How to Get Your Product on the Shelves of Large Retailers
By Andreas Schotter, Ph.D.
Small businesses should follow 10 important rules if they want to place their products on the shelves of large retailers. But first ask yourself: Have you already tested your product with your target customers and can you provide data about the tests? What is it about your product that would make the retailer excited? Do you want to sell your product directly to the retailer, or do you want to license it to a manufacturer who will distribute it for you? If you get in, can you handle rapid volume increases, and can you prove this to a retailer? Are you prepared to share some risk with the retailer in case your product does not turn around fast enough?
The 10 critical rules
1. Know why your product deserves shelf space over other products. Think about a large retailer as a company that wants to maximize rent for its shelf space. This can be done in two ways, by either generating greater margins or quicker turnover. At the beginning you will likely not able to compete on price, so it is critical to know your product and what it can do for the retailer.
2. Know your target distributor and your end customers. A search for the best retailer for your product starts with you browsing stores for similar or related products and to get a feeling for the type of end-customers that frequent these stores. For example, if you want to sell high-tech products that need a fair bit of explanation, then a big box retailer might not be the right distributor for you. Make sure that the customer that likely buys your product frequents the retailer of your choice. Spend some time at the retail stores to see what is on the shelves and who shops there. Have a clear vision where in the store your product would be positioned. Keep that in mind when you present your product to the buyer.
3. Make sure you and your product qualify for listing. If there is an application process, be sure to read the guidelines thoroughly before submitting the paperwork necessary to apply to become a vendor. The bigger the retailer is, the more specific and often more expensive their vendor requirements will likely be. Make sure that you are able to meet the standards for insurance coverage, electronic business processing, labor law and product safety, and delivery and lead times.
4. Check to see if the retailer offers any special programs, including local vendor shows that serve as an entry to regional markets or that offer opportunities for women-owned or minority-owned businesses.
5. Know your way in. Inside connections are always helpful. Contact the buyer or category manager by phone to check when and how frequently they look at new products. Try to see if you know someone at one of the target retailers who is able to connect you. However, buyers often have to follow very strict rules, and being too friendly can derail your sales efforts right at the beginning.
6. Generate excitement. Determine who should pitch your product to the retailer. Your decision to either present the product yourself or hire a representative to do it for you depends on your product as well as on your strengths as an individual salesperson. In addition, if your product line is one that involves frequent changes (like fashion clothing), you may want to hire a manufacturer’s representative who will present your line, among others, but therefore more frequently than you would be able to. In the grocery industry, it is common to use a broker who will sell your product for a commission. If you have a one-time sales pitch that needs to be done, you may choose to do it yourself.
7. Avoid product placement on the “graveyard shelves.” Visibility is extremely important. As a newcomer, you compete with much larger and more established vendors for shelf space. If your product is not being put in an attractive spot, you might not want to go ahead with the listing. However, declining an offer might also jeopardize any future opportunities.
8. Therefore, consider offering some initial in-store promotion activities for your product. Retailers really want support from their vendors, including in-store demonstrations, point-of-sale displays, advertisement and any other kind of promotion they can get. This can help you to bump up sales at the beginning and to make store personnel familiar with your product.
9. Leverage your online strategy. In today’s business environment, it is critical to have an online strategy. With very little resources, small businesses can create a professional Internet presence. If you are aiming for brick and mortar distribution, your online presence should serve as a multiplier. Don’t think “either or,” think “and!”
10. Be fully prepared for your presentation before you meet with the buyer. Know about the industry standards for your product, including sale terms, discounts, credit, shipping, allowances and return policies. Be ready to present your marketing and promotion plans, including visualizations of in-store demos, point-of-sale displays, advertising, online presence, etc. Have a sample of both your product and its packaging, including bar code and language requirements available. Packaging is of great importance, and therefore yours should follow the merchandising standards of your buyer’s policy exactly. Have a product brochure that provides thorough information on the product, including wholesale and retail prices, discounts, credit, shipping, allowances and other sales conditions available. Prepare a list of retailers currently selling your product. Be prepared to prove that you will be able to provide large volumes. This includes manufacturing information and as much evidence as possible to show how you or your manufacturer will be able handle increased volume while maintaining quality sand on time delivery. Be ready to talk about both your business and your personal history.
Andreas Schotter, Ph.D., is a professor of strategic management at Thunderbird School of Global Management in Glendale, Arizona. Before embarking on an academic career, Dr. Schotter was a senior executive with several multinational corporations in the automotive, industrial equipment, and consumer goods industries. He has lived and worked in Europe, Asia, and Canada. Dr. Schotter was the Asia-Pacific CEO of Bitzer International, a world leading commercial refrigeration equipment manufacturer from Germany. As an entrepreneur, he jointly owned and operated a manufacturing business in Australia together with a Chinese partner.