By James Chittenden
You have always known that your family’s jelly recipe is far superior to anything that is sold at the big grocery store chain in town. Or perhaps you have developed some other product at home that the public should be able to buy. However, you don’t know how to sell your homemade products to big retailers. Let’s get you there.
About Your Recipe or Formula
Novice entrepreneurs in this space often want to know if a recipe can be patented or otherwise qualify for intellectual property protection. The short answer is no. After all, if a recipe could be patented, most of what we eat, drink, or otherwise consume could only be purchased from the owner of the patent.
While a recipe cannot be protected, a brand can be protected by trademark. We recommend that you carefully safeguard your recipe or formula. Coca Cola offers an example of strict security procedures to protect their formula.
What Retailers Want from You: A Proven Market and Sales
Most people have no idea where to start selling their products, much less documenting those sales. Once you get some production and packaging rolling, there are a few ways to test the market for your product and get some sales.
Approach marketing like an experienced fisherman approaches fishing.
An experienced fisherman knows that you don’t just bait a hook, sit back, and wait. Instead, he works smart. He is familiar with the optimal conditions for fishing. There are times of year when the fish are most abundant. There are times of day when they feed and there are places where they gather. He knows what species he is fishing for, what they eat, and what depth and water temperature they thrive in.
Marketing involves getting to know your customers and their habitat the same way.
Start small so that your rookie mistakes are small.
Farmers’ markets, produce stands, community markets, beach markets, flea markets and similar settings offer an opportunity to sell your products. For the price of a folding table, banner, small tent, and a nominal daily admission fee, you can showcase and sell your product in a relatively relaxed and informal setting.
Get a point-of-sale system which will provide data on purchases, at least for customers who pay with credit or with debit cards. Bank statements showing cash deposits are evidence as well.
But don’t just keep good records for retailers that you hope to sell to. Keep them for yourself. If you sell different flavors or varieties, a community market offers a fantastic opportunity to test your products. Gather data of what is selling, and what is not. What was the weather like on your best days and your worst days? What else was happening in town? Did you have competitors nearby? If so, what are they doing right and what are they doing wrong?
Take note of WHO your customers are. Who is buying from you? Are they predominately male? Female? Young, old, or between? Are they single or do they have families in tow? Do you notice any trends in the ethnicities of your customers? Do they look affluent or not? The answers to these questions offer valuable data that you can use to create buyer personas; profiles of ideal customers. HubSpot has a tool that generates buyer personas.
It is just as important to learn who is NOT buying your products. Take note of the people who walk by your table and decline to stop even after seeing what you are selling. Are there consistencies or patterns among these people that you can spot? This will offer clues of where NOT to market, which is also valuable data.
What Retailers Want from You: Freshness
Perishability and expiration dates are a concern. Some retailers will be quite strict regarding this important measurement of quality control; they will not sell something that spoils quickly. The larger the retailer, the more stringent the requirements. To sell your homemade products to big retailers, have a great quality control program in place.
How can you establish products that meet retailers’ standards for freshness?
Example: Esthete Beard Company
Frankie Valle is the founder of Esthete Beard Co., a provider of beard oils. Consumers of Esthete Beard products tend to be affluent men who prefer natural and organic ingredients for cleaning and conditioning beards. The products are available in a variety of scents.
Valle explains his methods for managing perishability and maintaining freshness.
“To date I have loosely gauged the product shelf life based on the manufacturers identified shelf life (or expiration date) for each individual ingredient. Since I use a number of ingredients (8 carrier oils and a variety of essential oils), I keep in mind the shortest shelf life. It’s important to keep in mind length of time the product will be in the manufacturer’s hands (for the time being my hands) prior to going to market, then map out how long the product can sit on a retailer’s shelf and/or customer’s bathroom sink.
My understanding of product shelf life is that the shelf life provided on the label is how long the product should last once manufactured. Period. The clock starts ticking at that time, not when the product hits the distributor, store shelf or bathroom sink. I don’t think most consumers think about that. Most consumers assume they are likely getting the product shortly after the product was manufactured, which might or might not be the case. That is also why it’s important to buy ingredients from reputable sources.”
In other words, maintain a high standard of integrity when setting expiration dates. Fix the expiration date of your product consistent with the expiration date of your most perishable ingredient.
“If you are selling essential oils or similar products, expect a requirement that a product must be able to sit on the shelf for 6 months without any noticeable changes to the chemical composition of the product. No weakening of scent or deterioration in the ‘structural integrity’ of the product. Smaller retailers may not be as stringent as the big guys but they are also not buying in bulk with product sitting in warehouses for months on end.”
The last thing you or your retailers want is a product that spoils quickly. A reputation for quality and freshness is a potent marketing advantage.
What Retailers Want from You: A Profitable Product That Sells Fast
Retailers are looking for the best possible combination of profitability and turnover. If you can create a product with a profit margin of 40 percent that sells multiple times throughout the day, retailers will offer you opportunities.
Novice entrepreneurs often mistake markup for margin. They set prices using a markup instead of correctly setting profit margins, resulting in significant lost profits. This simple video can help you avoid those mistakes.
If your product has been selling and you are ready to pitch it to big retailers, get connected to the appropriate buyer.
Michael Zanetti of Tradesfactor is a longtime management consultant and consults and leads other entrepreneurs at Bunker Labs. Bunker Labs serves military veterans and military spouses and helps them start and grow successful businesses and startups.
Zanetti offers some insight on buyers and their motivations. Here is what you can expect as you begin your efforts to sell your homemade products to big retailers.
“Large retail chains have buyers who specialize in a particular channel. They are evaluated by how quickly products turn over and will sell premium space for an extra cost. Think endcaps or islands in the middle of an aisle or intersection. Right or wrong, these folks can make or break a product. Their goal is to sell through product as quickly as possible. They will often give you a trial period and an expected pull rate (the ability of a salesperson to close a sale transaction) If you perform, they will place a bigger order. In many cases, they won’t pay you until sales are complete because you are an unproven product. Keep this in mind for runway budgeting.”
Plan for a trial period. If you can make the buyer look good by offering a product that sells fast and at good margins, you have an ally, if not a friend, on the inside.
“For the Walmarts of the world, they are not interested in helping you to make a profit. They will help you streamline your operation to break even with Walmart, and then because your operating costs have become so much cheaper, you will increase your margins everywhere else.”
So don’t expect massive profits from a high-volume retailer such as Walmart, but success there can create a powerful marketing advantage. You now have a credible track record of sales and demand, enabling you to win visibility and new retail contracts. Now you have the power to set prices that carry healthier profits.
Some fantastic partners to help you sell your homemade products to big retailers
- How do I get the opportunity to pitch my product to big retailers such as Costco, Whole Foods, or Target? Zanetti recommends that you get a salesforce; someone with relationships and connections that you don’t have. One example is Acosta; they may be able to open doors to help you sell your homemade products to big retailers.
- I have developed cosmetics products. What is a good partner to develop and sell my products to big retailers? From manufacturing to distribution, you need a good co-packer or private-label company. Nardo’s Natural Private Label can help you manufacture natural and organic skincare. If you are new to the game, you obviously don’t want to be required to place large, expensive minimum orders. Nardo’s allows you to order in lower quantities.
- Are there other partners to manufacture foods, essential oils products, or other goods? If you are looking for private label help in the U.S. or Canada, Storebrands is a rich site that helps you locate co-packers or private label manufacturers near you.
- What about shipping? One of the first rules is that air freight is usually cost-prohibitive. However, at certain order sizes, it may make sense. Check rates here. Shopify has developed an extensive network and shares a few hints that you can use to assemble your own system. “Third Party Logistics” or “3PL” for short, is any order fulfillment, inventory management, warehousing, shipping, exchanges, returns, etc. It is getting your product to the retailers or end users. There are many providers of 3PL services. They vary in terms of cost and reliability, so choose these vital partners carefully.
- Should I sell on Amazon? Amazon provides a proven system for order fulfillment for your products, commonly referred to as Fulfillment By Amazon. You must ensure that an Amazon distribution facility is adequately stocked with your products. However, order fulfillment, shipping, and customer service are all handled by Amazon. Learn more here.
What questions do you have? Here is your next step.
In the time you have spent reading this, you have certainly picked up a few things. However, it is just a start. You found answers to some questions only to have more arise. For example, we didn’t cover foreign suppliers. So we are going to get answers for you from the experts quoted in this article and more. All you have to do is submit your questions here and we will address them in a future article.
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