If you’ve recently launched a brand, you’re probably searching for every opportunity to grow it. Your sights may primarily focus on major retailers and chain stores. However, that shouldn’t cause you to overlook other growth opportunities. One of the best examples of this are your local independent retailers.
Independent retailers can help you build your brand into one that major retailers and chain stores can’t wait to stock. They can also benefit your fledgling product line in other ways you may not be thinking about right now. Keep reading to learn how working with independent retailers can help your new brand.
Factors to Consider When Working with Major Retailers
Working with major retailers may be your dream, but it is difficult to fully understand what it will entail. Major retailers ask their suppliers to conform to stringent requirements throughout the sales and logistics process. When you partner with a major retailer, you’re likely to be asked to give up significant control over how your product is packaged, displayed and sold in their stores.
Despite this, working with major retailers can be absolutely worth it. They can significantly increase both your brand’s exposure and volume in sales. Still, there are several important drawbacks to this that your brand should be aware of before pursuing a major retailer partnership. For example, you may have to pay increased advertising costs to make your product sell through volume compete if you are selling against an established brand.
Similarly, you may be asked to pay slotting fees to have your product stocked in a major retailer to protect their pockets in case you aren’t able to supply the line anymore or decide to close the business. Slotting fees are especially prevalent in the food and beverage industry. They are an upfront payment that major retailers often want in exchange for stocking your products on their shelves and storing it in their warehouses. You should ask about his added cost before entering into negotiation with a major retailer.
Payment terms are also an area where some new brands can often be unprepared. You should be aware most large retailers operate on 60/90 payment terms. This means that they ask their suppliers to give them 60, 90, or more days to pay for the product once it is received. This could mean that you are laying out hundreds of thousands of dollars in inventory costs for many months before recouping that investment.
The other perilous term major retailers often use for newer brands is scan-based trading (SBT). Traditionally, retailers would pay a supplier for the products and then recoup those costs once they’ve been sold to customers. SBT flips that. When a company adopts it, they receive goods from suppliers and don’t pay them for those goods until they’ve been scanned (ie, sold) to a customer. This usually goes hand in hand with a system called Electronic Data Interchange (EDI) which tracks the sales of your product line electronically in a spreadsheet.
The Benefits of Working with Independent Retailers
Independent retailers offer new brands unique benefits that shouldn’t be ignored during the growth phase.
One example of this is the increased presence they have in local communities. Many independent retailers are cornerstones of the community, which means that when your brand is featured in them, it has the potential to reach an entirely new group of customers. Think about the corner grocery where people stop to get their coffee or gas station where your parents get a scratch off ticket every time they fill their gas tank.
Independent retailers have often gained the trust of their customers to a degree that major retailers will never be able to match by having the same face behind the counter every time you visit the store. This is something your new brand can access and benefit from if you’re able to sell the store owner on your product line.
Another huge benefit of working with independent retailers is the margins they offer. Major retailers and chain stores typically operate under a high-volume, low-margin model. Independent retailers won’t dictate that you sell your products in this way. This means each sale you have at an independent retailer can be much more valuable than each sale in a major retailer or chain store especially when you factor in the ease of payment and lack of promotional cost associated with having your product on their shelf.
Working with Independent Retailers to Get Into Chain Retail Stores
Smart brands use their work with independent retailers as a stepping stone to get into chain retail stores and help build their retail resume. This is an excellent path you can follow to grow your brand into the titan you’ve always imagined it to be. There are a few key ways that independent retailers can help you break into chain retail stores.
First, you’ll increase your brand’s exposure by selling at independent retailers. It will get people talking about your product and make it appear more legitimate when the time comes to pitch it to chain retail companies. Brands like Yeti and LiveStrong followed this model by focusing on the enthusiast side of the market through independent retail before going into any major retail accounts.
Similarly, independent retailers offer you the chance to gradually build your sales numbers over time. Your pitch to chain retail stores is going to be much more intriguing if you can come in and say that you’re already selling 1,000 units a day through independent retail in their region.
Along with this, you’re going to get the chance to build up your production capabilities and fix any problems that arise along the way. This is especially important when your end goal is getting your products into chain stores since they demand a high-volume production pattern. Learning what will work and which in-store marketing tactics get the needle to move is extremely important to know before spending valuable marketing dollars with a big box retailer.
Ultimately, independent retailers function as a testing ground for your brand to prove that it will sell when on the shelf without anyone there to promote it. They provide an opportunity to see what works and what doesn’t while getting your company ready for the retail big leagues. Working with independent retailers is how you walk before you run toward your goal of seeing your product line in a big box store.