I've worked in retail for virtually my whole career (except for a brief stint in film), and I've written this blog post with my husband, who has also worked in retail for his whole career (except for a brief stint in banking). We often have friends and acquaintances asking us for a advice on how to get their products stocked by retailers, so we've written down all this information for you guys. We know that lots of mums start their own businesses, and we're hoping that this post can help some of you take the next step with your business.
Terms of Trade
To calculate margin you will first need to know the retail price including GST and the wholesale price including GST.
To calculate wholesale price including GST: Wholesale x 1.15
To calculate margin %: (Retail inc GST - Wholesale inc GST)/ Retail inc GST
For example, if wholesale is $50, and retail inc GST is $100
First calculate wholesale including GST: $50 x 1.15 = $57.50
Then calculate margin %: ($100-$57.50) / $100 = 42.5%
The margin = 42.5%
*You can also calculate margin using your wholesale price excluding GST, just make sure that both the retail and wholesale prices exclude GST.
How much margin will they want?
Margin requirements will vary from retailer to retailer and industry industry, but a key KPI for buyers is the margin that they achieve, and a key way that retailers stay in business is the margin that they make, so don't underestimate the importance of this equation! Generally a retailer will be looking for a margin somewhere between 30% and 80%, and the bigger the retailer, the higher the margin they'll expect, excluding supermarkets which tend to be low margin and big volume. There's no point in having a high margin percent if it means that the retail price is so high that no one will buy product- I always love the old retail saying 'you can't bank percentages'.
The other side of the coin is that if you're selling to a retailer who also sells online, they might want your product to be packaged for sending by courier so that it won't break.
1. Visit the retailers website to find out a phone number for reception, then phone reception and ask for the name of the buyer in charge of the department you're targeting, lets say your product is children's socks, you want to ask for the name and email address of the person who buys children's socks. If that doesn't work, try emailing customer support.
2. Hardly anyone likes making cold calls, and people aren't always at their desks to answer calls anyway. Try sending an email outlining your product, the wholesale and retail price, with a few photos. Try to make it as easy as you can for them, the buyers for the big retailers are busy, busy, busy, and stressed, stressed, stressed, they'll probably shut your email if the photos are too slow to load (I'm not even kidding!) A good idea is to produce a PDF with a couple of photos of your product, a few bullet points about it, your logo, the wholesale and retail price, and your contact details, that way they can print it off, refer to it later, show their colleagues, and file it easily.
3. Follow up your email with a phone call a couple of days later, and ask if you can meet in person.
4. If you're product is small and not too expensive, try sending a couple of samples with a letter, the PDF mentioned above, and your business card to the buyer, there is more than one way to skin a cat right?
If you're approaching smaller stores you can probably just email them through the contact us page of their website. Their site probably won't allow for attachments so instead include links to your website, with a bit of information, and your contact details. You can follow it up a couple of days later with a phone call.
The in Person Meeting
A Few Do's and Don'ts
Don't tell the retailer what YOUR cost price is. I'm always surprised how often people do this, but please remember that they don't have your best interests at heart, they have theirs.
Do get a lawyer to check over the terms of trade before you sign them, if you have friends in the industry ask if they can have a look over them too. Pay particular attention to the payment terms, and the rebates.
Do be cautious about exclusive deals, ask yourself if they benefit you as well as the retailer, and if you'll still be able to grow your business if you sign an exclusive deal with someone.
Do be honest about the other retailers you're selling in to. Every retailer thinks that they're cooler than they are, and every retailer wants to make sure that they're not stocking products that a less cool shop is stocking! Only half joking there!
I hope this article didn't make the whole process look too daunting and horrible. Really it's not. Every retailer is looking out for the next big thing, or they should be. The main thing for you is that you know your product and your numbers, and that you're prepared to answer any questions that they have, and quickly. Good luck.