Getting into the retail major leagues is something many entrepreneurs dream about. Have you ever envisioned your products on the shelves of a big box retailer but wondered just how to get your company ready for the prime time?
According to experts--and some entrepreneurs who've already made the leap as vendors or suppliers--there are some basic principles that can help guide you through the process. If expanding into the retail big leagues is your goal, these eight steps can help you get placement for your product.
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This post originally appeared at Entrepreneur.
Begin With Questions
Before you try to make the leap to multiunit retail, ask yourself these basic questions: Does your product fit a demand just waiting to be tapped? Have you already found a multiunit retailer that's a good fit for your product? What is it about your product that would make a buyer see fit to take a chance on your product? If you land the deal, can your production handle the volume? Do you want to sell your product directly to the retailer, or do you want to license your product to a manufacturer who'll then distribute it for you?
Lake Charles, Louisiana, chef Kevin Hester took the licensing approach with his Cajun Chickcan, a wire caddy he designed to solve the problem of beer can chicken recipes run amuck by the cooking bird's toppling tendencies.
After patenting his idea and marketing the caddies to local, independent hardware retailers, Hester asked himself all the right questions and discovered his product was ready for prime time. It didn't hurt that a popular cookbook on making beer can chicken and a barbecue guru extolling the beer-tender fowl's virtues were fueling demand for his product among American barbecue chefs in love with the idea of poultry impaled on a can of suds.
Hester's next step? Knowing that he needed some help getting exposure for the Chickcan, he went in search of a licensee. Walking the aisles of Home Depot and Lowes led him to Rodney Barber, owner of Bayou Classic in Brandon, Mississippi, who agreed to license the product, manufacture it and get it on the shelves.
"Barber invented the turkey fryer, and he saw what a good product could take off and do ... He helped me launch into the big box stores, which I would not have been able to do [on my own]," Hester said. Now the Chickcan is on the aisles in Wal-Marts throughout the country, and Hester earns royalties from an estimated $4 million in sales per year.
Plan Ahead for Profit
Before you even think about becoming a multiunit chain's vendor, you need to make sure you can build a reasonable profit margin into your product's wholesale price. Plan for a manufacture cost that's one-fifth the retail price--or less. Then build the cost of packaging, commissions, marketing and distribution into the wholesale cost of your product. Check the retailer's guidelines for other fees as well that you'll have to build into the cost of your product.
A discount retailer will trim profit margins to the bone to squeeze those famed low prices out of products--but there are some advantages for vendors willing to go lean. In the case of Wal-Mart, for example, there's the sheer power of numbers that goes along with exposure to the world's largest market.
Retired retailer Martin Lehman, a volunteer with SCORE , a national organization that provides business counseling for entrepreneurs, says companies wishing to sell to big discount retailers need to closely examine their bottom line. If a widget costs $1 dollar to make, and the retail price is $4, and the product wholesales to boutiques at $2, a big box retailer may only offer the manufacturer $1.25--just 25 cents over the cost to make it. "They're a tough buy," Lehman says. "A manufacturer has to ask, 'Can I make enough with that quarter?'"
Look for the Right Store
A search for the best retailer for your product starts with you browsing stores for similar or related products. Spend some time in local retail stores to see what's on the shelves. Picture where in the store your product would sit on the shelf, and keep that in mind when it comes time to approach the store's buyer and make your presentation.
Check to see if the retailer offers any special programs that could give you a leg up, such as local vendor programs that serve as an entrée to regional markets or programs that offer breaks to women-owned or minority-owned businesses.
Kate Crosby's Charlottesville, Virginia, company, Dionis Inc. , grew from a cottage industry to a small business as the line expanded from soap to include what is now the company's driving product, lotion--all still using goat's milk from the Blue Ridge Mountain area. The company had more than a decade of business under its belt before courting the attentions of Cracker Barrel . Crosby just knew her product was a perfect fit for the chain, which bills its 538 company-owned units in 41 states as "Half Restaurant, Half Store, All Country." And the company agreed, first placing Crosby's products in just a fraction of its stores to test its customer interest.
Happy with the placement she was getting in just one district, it never occurred to Crosby that her products could be a national presence in Cracker Barrel stores. "It was above our radar," she recalls. "But one day we got called out of blue, and we went national. We went from 10 to 15 stores to 350 and had to start ordering [in quantities of] 50,000 and 100,000."
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