Know-How Exchange : Strategy

Partnering with existing vendors would be a great idea. I would seriously consider that route to save a ton of money and hassle.

If you do decide you want to go direct, build some leverage before you start negotiating. Patents and all that are obvious. The not so obvious leverage is how well this thing will sell. Build relationships with smaller retailers and test the hell out of everything that will increase sales, including pricing, packaging, shelf location, next to a particular product, etc, etc.

If you can go to Wal Mart and say "our product WILL sell 10 times more than the average product you have on this shelf and there is the PROOF" you'll be in a much better position to will placement or a trial run.

I believe this is what one electric toothbrush company used to get into Wal Mart. I can't remember which one it was. I think it was Oral-B but don't quote me on it.

~ Mel

Melvin Ram
Volcanic Marketing

PS: Go to www.ponderpearls.com and enter "melvin" as the giftcode. Download and install Ponder Pearls to enjoy wit & wisdom from histories brightest and most enlighted minds. It's my gift to you.

Many of my clients have wondered about this, and you basically gain the answer by asking yourself a series of questions:

1. Does a large section of your market require a particularly knowledgeable or qualified saleforce? In some countries selling to government, local authorities and public sector requires you to jump through hoops, so I would always recommend a partner for those channels.

2. If this REALLY takes off, can you hire enough people fast enough? I had one client who really believed that sales would go through the roof, could her hire enough sales people, marketing people, operations people, admin people quick enough? No he couldn't, I suggested third party channel and he is going great business now.

3. Can you grow the needed relationship fast enough? It can be difficult to get introductions to a business, find the right person to talk to quickly. You are obviously aware that many of these discussions are not completed within a week or two, but can take months! Do you know someone with the contacts today?

4. Are you seen as light-weight? If you are, if you do not have the industry or market clout then many of these bigger customers might even ignore you altogether, but a channel partner may be seen as a better bet!

With all that said, unless you have a large contract that demands exclusive rights, a direct channel is also important, it keeps you close to your customers, allows flexibility in delivery (if your channel partners aren't working hard enough, your direct channel might be able to fill the gap).

Good Luck

Andrew

Randall painted too rosy a picture. It's not as easy as he made it sound.

I've been through this for clients at a number of retail outlets -- The Home Depot, Lowe's, Menard's, Office Depot, Staples, OfficeMax, Wal-Mart, Costco, BJ's, Sam's Club, you name it -- and it's truly an onerous process.

In the end, they'll dictate all the terms and make sure you don't make enough on their business to be worth the hassle. And their return policies are a joke.

Why do people go through this? Because the volume is so great that you fool yourself into thinking you'll "make it up in volume," only it never happens. I have one client who recently lost distribution at one of these major retailers and his profit (in actual dollars) went UP as a result. As a percentage of sales, profit quadrupled.

Re-read Randall's post. Then recognize that Randall is an optimist.

Good advice, above. The majors represent a huge volume opportunity -- they can and probably will eat you alive, too.

Three thoughts:

1. Regional players are better bets than national ones. They will also be more flexible, give you an easier ramp with scalability, and -- if you want to -- give you data points for your next go 'round with Walmart. This may also help you from a branding standpoint - being a bit exclusive is always good.

2. Licensing makes sense here, if you have your intellectual property locked up. Approach a Newell/Rubbermaid, an OXO, or other brand. Get good IP advice here before you go down this path, because these are smart people.

3. Absolutely, positively, go after the consumer market directly via QVC and your website.

Good luck!