How To Sell To Big Box Retail – Part 1: Ready For The Jump

For retail companies, there exists a “holy grail” of growth and expansion, or rather, a holy grail category. A magical avenue that can take a business from middling to exploding. A way to put products at the fingertips of millions of customers all at once, all with an increased chance of sales. What is this wonderful world where retail dreams come true? Big. Box. Retail.

 They used to be called “department stores” but have become so much more. Giant, multiunit chain retailers like Wal-Mart, Target, Home Depot, Costco, and so on are the ultimate goal destination for many entrepreneurs. Having product space in one or more of those stores is playing in the Major Leagues. Why? For one, the product exposure is unbeatable. Thousands (if not millions) of people pass through the many doors of Wal-Mart stores around the country every single day. Two, a product’s presence within a big box retail store carries the implicit endorsement of that company. When a product passes muster to the point of one of the largest retailers in the nation willing to give it a thumbs up, that means something to the chain’s customers. Three, when you sell your product on your own in the world, you are competing against every single other similar product that anybody else is selling in an incredibly competitive market space. But when your product hits the shelves of a big box retailer, it is likely to only be competing against a handful of other similar products in the store – if any!

 Clearly, there are major potential benefits to selling products through big box retail. But not just anyone can do it. There’s a lot that goes into the process of applying and getting selected as a vendor for a multiunit chain, and even more to actually making it a reality if you do get selected.

 Look At You

 Before embarking on your big box retail quest, taking a good, hard look in the mirror and ask yourself if this is truly the right step for your company right now. Moving forward will require patience, resources, capital, solid manufacturer relationships, flexibility, and the ability to scale up quickly, and by significant multiples. You also need to have good understanding of which multiunit retailer is a good fit for your brand and why. Will your products fill a need for that retailer’s customers? Are there other similar products already on offer? How is what you’re offering similar to the point of fitting in? How is it different so it stands out? These are all questions you’ll have to answer to others eventually, so you should be sure to have a good answer for yourself before going too far down this road.

 Scalability

 Of course, having answers for all of the philosophical questions about whether or not you should move forward with big box retail won’t do you much good if you can’t physically pull it off. This isn’t all about fortitude, determination and grit. Selling to big box retail means creating more product. Like, a lot more product. You have to be 100% sure that your manufacturing process can handle a massive and sudden increase in volume without sacrificing quality. Can you get your hands on all the raw materials you need? Are all of your vendors and manufacturing partners capable of handling the challenge? Do you need additional employees? Do you have backup plans in case one partner fall through for some reason? And then, are you able to prove it all on paper? The process of getting set up with a big box retail can be lengthy and at times grueling, but once a company like Wal-Mart or Target places an order they will expect a fast turn around time. Your production process has to be rock solid and ready to go so that you can hit your shipping deadlines.

 Profit Margin

 One of the other big questions you need to ask yourself has to do with your own profit margins. Every business is going to have their own pricing structure. Typically, though, products will sell at retail for around 3-5x the cost to manufacture. When selling products wholesale, buyers will expect to pay around 50% of the retail price. That’s completely normal and satisfactory for most boutiques and smaller retail stores. Big box retailers on the other hand, will expect a much deeper cut from the retail price – something more in the realm of 65%. The idea, of course, is that you will more than make up the lower profit per item with a huge increase in volume. But this only works if you can still manage a decent enough profit over the cost of manufacturing, or any profit at all. If your pricing isn’t such that you could manage to accommodate selling to a big box chain at that steep of a discount, then your business may not be ready for this step.

 Track Record

 No big box retailer is going to want to take a risk on a company that doesn’t have a significant retail track record. The jump from retail to big box can be challenging even in the best of circumstances. It would be next to impossible for a company that didn’t already have systems in place to be operating in the retail space successfully. Usually, this means have some form of your own retail operation as well as selling your products wholesale to smaller retailers or boutiques. You’ll also need to show that your company has been successful doing this, and that customers have shown a history of being interested in your products with some consistency. Plus, big box retailers don’t want to be relied upon too heavily by any one brand. Wal-Mart, for instance, still wants to see about 70% of its suppliers’ business coming from other sources.

 Product Diversity

 While having one great product that you can sell to a multiunit chain is great, it will help you tremendously in getting that first product in the door if you have a great product line on offering, too, as well as other products in the pipeline. Big box retailers aren’t necessarily just looking to work with a supplier for a single order or a single product. It is a lot of work on both ends to introduce a new supplier into their system, so buyers will be more interested in potential long-term relationships that can span multiple products or product lines.

 If you’ve taken a good hard look at your products, your process, your profits, and your overall business and determined that you have the drive and the bandwidth to scale up fast while still staying in the black, then it may in fact be time to take the leap into big box retail.

Need help selling your products to Big Box Retail? Contact us today!