Make It Worthwhile
In most startups, the modus operandi (MO) is get into as many “doors” (or retail stores) as possible. The logic is simple. The more stores you are in, the more sales you will have and therefore the more successful you will be. And while that may seem true on the face of it, it is actually the worst possible move you can make in retail.
Probably the biggest misunderstanding about retail is that they are not in the business of food. Shocking? It should not be. They are in the business of real estate. Let me explain. To get into retail stores, buyers usually ask you for slotting – call it a set-up fee or one-time fee in order to get a facing – one spot on the shelf. This slotting fee can range from a few thousand dollars up to $40,000, for a single spot on the shelf! Obviously, that is a lot of money upfront with no refund policy, and really no guarantee of a single sale. You got to pay to play.
With that in mind, you can see that getting into as many doors as possible becomes a really expensive endeavor. For cash-strapped startups, you need to therefore need to choose wisely. Be selective about the retail partner you want to get into (and give your money to). Not all “doors” are the same. Some retailers are only good once you have stable base sales. Others are great at building your first base. Be picky!
Things to keep in mind is the geography you want to get into, the type of consumers you are catering to, the locations served by the retail partners, the competition of that retail partner, and the amount of support you will get from that retail partner. Some retailers are all too happy to take your money and let you go after six months if you don’t perform. Ouch!
And that brings me to my next point. Go for consumer value and retailer value, rather than chase after doors and facings. Getting more facings for a better shelf experience is great, but costly. You will get a “billboard effect” – see picture – but don’t hope that will suffice to get sales. If consumers don’t know your product nor your brand, if your packaging doesn’t speak to the consumers shopping the shelf, the great shelf presence will be beautiful but worthless. Instead focus on your sales velocities and turnovers. If you’ve done your P&L right, each sale gives you money to pay for promotions and recoup (over time) your slotting “investment”. It is all about developing value for the consumer and your retail partners to grow your sales, not about getting into as many “doors” as possible. You will spend all your cash getting on the shelf with no funding to actually get sales.
Don’t know where to start? I can help. Contact me to explore how I can develop your consumer value to drive growth the right way.