How to work with Large Retailers
You properly registered your business, you’ve got great working partnerships with your contractors and suppliers, and people are clamoring for your products. It seems like life couldn’t get any better until a retailer (like, one that has its own catalogues that you occasionally get in your mail) reaches out to you and asks to stock your products.
Say what?!? Of course you’re stoked -- who wouldn’t be? But take a step back to see the big picture before you put any ink to the paper. Large retailers didn’t get where they are by acquiescing to every stockist they decided to partner up with. They’re an entirely different type of retailer with their own rules. Here’s what to watch out for:
It’s common practice for you to buy back the inventory that doesn’t sell so that you can sell it through other means. Will the retailer allow for that practice, and will they sell it back to you at an affordable rate? You also need to account for inventory space for buy backs, since this may result in unneeded storage and production costs.
Retailers operate a massive supply chain and typically coordinate their warehouse deliveries to the day (sometimes to the hour if you offer two-day shipping). How can you ensure that your products arrive on time to their warehouse? This will require a higher degree of sophistication from your own supply chain, and you need to be able to plan for an expedited timeline with your suppliers/distributors unless you want to pay fees for your products arriving too soon or too late.
Since large retailers can afford to buy products in bulk, they often expect a hefty discount in exchange. Run the financials to make sure you can afford to sell a large amount of your products for less than average after calculating production, shipping, and marketing costs.
The retailer might have opinions about which specific products they want to sell, but don’t be afraid to speak up. You know your customers the best and which products sell in different conditions. Push for what you think will sell the best in a large retailer environment.
Retailers often have a standard contract that they use for purchasing products, so it’s a good idea to have it reviewed by your business attorney. You might be eager to score yourself a sweet business partnership, but make sure you know what you’re agreeing to ahead of time before taking this huge step.