People often ask questions like…
“How do retail stores decide if they want to go forward with my product line?”
– or –
“I can’t understand why this buyer isn’t re-ordering from me?”
Your product isn’t going to be a home run for every retailer who carries it. That’s the beauty (and beast) of dealing with retail stores.
If you’re prepared for this situation, chances are you’ll actually end up preventing it most of the time. But of course, there will be times when you can’t prevent this so you should at least know how to recognize the warning signs. That alone can save you a whole lot of heart break – and money – down the road.
Why A Retailer Will reject Your Product (and what you can do to prevent it)
1. Low sell through.
Sell through percent is a key metric retailers use to decide if your product is successful or not. It’s calculated by taking the number of units sold divided by the number of units purchased. In many ways, I believe the sell through can be deceptive because of how reliant it is on what quantities were bought. But I’ve actually found that this can be a good thing if you know how to use it to your advantage.
Here’s an example of how different your sell through percent can be, even despite selling the same number of units:
Scenario 1: 1,000 piece order. 800 pieces sold = 80% sell through.
Scenario 2: 10,000 piece order. 800 pieces sold = 8% sell through.
See how different those numbers can look despite selling the exact same quantity (800 pieces) in both scenarios?
So here is the key: Don’t push the buyer to write massive orders. It is that simple. Instead, tell the buyer to be “conservative” and let them order on the safe side.
Honestly, this is one of my MOST EFFECTIVE selling techniques. I build trust immediately this way because
a) I don’t end up being the bad guy who put them in excess-inventory-hell at the end of the season.
b) Regardless, they always come back to me when the product does well.
2. Slow turn.
Turn (also called ‘turnover’) is how often the retailer needs to replenish your goods. It goes hand in hand with sell through. Turn is calculated by taking sales dollars for a period divided by the average inventory value for that period. It’s just another way to look at how productive your sales are.
High turn = stuff is flying off the shelves.
Low turn = your stuff has been sitting there forever.
High turn is good news. It means bringing in more of your product is a low risk investment of the buyer’s spending dollars because they know it’ll move swiftly and generate revenue right away. Really really high turn usually means the buyer didn’t purchase enough inventory. I find that off-price and discount retailers tend to prioritize “turn” more often.
3. Bad packaging.
What does your product look like physically? How is it sitting on the shelf? Go to the store and find out.
Is it falling over? Is the product getting dirty or ruined from being tossed around?
Think about how many times you’ve picked up a product, spotted a stain or a dent, and then put it back for a “fresher” one sitting in the back of the shelf.
When you are selling to a mass merchant there is no sales person sitting next to the shelf keeping it neat and organized. Not taking this into consideration is a huge rookie mistake. Your product will get beat up between transport, unpacking in the back of the store, customers messing around with it on the shelves, stuff falling on the floors, etc. It is endless.
Your packaging needs to be bullet proof to these scenarios. If not, it could be a huge reason why people are not buying your product.
4. Customer is not “getting it” in 2-seconds or less.
Show your final product and packaging to everyone you can. Get their initial reactions. Don’t say anything. Ask strangers. In our business, we have literally asked random people “what is this?” or “do you know what this product does”?
If they can’t answer those questions immediately, your packaging most likely needs improvement.
Usually it means that you are not calling out your product's features enough to explain what it does. If your product is $3 more than your competitor’s product seated next to you, tell me what benefits about your product justify the price.
Are you organic? BPA-free? Machine washable? Bio-degradable? As seen on TV? Do you have “built in dry fit technology”?
I can think of a thousand different feature call-outs companies use just by walking through a store and reading packages.
I have actually seen beverages with the phrase “gluten-free” on their labels. Believe it or not this marketing tactic actually works because it EXPLICITLY calls out another benefit (despite how obvious it may seem to some) and goes further to differentiate itself on the shelf.
Don’t take for granted that your customer knows anything about your product. Make sure it's written in black and white.
5. You’re not an easy vendor to work with.
Sometimes a retailer might want to drop you from their stores because they don’t like working with you (or worse, you’re doing shady things). Example: it would not be a good idea to sell your product to the retailer’s #1 competitor at the same time, during the same season, in the same year, and expect there to be no hard feelings. Unless you are a huge brand where a presence everywhere is expected, try to keep it separate and balanced. By all means sell the competitor too, but give them a different product or change something up.
Don’t be unwilling to work with them when times get rough – they may come to you for mark downs, promotion help, advertising dollars, etc. Be prepared to wiggle a little from time to time.
6. You're not shipping on time.
Although we tend to think buyers have this huge bank of money to shell out, they function off a budget like any small business would too. The buyer will plan when money is spent very carefully for a bunch of reasons that have to do with their financials and cash flow, but just know that this is a huge part of how they dictate your ship dates so the ship dates MATTER.
Another big driver of ship date decisions is whether or not your product is going to be included in some type of promotion.
Let’s say Neiman Marcus plans to order 7,000 jackets from you for a ‘Black Friday’ promotion. They know that normally they’d only be able to sell through about 2,500 jackets in the season, but because this jacket will be advertised in their Black Friday catalog and discounted 40% off, they know they’ll be able to sell more than twice the amount, aka 7,000 jackets (which they have calculated based off prior selling history and other data you don’t have to worry too much about).
If you deliver late and miss the promotion, they will be stuck with 7,000 jackets that no longer qualify for the special discounts…and angry customers who saw the ad but couldn’t get their hands on actual product.
Now Neiman Marcus will likely only sell 2,500 jackets. That will leave them with another 4,500 jackets they’ll need to mark down and take a huge loss on.
7. Back office ‘housekeeping’
Sometimes some back office like the accounting department just wants to narrow down the vendor list. It happens. We’ve experienced this with a few retailers despite working with them for several years consecutively.
This scenario isn’t as avoidable as the others because it is largely out of your hands but my advice is to just keep a strong rapport with the buyer and the buyer’s superiors if you can (GMM or VP). And most importantly, keep your product sales strong. If you are a critical factor in the department’s sales, margin, or turn metrics, the buyer will fight to keep you.