If you’re a manufacturer of consumer products, one of the fastest ways of growing your sales is by tapping into the wide distribution networks of the large retailers. It is however important for one to understand the following key items about major retailers before engaging a them:
Understanding the system
I. Small margins:
as a result of the sensitivity of consumers and fierce competition in the retail sector, the major outlets price their products as low as profitably possible. What this means to you as a product manufacturer or supplier is that your price has to be competitive enough to allow them to put a healthy mark up on your product. In most cases you might find yourself forced or having to settle for a few cents in profit per product.
II. Volume sales:
since the margins per unit are low, the main strategy of these retailers is to sell as many units as profitable so as to realise any significant profit. As a manufacturer, you are tasked with coming up with a product that will appeal to consumers and move in this regard. So once they accept and stock your product, you should not rest on your laurels but aggressively educate consumers, encourage them to buy and provide incentives for repeat sales. If your product does not move as fast or at all, then they have no option but to discontinue stocking your product.
III. Delayed payments:
the large retailers have policies in place to make payments at given intervals, this can be mid month or at the end of the month. Some even pay you after a number of months. So once they have ordered your product, you will have to wait for some time before receiving any payment. This then requires to plan your cash flows accordingly to make sure your business stays functional and does not run out of cash whilst you await your payment.
IV. Bulk orders:
most large retailers have a centralized buying program. They order products in large quantities and then distribute them to their various outlets from a centralized warehouse. What this means to you is that you need to build up your capacity to fulfil these large orders. They will not be ordering just 10 or so units but thousands, and you need to be able to handle such large quantities.
V. Shelf space:
In their bid to give consumers variety, retailers stock a wide range of products and variations to appeal to the different market segments. There is therefore a large number of products all vying for the same shelf space. So your product needs to be able to hold its own on the shelves and it also needs to generate enough sales to justify being accommodated on the shelves.
With that said, you need to make sure that your product meets the following requirements:
your product should do what it does
it should look attractive or as appealing if not superior than the competition
• Proper packaging-
This means having an attractive label with all the necessary details. This includes
a.) your address, website, emails and customer care contact numbers
c.) directions for use
d.) Expiry date
e.) Bar codes on both the primary and secondary packaging
f.) Your brand, prominently displayed
depending on your sector, you will need the relevant certification from the various organisations involved. Environmental certification, City Council certification etc. You can go a step further and get your product certified by a body such as the Standards Association of Zimbabwe (SAZ).
Pitching your product
Once you are satisfied that your product meets the above requirements, your next step is to approach your target organisation. It is important to do your homework prior to this. Also make sure that your product has gained significant momentum on the not-so-mainstream retail channels before approaching the major retailers. This will prove your product’s appeal and also give you a chance to sort out any issues before attacking the mainstream channels. You will need to have the following when you approach the retailers with your sales pitch:
1. A company profile
outlining who you are, your team and details about your products and why you feel it will be a good decision for them to have you on board. This should also include your bank details as well as other payment methods that you accept. Include any terms if possible and any other information that the buyer might find useful.
2. A valid tax clearance certificate-
Doing business without one means they have to withhold 10% of your payment. This gives them the burden of having to deal with withholding tax and it also eats into your chunk of profits. 10% becomes significant as the order becomes larger. To get a tax clearance certificate one would have to register with ZIMRA.
3. A product profile.
This gives details about your product, the product variations (e.g. colours, sizes and models), stock keeping units, display suggestions and any product support offered.
4. Price list-
A detailed price list showing your prices for each product variation, your recommended selling prices, as well as any discounts or price incentives that you might be offering.
these give the buyers an idea what your product looks like as well as a chance to test it out and see if it would be a good fit for their organisation.
6. Promotional items-
these can be items such as caps, key holders, pens, calendars. Be as creative as you can be. The objective is to leave a good impression as well as to remind them of your product or brand.
After sales service
So you’ve followed all the steps above and you’ve just supplied your first order. What’s next? You will need to follow up and provide product support to the retailers. This will include
I. Say ‘Thank you’
Start by thanking the company for accepting your product. You can send a letter or invite them for lunch etc.
II. Product Display
setting up an attractive product display in the store. If allowed, add your branding materials, shelf talkers and anything to command the customer’s attention.
III. Tasting/Sampling booths
setting up a tasting/sampling booth to promote and increase awareness of your product.
IV. Seek customer feedback
Find out if customers are buying your product and if there are any complaints or suggestions.
V. Tell the world
Aggressively market your product on other channels. The objective is to get customers into the store and to eventually buy your product. You can even consider running a promotion.
NB. This doesn’t have to be expensive, you just need to be creative.
We hope that you found this article very helpful and more importantly , you are taking action. If so, please let us know in the comments below and also share it with your friends. We would also love to hear from you what other topics you might want to read about. Our main objective is to keep these articles practical and relevant to you.
We wish you all the best.
To your happiness, health and wealth.