Business owners who’ve managed to get—and keep—their products on the shelves of a few boutiques and Mom & Pop retailers deserve some applause. They’ve cracked the code of moving from their basement to brick and mortar.
There’s a learning curve in moving from selling direct-to-consumer to adding wholesale to retail sales. Once companies get some retail customers and, more importantly, keep up with the increased pace, they may be ready to scale the business further. (read about what’s necessary for that journey in Selling to Retailers Phase 1)
Expanding wholesale to retailers might mean adding more small stores, going after bigger stores, or both. This may seem like a small, straightforward step with the same hurdles to clear, only on a bigger scale. While that is true to a certain extent, going after more and bigger retailers adds new challenges, too.
The difference between the business owners who fail and those who succeed at this point is how well they’ve adapted to increased demand for their products. They must build upon what they’ve learned as they move forward. The keys lie in tracking data, automation, and integration.
Using Feedback to Fine-Tune Operations
Breaking into retail for the first time gives business owners a wealth of information. It essentially becomes a proving ground for a product. Even if the product has sold successfully online, the retail market can be quite different. Data gathered can be eye-opening and will drive decisions made back in the warehouse, the manufacturing plant, and the marketing whiteboard, all of which can affect new retail customers.
Feedback from retail shops allows the business owner to answer these questions and tweak their operations accordingly:
Which items are selling and how quickly?
In part 1 of this series, we introduced you to Charlie Awesome, owner of Awesome Block Company (ABC). After a few months selling his blocks at a local teacher’s supply store and a toy shop, Charlie discovers that his brightly colored blocks are outselling his black-and-white sets at a significant rate. Charlie can use this data to adjust his manufacturing in favor of the colored sets. This will, in turn, trigger a change in his paint orders, packaging, etc. And unless the black-and-white sets are still big sellers on his website, he may eventually choose to eliminate that SKU entirely.
Are we fulfilling our orders correctly and on time?
Difficulty keeping up with increased demand signals the need to reevaluate everything. Ordering, storage, picking, packing, and shipping all play a part in getting product out the door. Businesses need an efficient warehouse setup, as well as WMS products that can support a higher level of productivity. It may be time to automate more tasks like inventory counts and auto-ordering and work to better integrate software throughout the company.
Are the margins we’ve set acceptable?
Inexperience with the retail world can result in wholesalers accepting margins that are less than stellar. Finding ways to cut costs is one way to improve margins. Sometimes, though, there’s little to be done besides waiting for the contract to run out, at which time they’ll be ready to renegotiate a better deal. They will also know to aim for more favorable terms with future customers.
Is the number of returns tolerable and manageable?
There will always be at least a few product returns, but gathering data about the reasons is helpful. If products are damaged or don’t work, owners need to take a look at their quality control procedures. If customers complain that the product wasn’t what they expected, perhaps the packaging is misleading or unclear.
Addressing and fixing the weaknesses exposed by these questions will help business owners, whether they are happy where they are or are ready to scale. First, these small retailers will be more likely to reorder when a company is responsive to their needs. Second, ensuring that operations are running smoothly will make it easier to take the next step into larger retail markets. Finally, optimizing efficiency is essential to maximizing profits, no matter how and where products are sold.
Expanding Your Retail Footprint
Launching into retail sometimes means convincing shop owners to take a chance on an unknown product. Online sales numbers don’t always guarantee that an item will do well on store shelves. When a product is successful in small stores, the analytics will act as proof to larger stores that it can sell in the retail space.
When approaching larger stores and retail chains, sales numbers carry more weight than before. Just like smaller stores, these venues have limited space and budget for new products. But they also have many more candidates vying for a place on their shelves.
While approaching a small, local boutique might mean simply walking into the store when the owner is there, mid-sized retail stores and chains are more likely to have full-time buyers. ABC’s story and Charlie Awesome’s personality may have played a large part in the small shop owners’ willingness to give his toy blocks a try, but retail buyers are more interested in his sales data.
A wholesale agreement with a bigger store can also mean stricter requirements. For example, if the wholesaler doesn’t already handle orders electronically, they will certainly need to implement that change for larger stores. Adding a special wholesale web page specifically for retail customers might be beneficial. Larger retailers might also have less flexible payment terms. They may want to be billed only monthly or quarterly, something that wholesalers must be prepared for.
To appeal to this new, larger, retail audience, your tracking data will be one of your greatest assets. It will provide proof that your product sells, that you can keep up with demand, that there are few returns, all while bringing retailers their desired margins.
Efficiency Is Everything
Getting into mid-sized retail stores is a big step, but in order to stay there and thrive, wholesalers need to look inward at their operations. Automation, even in small increments, can be the difference between struggling to fulfill orders and doing so with ease. Warehouse metrics and KPIs will contribute to success with demands of bigger retailers.
Tracking inventory is crucial. Auto-ordering raw materials can ensure you never run out. Production data can help anticipate fluctuations in demand so warehouse managers can staff up or down accordingly.
Time-on-task analytics will help maximize staff efficiency and determine the timing and ROI of adding new equipment or making the decision to outsource certain tasks. Using Awesome Block Company as an example, if sanding the wooden blocks is holding up production, it may be time for Charlie to consider adding another sanding machine.
Automation and analytics are useful tools, but their full benefit isn’t felt if systems aren’t talking to each other. Failing to integrate individual pieces of WMS technology is one of six big mistakes we outlined in a previous article.
Wholesalers increase their chances of a successful partnership with retailers when they maximize data tracking, automation, and integration.
Reviewing the Supply Chain
It’s not just the wholesaler who has to adapt to working with larger retailers; it’s the entire supply chain. The wholesaler may need to review its vendors for raw materials, staffing needs, and shipping.
For example, noting the high cost of paints used on his blocks, Charlie Awesome might look into other suppliers. There may be cheaper products out there, but he must be sure to use non-toxic paint that doesn’t fade or flake off. If he decides on a new paint source, it must be cost-effective while maintaining his high standards for quality and safety.
Likewise, a shipping partner may need to be replaced if they are unable to deliver products on time to multiple locations without breaking the wholesaler’s budget.
Wholesaling to Bigger Retailers and Beyond
Wholesalers need to look inside their companies for the keys to success in the world of mid-sized retail stores and chains. They may need to adjust their operations to accommodate new demands placed on their organizations.
By taking the lessons learned from their small retailer partners and leveraging that information into action, wholesalers can optimize speed, accuracy, and overall efficiency. With a willingness to change and evolve, they can grow their product reach into new and bigger markets.