Breaking Into the Big Boxes
Here's a strategy that'll help you expand your distribution channels in a way that makes sense to your bottom line.
Opinions expressed by Entrepreneur contributors are their own.
A reader sent in the following question recently in regards to getting their product into a large retail outlet:
"I'm in the process of launching a specialty food product. I've lined up a contract manufacturer to make the first batch of 5,000. What's the best way for a small business like mine to get into the big retail chains?"
No doubt about it, "big box" retail chains like Target and WalMart are taking over retail distribution channels for most consumer products. People want the convenience of one-stop shopping, and they love the discounted prices. But it's tough for small businesses to break into the supply chain when retail is dominated by only a handful of players.
First, you have to find the right buyer for your product among the retailer's hundreds of employees. Then you have to get on the buyer's radar screen so they can review your product. Then you have to make the pilgrimage to the retailer's corporate headquarters (Bentonville, Arkansas, in the case of WalMart). As a small supplier, you'll have to be prepared to grovel, beg and plead to get your product considered, and your pitch will have to be perfect.
But here's the kicker. Let's say you do all that, the buyer is absolutely wild about your product, and (surprise!) the buyer actually has the authority to buy your product right then and there without "going up the corporate chain" for further approvals. Here's what she's going to say to you when you're done pitching: "You've really got something here; we're definitely interested. We'll place an initial order for 100,000 units, we need delivery next week, we're going to mark it up 300 percent and pay you $1 per unit (or less) over your cost, and we want you to take back all unsold inventory if it hasn't sold out in three months."
Okay, hotshot, now what are you going to do? Is that a sufficient price to pay to get nationwide recognition for your product?
A manufacturing run of 5,000 units is simply going to be too small for a large nationwide retail chain. My advice would be to launch your product on a smaller scale, using local retailers, specialty mail-order retailers and online retailers to start with. That way, you can charge a higher price for your product, get valuable market feedback, and recoup at least some of your investment before you gear up for the mass production a national chain is going to require.
Talk to some of the higher-end gourmet grocery stores in your area and get them to carry the product. Not only will the stores generate sales for you, but remember, they're being visited every day by representatives from the larger specialty food distributors. If a rep sees your product in a local store and likes what she sees, she'll probably want to "rep" your product as well (for a fee, of course).
These days, to sell any kind of consumer product, you have to generate buzz among the early-adopter buyers who always want to be the first on the block with the latest new thing. So look for specialty retailers that target these early adopters. For example, since you have a specialty food product, you simply must do everything you can to get it into Zabar's supermarket chainin New York City. The people who write articles for the important trade publications in the specialty food industry are always looking to see what's new at Zabar's, and if they see your product there, you could be in like Flynn.
And don't overlook online retailers. These days, if someone has a specialized or niche interest, the first thing they do is Google the web, and a number of clever Internet entrepreneurs are creating information clearinghouse websites for people with a common interest. Thinking about a line of baked goods for people with food allergies? You couldn't ask for more than a mention on AllergyGrocery.com.
Specialty mail order and online retailers are less likely to order large quantities--and are more likely to negotiate generous price and return conditions--than the big nationwide chains. Some will even drop ship your products--they'll list them in their catalogues or online and will order from you only when they receive an order from a customer, so you can maintain control of your inventory.
So how you do find specialty retailers? The online Chain Store Guidepublishes several high-priced directories of specialty retailers (expect to pay $200 and up for access to these). Sadly, the classic publication, The Catalog of Catalogs has been out of print since 1999, but you can find an out-of-date copy at most libraries and it's still pretty good.
You can also find specialty distributors through your industry trade association. The National Association for the Specialty Food Tradeoffers several publications and resources for its members that aren't available to the general public. If nothing else, by finding out where other members are looking to source their products, you'll know where you need to be to generate the buzz necessary to get your product off the ground.
Cliff Ennico is a syndicated columnist, author and host of the PBS television series MoneyHunt. His latest book is Small Business Survival Guide(Adams Media). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. Copyright 2005 Clifford R. Ennico. Distributed by Creators Syndicate Inc.