Breaking Into The "Big Boxes"
Cliff Ennico
www.creators.com
"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 such as Targetreg; and WalMartreg; 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" to review your product. Then, you have to make the pilgrimage to the retailer's corporate headquarters (Bentonville, Arkansas, in the case of WalMart(r)). As a small supplier, you will 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 of 100,000 units, we need delivery next week, we're going to mark it up 300% 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 the 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 high-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 probably will 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. 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 chain in New York City (
www.zabars.com
). 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 . . .
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 (
www.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 will 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 Guide" (
www.csgis.com
) publishes 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 Trade (
www.specialtyfoodmarket.com
) offers several publications and resources for its members that are not available to the general public. If nothing else, by finding out where other members are looking to source their products, you will know where you need to be to generate the "buzz" necessary to get this product off the ground.
Cliff Ennico (
cennico@legalcareer.com
) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is 'Small Business Survival Guide' (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at
www.creators.com
. COPYRIGHT 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.
