Don’t worry, no one is going to rip off your product. Here’s why – and what you can do to protect yourself:
Private label, also called store brands or owned brands, are retailers’ way to offer its shoppers a good value. These are often used as “opening price point” brands to lure in the value shopper with the hopes of either pocketing a nice chunk of change through better product margins or trading them up to a pricier brand (your brand).
Endcaps and sidecaps are largely used to drive a sharp lift in sales in a short period of time. Therefore the expectations for the sales volume they will generate are HIGH – and typically not achievable for most newcomers to achieve. These “programs” are in-and-out programs. Meaning, this space is allocated for a limited time. And, buyers have to compete with other buyers to win this temporary space. To win the space, they have to propose an endcap or sidecap program that will earn their retailer the most sales and profits. And if buyers win this space, it gives them a huge leap forward in meeting their individual financial performance goals.
What a great problem to have! No, really – it can be a problem.
Last week, I was at Target HQ to present a line that recently launched in market. How they were invited to Target for a line review is actually a crazy story. They launched in Spring 2014 at a trade show at which a Target buyer stopped by their booth and collected information. Fast forward a couple months later, out of the blue, they received a call from (a different) Target buyer inviting them to Minneapolis to present their line for consideration for the 2015 assortment.
Let me be clear. This rarely happens.
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. 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.
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.
This tip is THE most often ignored advice I give. Which is frustrating because it is among the EASIEST of critical steps to complete in your process of woo-ing a buyer.
Showing that you know the retailer’s business is important. Before you go into any conversation with a retail buyer – be it an initial email to make first contact or an in-person presentation or as a current vendor, you should always know the following, which can be found in a retailer’s annual report (also known as, 10K):
Going global is great for younger companies because it helps grow your sales and creates cash flow. But one risk in going global is the inability to control your brand reputation. And brand is what creates value for your line and company financials, your retailers, investors and potential acquirers.
You are ready to pitch to your first retailer when you can say “I’ve done it!” to the following: