excellent points on the upsides of selling on .com.   So why not do it?!   Just make sure your .com retail prices do not undercut your brick and mortar retailers.

From the Buyer's Perspective: Five essential tips for getting the attention of a retail buyer!

By Vanessa Ting

The common tips you might hear include:  Hire a sales representative, go to trade shows, have your friends and family make requests at the store.  These are all effective tips, but there are a few more ways to be resourceful.

Tip 1:  Be at the place of influence of your targeted retailer.  Whether they buy for the big guys (Walmart, Walgreens, Kohls) or small independent retailers, buyers are out in the market place and shopping competitors to stay on top of trends and get new product inspiration.  Try and find out where they shop.  Often times they are shopping small boutiques and stores – since many new trends start there.   Then, using this intelligence, get your product into that store.

Tip 2:  Research that retailer and determine what is important to them.  If they are publicly traded, read their annual reports and listen to quarterly earnings calls to learn their strategic focus. Knowing this, you can spin your retail pitch to align with their strategies.

Tip 3:  Shop their stores.  Notice how they merchandise your product category.  Observe price points, how they organize brands, piece counts.  Form opinions and recommendations on how they can do things better to grow their business; and those recommendations should also include adding your brand.  Adding value and being a credible source of unbiased industry intelligence will earn you ten more minutes with that buyer than if you were calling just to pitch your product alone.

Tip 4: Another way of grabbing attention is showing your product has selling power.  What is its selling history in other retailers?  Have sales been growing steadily over time? Sales is THE most important metric to grab their attention.

Tip 5: Lastly, take a step back and make sure you have a tight elevator pitch.  30 seconds.  Be succinct, clear, and persuasive.  Give them the information they want to hear.  No more.  No less.

What tips do you have to share with our community?  We would love to hear what has worked for you, so please share in the comments section below!

Next, Romy and I will tackle the common question, "What things do I need for my retail pitch?"  Check back with us soon!