Getting into the retail major leagues is something many entrepreneurs dream about. 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.
Begin with questions. Before you try to make the leap to multiunit retail, ask yourself these basic questions: Does your product fit a demand just waiting to be tapped? Have you already found a multiunit retailer that’s a good fit for your product?
What is it about your product that would make a buyer see fit to take a chance on your product? If you land the deal, can your production handle the volume? Do you want to sell your product directly to the retailer, or do you want to license your product to a manufacturer who’ll then distribute it for you?
Plan ahead for profit. 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, such as the sheer power of numbers that goes along with exposure to a bigger market.
Look for the right store. A search for the best retailer for your product starts with you browsing stores for similar or related products. Spend some time in local retail stores to see what’s on the shelves. Picture where in the store your product would sit on the shelf, and keep that in mind when it comes time to approach the store’s buyer and make your presentation.
Check to see if the retailer offers any special programmes that could give you a leg up, such as local vendor programmes that serve as an entrée to regional markets or programmes that offer breaks to women-owned or minority-owned businesses.
Determine who should pitch your product to retailers. Your decision to either offer the product to retailers yourself or hire a representative to do it for you depends a lot on your product as well as on your strengths as a businessperson.
If your product line is one that involves frequent changes – say, clothing, for example – you may want to hire a manufacturer’s representative who’ll present your line among the others he or she pitches in return for a percentage of the sales. In the grocery industry, for instance, it’s common to pay a commission to a broker who’ll try to pitch your product to a grocery retailer’s category manager.
Just how do you find a rep to pitch your product? One way is to get referrals from buyers. Another is to search the directory of trade associations within your product’s category or track down a list of the sales reps attending regional or national trade shows. If you have a one-time pitch that needs to be done, you may choose to do it yourself.
Fill out the vendor application. 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 email to ask for an appointment for a presentation.
Make contact with a buyer or category manager. 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 traveling in your future).
Be ready for the presentation. 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. 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
Prepare for increased production volume. A whole 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.