How To Sell To Big Box Retail – Part 3: The Supply Chain

Getting your first order from a big box chain is a huge accomplishment for your business. But as difficult as it is to get the opportunity to sell your products to a retail giant, that could only be the beginning of your challenges. Big box retail partners have certain expectations for how your company should operate, and the increased exposure you’re likely to experience from your placement on the big box retail shelves could change your customers’ expectations as well. Your company might need to make significant upgrades to supply chain, inventory and fulfillment systems, along with a significant investment, if you want to play in the retail big leagues, and stay there.

EDI

One common standard that your big box retail partner is likely to require is EDI. EDI stands for Electronic Data Interchange, and is a way for two businesses to exchange certain documents and information quickly, or even instantaneously. Purchase orders and invoices, for instance, instead of having to be printed and mailed, or even emailed, are automatically exchanged between the two companies’ EDI systems. Not only does this process significantly speed up the exchange of order and payment information between buyer and seller, it also cleans up the process by creating electronic, synchronized, paperless records.

EDI can be expensive to both set up and maintain, so will likely require a significant investment. But considering that EDI systems also increase efficiency and decrease the risk of mistakes, inaccuracies, or things “slipping through the cracks” since there is less opportunity for human error, the investment is well worth it. Plus, if you want to be in business with a big box retailer like Wal-Mart, you won’t have a choice.

Inventory Management

In order to succeed in the world of big box retail, you’ll also need a rock solid inventory system that integrates with EDI, your warehouse, and any other retail and/or e-commerce systems you are using. Some growing businesses may try to utilize multiple inventory systems for their various channels. But this can create problems, especially once orders start growing through big box retail buyers.

Multiple inventory systems need to be reconciled manually, which can both lead to errors, and can be problematically slow. For instance, in the time it takes for two systems to become aligned with each other’s information, a customer could attempt to place an order for a product that may have sold out due to a big box retail order. Not that long ago, if a customer placed an order online only to discover a few hours or a day later that the item was actually out of stock, it wasn’t that big of a deal. Now, though, customer expectations have changed. A customer who orders through your e-commerce store will expect that order to be fulfilled almost immediately, and will be very turned off, perhaps permanently, if they are later told otherwise.

Order Fulfillment

In addition to more sophisticated inventory management, venturing into big box retail may require re-thinking the way that orders are fulfilled and shipped. For one thing, if your company has been fulfilling order in-house, you may want to consider moving toward a third-party logistics solution. A third-party will probably be better set-up to ship out large orders quickly and efficiently. There are also advantages over, say, fulfilling orders from the back-of-house in retail locations, since a third-party warehouse would allow most if not all of your product to be managed in a central location.

Factoring

Upgrading and maintaining all of these systems may be well worth the investment if the upshot is allowing your company to do business with a big box retailer, but that growth won’t come cheap on the front end. Fortunately, there is factoring.

Factoring is a way of financing B2B business activities, such as selling your goods to a big box retailer, which allows a company to get quick cash flow based on their invoices. Invoice factoring (also known as accounts receivable financing) takes your company’s invoices that are due to be paid within 30, 60, or 90 days and sell them to a “factor” for somewhere between 70% and 90% of the value immediately. Then, once your customer pays off the invoice or invoices, the factor sends you the balance, minus fees.

Factoring is a great solution for short-term financing and is a model that fits especially well with big box retail, especially since multiunit chains will typically place large orders, with the full expectation that you will foot the bill up front. For factors, these are fairly safe loans since it is very likely that your customer will pay those invoices.

While selling to big box retail is rife with opportunity, there are also significant challenges both in terms of costs and logistics. But if your business can navigate those challenges successfully, it will come out the other end with advanced and efficient systems in place that will have you set up to grow and profit for years to come.

We hoped our mini series of how to sell to big box retail, if your company is ready to make this step, contact 10twelve for a 30 minute consultation.