Electronic Retailer - January 2012 - (Page 37)
BY ADAM SCHUMACHER
Create a Plan for Long-Term Retail Success
Is retail distribution a risk or a reward? The truth is … it’s both. One of the many decisions you will have to make during the development of your product is to define your distribution model and incorporate retail sales into your plan. Given the short window of time many direct response products have, the decision on whether to enter retail needs to be part of the brand strategy and planned during the product development phase of the launch. As you determine your distribution model, you must weigh the risks of retail with the potential rewards it can bring and the long-term effect it will have on your business. If you want to be a one-hit wonder, then you can stop reading because this doesn’t apply to you; but if you want to build a company that will be in business longer than 12 to 24 months, then you need to build in a strategy where you use retail long-term and manage your risk and the risk of retailers.
Plan Your Strategy
As retailers have seen As Seen on TV items bring big hits and big failures into their stores, they have started to put more of the risk burden on the vendors in regards to new products. Many times, retailers expect unrealistic sales performance just because a product has the As Seen on TV logo – not every item can be the “big hit” of the year – and they have expectations for guaranteed sales, longer payment terms and one-sided exit strategies. These requirements from retailers can become a huge burden to your company, and, in some instances, they have put great companies out of business. The challenge for your company is to manage a program with realistic expectations for both you and your retail partners. What is the long-term strategy for your company or brand? Will people buy your product one time, or will they continue to buy over and over again? How large is the market for your
There is a reason why the best companies have hit after hit: It’s because they look at the long-term big picture of their relationships and manage their product programs accordingly.
particular item? Will you create another product that will sell to the same market? Ask yourself questions like these in order to determine what the long-term goal is for your company and your brand. If you want to build a company that will last, then you need to act accordingly with your retail partners. Nobody needs advice and nobody is going to question you when things are going perfectly, but how do you react when things start turning downward? This is a question that only you can answer, but understand that retailers have long memories. If you stay in the Consumer Packaged Goods (CPG) world, there is a good chance you will cross paths with the buyer again. For a new brand and a new company, you don’t always have the luxury of long-term relationships, so you are selling off of projections and promises. This can be challenging for a new brand; you have the utmost confidence that your product will become a wild success and you want to portray this to your retail customer with high projections and quick turns. You need to balance building excitement with realistic expectations; this is where caution comes in. If you tell a retailer that you are going to advertise heavy in Q4, then it will make inventory purchases based on this information. If the sales don’t happen based on these expectations for Q4, then that retailer will be coming back to you for answers and a solution to fix its inventory problem.
It is true that buyers buy based on relationships; one of the hardest things to do is get in the door and be taken seriously. 37
January 2012 | electronicRETAILER
Table of Contents for the Digital Edition of Electronic Retailer - January 2012
Calendar of Events
Your Association, Your Bottom Line
IMS Retail Rankings
Jordan Whitney’s Top Categories
Lockard & Wechsler’s Clearance & Price Index
When Words Can Hurt
‘Because They Can’t Afford to Get Sick’
Electronic Retailer - January 2012