Is Bigger Better
Everyone would like to get a large order from a big box store like Walmart or Costco but are you ready for it? As the world switches away from brick and mortar and moves onto the web, is the big order really worth it? What do you have to do, or more accurately, what do you have to give up for these big orders? It would me nice to think that there is no difference except that the size is larger and therefore the profits are bigger. Though that can be true, bigger is not always better.
Firstly, lets talk about price. You may have done your homework and found a price that checks all the boxes, gives you a decent profit, is acceptable to your customers and doesn’t cheapen the brand. Unfortunately, you can forget all that. The big box retailer is going to tell you what they want to sell your product for. They know their customer and know what works, this is usually a take or leave it proposal. Don’t be surprised if you have been selling your item for $19.99 and Walmart wants to price it at $9.99. They know their price points and will stick to them. Don’t forget that the big guys also like coupons. These are incentives to move the product as it reaches the end of it’s run. They might drop the price to get it off the shelf but this was negotiated up front during the buy. They might have asked for $30,000 in coupons but in reality, they are taking that money whether they have sold out or not. Some retailers take that $30,000. off the first invoice, they don’t even wait. They also might ask you to take it out of other retailers so it looks like an exclusive price for them. Definitely more is less here.
My warehouse or yours? Really there are two choices here. Direct Import, where the items go directly to Amazon/BestBuy/Target…. or, to your warehouse and then to the retailers. This is a good news/bad news situation. On the good side, they take possession of the product at the shipping port and it’s out of your hands. The bad news is that most big retailers have a whole system of factory inspections, product testing and certifications that must be met to do business with them. You are on the hook for all those costs and the they can be in the 20 to 30 thousand range. You also need to be aware that the inspection companies love to fail products for the smallest thing thus requiring another inspection. Inspection companies also like the money up front, no terms here.
If you ship out of your warehouse, many retailers then consider it to be a domestic product and you might avoid a lot of that inspection process. You will still need to have any certification documents that are needed but you get to skip the 3rd party inspections that we al love. Most of the big box stores will want to add your product online and then it ships from your warehouse to the customer anyway so going that route a completely valid way to sell.
It’s not the same color as the picture. Let’s face it, people will return things for the most ridicules reason and the major retailers will accept them back no questions asked. They do this because it doesn’t cost them anything. They just charge the manufactures for the return, most of the time you don’t even get the product back. That’s because you would have to pay for the return shipping so it’s actually more cost effective to discard it, unfortunatly it’s likely you’ll never know if the product had a problem or not. Of course, there might be a nasty review but that’s a totally different subject.
What about the money? Everyone likes big pay days but the other problem with the big box stores is that they like to hold onto their money. A 90-day payment term is not out of the question. Great if you can float that purchase while you make payroll and pursue new products, but that’s a lot of money sitting in their bank account while you pay interest on your loans. The last thing to keep in mind is that they might not actually buy the product. I’ve seen more than one deal go from “It’s amazing, I’m going to have this in every store!” to “Sales are projecting to be slower than expected so thanks for working with us but…” meanwhile you’ve pulled the item from other online retailers to avoid conflict and now your stuck holding and empty purse.
My advice for those seeking the big deals is to make sure your items are bullet proof. Rock solid items that have no quality issues and that you can offer at a reduced price without any financial risk or harm. Most big box retailers usually avoid the negative review problems that Amazon has as the customers are really looking for the deal so you’re a little safer there. It seems that the review process on Amazon is at least partially about the ego of the reviewer and a couple of negative comments can really slow your sales. In the end, going for the big sale is a manufacture’s dream but you need to have deep pockets to make it work.