Know-How Exchange : Strategy

Sounds like a very intriguing scenario - Here are a few thoughts they hopefully will assist your planning.

First Big Box Stores refer to people like Walmart, Costco, Sam's Club, Home Depot, Lowes, etc.....National Retailers are Toys R US, Gap, JC Penny's, etc

We have worked with quite a few clients in the Big-Box or National Retail Chains and I always ask the question "what price glory"----They can delay your entry with the proverbial wait and sees, you can loose focus on your target market, your roll out, with thinking getting a national contract is a golden rainbow.

We have some products that took as long as 5 years to get into the BB/NR and others that took 6-8 months.
You get on the corporated merry-go-round.

Smaller retailers, local, regional and smaller nationals require more "merchandising hand holding" to launch.

With the BB/NR you must decide whether to manufacture and private label for them or sell it based on a unit royalty and yearly license agreement- this can really take some time to put in place. They really control your margin, because they want to capture their overhead and their target audience price points. They can be difficult to negotiate with and no one person makes the decision, normallly it is committee based, after you get the primary buyers recommendation.

Without having greater details - the Primary Question becomes what does your client desire? -

Safer scenario (reduced start up costs) but lesser margins and little merchandising control. or Higher start up costs, higher margins, longer start up model, but greater control. Each has a comfort zone- some clients have the will and the way to do it, others want the path of least resistance.

Do they currently have other products in their business they sell or is this a "one-shot wonder" they are banking on? Will this take effort, money and focus away from the core business?

Could they extend the product with extensions to sustain the short term fizzle?

Can they handle the costs associated with a full scale retail /merchandising development program. Including associated "going to market costs"? Extended time for break even!

Assuming price points are based on a market study and costs are relative, a full scale retail campaign could be costly - could they self-fund this or are outside funds required? This answer could determine your method to market.

Short term payday with risk or long term structure (3-4 yrs) with reliability on other companies (Big Box - Walmart, Costco, ? ) to properly market and merchandise the product, and accept a unit royalty and or yearly licensing fee.

Both have unique issues and would require more details:

First I would suggest these questions to your client:

1. Speed to Market

2. Attainable Sales revenues in a "blitz sales/mktg campaign.

3. Cost Structure Time to Break even --VERY important.

4. Opportunity Costs and Loss of Opportunity by Delay

5. Barriers to Entry at both BB/NR and prime retail.

6. Exit Strategy Issues from product, channels and partners without jeopardizing relationships and economics.


If you go Prime Retail and Not Big Box/ National Retail you would need:

1. Who would it be selling to? (Target Market not consumer- TARGET the retailer, let them target the consumer) - Best methods to accomplish this selling strategies and expense models must be built. Sales Genies cost money and sales expenses could be high.

1. How would it make money? (Revenue Model) and When do you achieve your break even point

2. How would it differentiate itself from what is already out there? (Unique Selling Proposition)

3. What are the barriers to entry? (Obstacles to Entry)

4. How many competitors does it have and of what quality are they? (Competitive Analysis)

5. How big is the “potential” market in dollars? (Potential Market Size)

7. How fast is the market growing or shrinking? (Market Growth)

8. What percent of the market could it gain? (Market Share)

9. What type of company would this be? (Lifestyle or High Potential, Sole Proprietorship or Corporation)

10. How much would it cost to get started? (Start-up Costs)

11. Does it plan to use debt capital or raise investment? If so, how much and what type? (Investment Needs)

With all this said, there is a very good company we have used to get into Walmart: https://www.retailingworks.com/validate.htm
They can do quite a bit for you.

Hope these give you a few ideas.

Good Luck and Happy Marketing ~ Bill

I currently sell my product to retailers of all sizes.

I have found that the small retailer is quick to adopt new items and makes quick decisions and are more open to risk.

The BB guys are slow, expect you to know the "Rules" which are unwritten and if your product is seasonal, they work at a minimum 1 year in advance - so if you have a christmas item, you need to wait till december to present or schedule the appointment.

Additionally, the Buyer at the BB is risk adverse and will most likely ask for a guaranteed sale arrangement.

Bottom line and reality is they don't need your item no matter how great it is - the chain is not going to fold if they don't carry it and if it is not patented or protected it will be knocked off in china very quickly if it is that good.

Don't mean to be negative, but you must consider it.

Still undaunted, the quickest way is to go to appropriate shows, ie gift item - gift show, etc. Another is to find reps.

I could say lots more on this subject

Good Luck - see my profile to email me

If this is a brand new product and the first from this business, I would recommend to avoid the big chain stores.

BB's always seem to want:

1. Long (90- 180 day) terms, or discounts for "prompt (30 day) payment

2. "Put" option (return unsold inventory and cancel invoice)

3. To see if they can reverse engineer your product and get it made cheaper in their sweatshop factory in wherever

4. You to do all the merchandising, stock checks, re-ordering, returns, warranty, etc., etc.

Online works well because you get all the margin.

Small retailers work well if you can handle the multipoint logistics because they don't negotiate as hard as the BBs.

Only exception to "Avoid BB" rule is if you have contacts and the BB offers to nurture you with capital loans, and other management assistance. But your product will need to be very, very special for them ever to contemplate such a deal.

Good luck.

Hi Michael,

I works in a product development company and have come across a whole lot of new product ideas from budding entrepreneurs. These new products are not suitable for the big box unless you are very confident that the sales volume will be high. Big Box tend to squeeze the profit margins for manufacturers, so you need the large volume to achieve low cost (economies of scale) and to reap profits.

Since your target group is junior high to college girls, you should spend time on market and retail it online. These teenagers and their parents now are very internet savvy and open to buying things online.

Instead of spending time & money to get big box to buy your product, why not spend it on professional looking website, prompt logistics and 'money return policy' etc to entice the people to buy it online.

Good luck!