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How to get your products into a retail store

June 24, 2016

How to get your products into a retail store

How to get your products into a retail store

So you've got a product and you want to expand by selling it to retailers. You probably have an idea of the retailers that you want to target, but before you approach them it's best that you get all of your ducks in a row. Buying meetings might only be ten minutes long, and the questions will come thick and fast. You need all this information close at hand, or even better, committed to memory, before you go into the meeting.

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.

Retail Price

If you are going to be selling on your own website or at markets, the retailer will want to sell the product in their store for around about the same price that you do, they probably don't want to be your customer and your competitor. You'll need a firm idea of a recommended retail price.

Wholesale Price

Your wholesale price is the amount of money that the retailer will pay you for each product. Typically wholesale is quoted excluding GST. Be clear about the terms that you're quoting under (read below under delivery), and you should quote based on the Terms of Trade that you think that the retailer is going to expect from you (read below under Terms of Trade).

Terms of Trade

Before you start supplying a retailer you'll need to agree to some Terms of Trade. This document will outline when the retailer will pay you, which can vary from 20th of the month following delivery, all the way to 90 days after delivery, and whether or not they'll expect rebates for advertising, prompt payment, markdowns, volume, and position in store. I can't stress enough how important it is that you don't get screwed on the terms, for the bigger retailers this is where the money is made, so have it checked over by a lawyer and make sure that you factor in the terms when you quote. Don't feel like you need to accept the first set of terms that are offered to you, they're up for negotiation.

Margin

One of the first questions that retailers will ask is for the margin, or if they don't ask they'll probably pull out their calculator and figure it out themselves. The margin is the percentage difference between the retail price and the wholesale price, or to put it in plain terms, it's the money that the retailer gets to keep, after they pay the tax man GST, and they pay you the wholesale price.

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'.

Mark-Up

Some retailers talk about markup instead of margin, there is a different formula to calculate mark up. It's a good idea to know your markup % as well as your margin %, however in my experience in New Zealand most businesses talk in terms of margin rather than mark-up. To calculate markup $: Markup ($) = Retail Price - CostTo calculate markup as a %: Markup (%) = Markup Amount ÷ Retail Price

Labelling

Not so important for online, but if you're selling into retail stores you need to get your products retail ready, so that they're appealing to customers. That means care labels if you are selling apparel, packaging if you're selling food, swing tags with your logo on. Think about how the retailer will sell your product, pharmacies will probably want hang sell, other stores might want something to be boxed and sitting on a shelf. You might want to include a label with pictures of how to use the product. Try to think about the end customer, you want to make it easy for them to buy your product, also think about who will till be buying your product and why. If your product is going to make a popular gift then make the packaging exciting and gifty. A good example of this is Pretty Brave shoes, which in my opinion are packaged brilliantly for gifting, you can imagine how the recipient will feel when they open that gift at a baby shower.

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.

Delivery

They'll want to know when you can deliver, or lead times (how long after they place an order you can deliver). They'll also want to know if you're holding stock here, or if it always needs to be made to order. Assuming that you don't have the capability to pick, pack, and dispatch stock to each individual store (not to mention absorb the freight cost) you'll want to quote the price FIDC (free into distribution centre).

Volume

They'll want to know the minimum order, which is what they mean when they say 'what are the MOQ's? (Minimum order quantities). This is sometimes expressed as a dollar amount, sometimes volume (like a full container load), and sometimes a number of units. For example the MOQ's in our shop range from $100 to full container load.

Approaching Retailers

Now you know everything there is to know about your product, and it's ready for sale, so you're ready to start approaching retailers. Don't be shy, even if you're a small business with just one product, no buyer wants to miss out on the next hot thing. You need to start doing a bit of detective work.
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

Be prepared with samples, printed out pictures, spec sheets, and pricing. Print out a few copies, in case the buyer turns up with a few other people. Get to the meeting on time, and don't assume that there will be any equipment in the room, other than a table and chairs. It's unlikely you'll be given access to the company wifi, so if your presentation requires internet access make sure you've got some data.

A Few Do's and Don'ts

Don't be too disheartened if you get turned down, and ask them for feedback, it might be that they don't think the product is right for their customer, they've already got something similar, they don't have enough money this season, or they might have some suggestions for ways that you could make your product more marketable.
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.