Posted by Asako Tsumagari on 26 Sep 2007,
(126) Comments — Marketing Sales & Distribution
The first tip from my series of Six Tips for Getting Your Product into the Mass Retail Channel is that you know your potential customer, meaning the mass retailer in this case. Jumping to this step assumes, of course, you already know the ins and out of your own product and end-consumer.
Who is the Customer?
You’re probably already familiar with the types of mass retailers. But let’s look at the sampling below so we share the same distinctions.
What Drives Retailers to Entrepreneurs?
The various types of retailers differ in terms of their product portfolio, store network, store size, target consumer, and overall strategic approach. These differences motivate their responsiveness to small business owners wishing to introduce products to the mass retailer.
1) Retailer Type: Generalist vs. Specialist
General merchandisers carry broad categories of products from groceries, drugs, home appliances, clothes, to personal care, etc. Due to limited shelf space, they rarely carry more than 3 to 4 brands per product category. Thus, they favor proven brands, and seldom take entrepreneurs on board early on.
Specialty stores, on the other hand, strive to be the destination for selectively targeted consumers who seek specialty products. Hence, specialty stores carry as many brands as possible of the same category. As such, entrepreneurs have a much better chance starting here.
2) Consumer Destination Behavior: Convenience vs. Planned
Consumers decide where to shop based on convenience or “planned shopping” trips. Not surprisingly, retail channels focus on this behavioral dichotomy. So, the entrepreneur should pay attention.
Large conveniently-located networks of stores, such as drug and grocery store chains, usually have small footage per location. With 60,000+ stores in the US alone, they focus on the daily shopping needs of consumers, relying the frequency of consumer visits and impulse shopping to maximize profit. Such retailers favor a smaller package size and low price point, and seldom carry products priced more than $100.
General merchandisers like Wal-Mart, Costco, and Sears focus on shoppers with “planned” visits. They have mammoth floor space per store, but utilize a smaller network of stores than convenience retailers do (<10,000 stores). These stores carry large package sizes, and often more expensive items as well.
Specialty stores also fall into the category of the “planned shopping” destination. While their network of stores remains small, the target consumer has well-defined needs and price points.
As a small business owner, you should think about how your new product fits into the overall mode of operation and strategy of each type of mass retailer.
3) Demographics of the Target Consumer based on the Retailer’s Product Specialty
Obviously, you’ll want to pitch products that benefit the target consumer of retailer’s product specialty. This increases your chances of getting your product accepted.
For example, what consumer would more likely come to Frye’s Electronics? Young male consumers who are electronics geeks. Who would more likely come to drugstores? Senior citizens with chronic medical conditions. How about Toys”R”Us? Young women with kids or with friends with kids.
Note, however, that retailers often carry products beyond their specialty. I was amused, for instance, to find the book Tax Savvy for Small Business: Year-Round Tax Strategies to Save You Money 9th Edition
4) Demographics of the Retailer’s Strategic Target Consumer
Even retailers of the same category may target different consumer segments. The battle between Wal-Mart and Target is a well-known example of this.
Wal-Mart targets the middle-class American, with their touted “everyday low price” model. Even their new “save money, live better” tagline is essentially all about low price. If you have a chance to work with Wal-Mart buyers, one of their first questions to you will be, “what is your opening price?” Wal-Mart would give you brownie points for helping them lower the lowest price point in the product category.
On the other hand, Target aims for more affluent consumers. Target spends more money in store appearance, and carries more premium SKUs in each category.
5) Online Presence of the Retailer
Fixed capital is much lower for online formats than for offline store formats. As such online channels generally have more leeway to add new products from your small business. They may carry inventory of your product in their warehouse or simply ask you to drop ship to their end-consumer. Many mass retailers have both an online and an offline business. So think about how which you would like to approach first.
Getting Started
With an understanding of the needs of each channel, how do you get started on pitching to a retailer?
- First, study the channels that seem to fit your proposition. Learn about all other products within the same product category carried by each channel, and understand how your product compares. Then, optimize your proposition.
- Create a compelling story why your product fits the retailer. Then prepare a letter and presentation to your target retailers.
- Don’t waste time repeating approaches to retailers that do not fit your proposition. If they do not respond after a few attempts, it is not your fault. Just move on.
See more practical business tips.
Comments for "Know the Mass Retail Channel"
28 Sep 2007 at 10:29 AM
Asako this is absolutely brilliant info for anyone wanting to pitch a product to retailers. My businesses have all been service based, and I wouldn’t have the first clue about where to start in retailing. But, by the time I’ve read all of this series, you never know!
28 Sep 2007 at 03:48 PM
Thank you! More articles to come. In the last article, I will also address the international market!
10 Oct 2007 at 05:56 AM
Asako,
These are some excellent tips which help structure taking some of the first scary steps when approaching a retailer as an entrepreneur!
10 Oct 2007 at 07:49 AM
Thank you, Kelmo. I am glad this is helpful. My next article of this series is going to come out soon. Please stay tuned!
30 Oct 2007 at 04:40 PM
This is such great information. I’m a start-up trying to figure out how to get my testing supply kit bags into drugstores and into specialty doctors office and any information such as this is very helpful. Will look for the rest.
31 Oct 2007 at 01:11 AM
Hello, your diabetes testing supply kit bag has a wonderful design. I could definitely see it next to the diabetes supplies on the shelves of drugstores. Drugstores are the most open to new proposals in the medical products, hence, you should definitely try contacting the buyers.
At the same time, to create a momentum on your proposition, I brainstormed the followings. Maybe, you have tried them all already…
- ADA (American Diabetes Association) has an online store where you may want to list your product. Also in March 2008, ADA seems to be organizing a trade show.
- There are a number of high-traffic diabetes blogs you may want to ask to be featured.
- There’s a company named Polymedica that does mail delivery of diabetes supply. Their business model is, the more patients are compliant, the more they can sell test strips. They may be interested in purchasing a big number of products from you just to give them away to their members as a part of their services.
- NACDS (National Association of Chain Drug Stores) has a trade show in June 2008
- You may want to get on the catalogue of distributors like Medline, McKesson and ISG (Invacare Supply Group) who distribute products to pharmacies, DME stores and physician offices. Although from my experience, the hit rate is low…
- You should definitely approach drugstore.com, and online parts of all chain drugstores. Also player like ActiveForever that focuses on DME may have demands
I can keep going.... should I?
31 Oct 2007 at 05:19 AM
Asako,
Please do, feel free to email me...looking forward to it.
OMGoodness this is information is gold* You seem to know healthcare. I looked at the CVS website last night and gee whiz they want you to register with Dunn & Bradstreet, send your first born son and your new car you just bought. So ok I’m not ready for CVS. But I am looking to assuredly and steadily grow and get into supply stores and start getting to the patients here in area. Yeah you can go on
31 Oct 2007 at 09:01 PM
Yes, that’s right. CVS and any stores would ask you to pay for the listing fee. So if you have not gotten a certain scale of business, it would cost too much.
I will send more ideas to your email
26 Nov 2009 at 10:14 PM
I agree with asokas comment for the diabetes,signs and symptoms are more likely to be similar as the blood sugar is high, either due to less production of insulin, or no production or insulin resistance…
30 Nov 2009 at 11:42 PM
Hello guys!
I agree with diabetes postings and information and moreover for the diabetes,if you eat too much food you get fat and then get all kinds of medical problems that taxpayers have to pay for stop eating so much fatsos..
06 Jan 2010 at 05:22 AM
Drugstores are the most open to new proposals in the medical products.Hence,you should definitely try contacting the buyers.At the same time,to create a momentum on your proposition.
13 Jan 2010 at 12:10 AM
As such online channels generally have more leeway to add new products from your small business. They may carry inventory of your product in their warehouse or simply ask you to drop ship to their end-consumer. Many mass retailers have both an online and an offline business. So think about how which you would like to approach first.
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