Landing shelf space at a major retailer can be daunting; however, the upside for your business can be tremendous. For companies wanting to take their goods to a national audience, getting an appointment with the buyer and getting an order, while difficult, are only part of the challenge. Companies need to be aware of other challenges that will make or break their relationship with a major retailer. Awareness of the potential setbacks will ultimately boost your likelihood of success. Here are three critical factors to take into account before you begin:
One key area suppliers must get a handle on is the distribution center. For large retailers, these logistic hubs are profit centers much like departments inside a retail store. Each retailer has specific and somewhat painstaking requirements suppliers need to adhere to in order to avoid chargebacks. Incorrect labeling such as address position, UPC code position etc., can cause extra handling, which can result in the assessment of fees by the retailers fulfillment center. Major retailers oftentimes use their own trucks to pick up product as opposed to having a supplier ship via a common carrier. The supplier should factor shipping costs into their cost calculations.
While landing your product in a major retailer's weekly print circular or a seasonal catalog can provide significant exposure, the publicity can consume a significant portion of a vendor's margins. Negotiation of advertising allowances should be done at the time the retailer places the order so that the supplier can calculate the costs into their pricing and maintain desired gross margins. Suppliers should insist that they get sign off on the retailers marketing materials, they are bearing the cost.
Another important area within promotional spending is the slotting fees seen in supermarkets and certain other retail formats. With these fees, companies pay a negotiated amount that can vary greatly based on prominence on a shelf, or even the location of the store. The rationale is that the attractive real estate, such as end-of-aisle displays will translate into higher sales. You should be aware whether or not the retailer will deduct fees from your payment or if you are expected to make a payment to them in advance for the positioning.
If a supplier does not currently have EDI (Electronic Data Interchange) software they must either make the investment or hire a third-party provider to handle this requirement. With major retailers this software creates the machine-to-machine exchange of everything from purchase orders to invoices and shipping documents. Not having the capability will preclude retailers from working with your company.
For a brand interested in garnering the attention of a big-box retailer, the challenges can be fierce. However, mastering the intricacies of distribution and shipping, cost to market, marketing promotions and stock wares can prove valuable. Once you understand the retail logistics and overcome these hurdles, having your products on the shelves of national retailer stores can be incredibly beneficial to your brand recognition and sales volume.
Louis Barone is a Managing Director at
CIT Commercial Services.
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With e-commerce becoming increasingly prevalent, social shaking things up and brick-and-mortar-focused retailers stepping up their online game, 2017 will prove to be an interesting year for retail.