Mass retailers will not take in a new product with an unknown brand name, especially from small business owners, unless your product is truly hot. Even if you think it’s hot, you still need to do your homework to prove your product is hot. But what defines hot?
In this second article from my series of Six Tips for Getting Your Product into the Mass Retail Channel, I talk about how mass retailers define what’s hot and what’s not using key performance indicators (KPIs), and why you need to know your product’s KPIs.
What are you trying to prove, anyway?
To prove to the retailer that your product is hot, you need to prove that your new product will provide profitability on par or greater than that of other products of the same category sold by that retailer.
This means you need to know your customer (target retailer) and provide business performance data that demonstrate your product will satisfy the KPIs of the target retailer.
There’s really only one set of KPIs that every mass retailer cares about:
- Dollar sales that your product can make on 1 square foot of shelf space per week
- Dollar margin between the retail price the consumer pays and the list price the retailer pays you.
Realize that mass retailers run a real estate business. They watch closely on how much they can sell on the limited space that products occupy.
So, what is the KPI hurdle for your product
Mass retailers have different KPI hurdles for different products. Retailers learn from their long operational history how fast each category of products turns. You need to know if your product fits the buck.
How do you do this? Study your category. Let’s take as an example our hypothetical new concept SUV-- The Ultimate Shower Tile Cleaner, which is a brush that uses sonic and UV light technology to clean and sanitize bathroom tiles.
With SUV, you will be fighting for a shelf space in the home cleaning aisle. Visit your local mass retailer, such as a Target store, and you’ll get a good sense of the KPIs for the category. Specifically, look at competitive or substitute items that are shelved where you want to be shelved.
In the case of SUV, you might look at tile cleaning solutions, such as the Tilex brand soap scum remover. Bring your measuring tape, a calculator, and paper and pen with you, and this what you mind end up jotting down.
To figure out your hurdle, let’s do some simple math. Divide your competitors Revenue Per Week per Square Foot ($105) by your unit price ($50). You get 2.2. Now, divide that by the number items per square feet your product takes (1), and you 2.2.
This means that to match the performance of Tilex, your SUV ultimate shower tile cleaner, the retailer must sell at least two units of your product per week.
Look at a number of other comparative items on the shelf to round out your estimate.
Next Steps—Proof of Concept
With your KPIs in mind, you’ve now defined your goal. A great first step! Your job now is to collect sales data on your product that create a proof of concept that explains why the retailer should believe you when you tell them they can sell at least two units of your product each week.