You’ve come up with a unique idea for a product, located distribution voids, researched the competition, made your sales pitch, and it’s paid off. Your brand is now on the shelf of a major retailer. Congratulations! Give yourself a pat on the back — but don’t rest on your laurels just yet.
For many emerging CPG manufacturers, starting an account with a major retailer feels like the end goal. And it’s certainly an achievement! But your big break is actually the start of a new chapter. Many challenges still lie ahead, and if you’re not careful, the hard work spent getting into stores like Target, WalMart, or Whole Foods might be for nothing.
Here are a few steps CPG startups should consider when scaling operations for a new account…
Many growing startups assume — incorrectly — that shelf presence alone leads to sales. In reality, store patrons may not even realize that new products have arrived without an initial launch promotion. Unfortunately, few emerging brands have the promotional support or expertise to market products under a new account.
CPG startups should always assume they will need to manage promotional responsibilities on their end. Make plans to launch your product, market it to a new audience, and offer an initial discount. Your first promotional period should be aggressive to drive adoption — lasting for at least 2 weeks, up to 6 – 8 weeks. This will help attract new customers while providing sales data when planning future promotions.
Unless your product is already high-performing, it’s unlikely retailers will do the heavy lifting of promotions for you. That said, retailers succeed when you succeed, so most will assist with “New Item” stickers or offering product samples to consumers. Just don’t forget that new brands are always arriving in store, so you’ll have to fend for yourself once the initial promotion is complete.
Getting onto retail shelves isn’t free. There are all kinds of costs a startup will accrue when scaling operations for a new account. Your production will ramp up significantly, and you’ll move consistently higher volumes as well. If you’re not prepared for these costs, they might eat into other initiatives intended to help your brand grow further.
Beyond the potential increase in production costs, some retailers ask for slotting fees before shelving your product. Warehousing a new item costs anywhere from $250 to $1,000 per store location — defaulting to higher rates if you represent an untested brand. This fee is typically an upfront cost instead of a regular payment, but it’s a major expense for any emerging brand.
The good news is this cost can be mitigated in some circumstances. Retailers might waive the fee depending on your brand size, or if you’re offering a particularly tantalizing product. If your account was negotiated through a broker, their prior relationship with the retailer might also provide incentive to reduce costs.
Any vendor working with multiple accounts can tell you that no two retailers are alike. Some dedicate specific shelf space to organic products, while others segment organic items within a parent category. Every time you pitch a new account, you have to market your product to fit the retailer’s expectations and organizational structure.
In other words, don’t assume that Whole Foods will accept the same promotional strategy as Target.
This challenge isn’t unique to startups. Even established brands effectively begin at the ground level for each new account. All of the previously-mentioned costs repeat themselves for each new storefront, making it difficult to surpass key expansion tiers. What’s more, you’ll take part in category reviews tailored for each individual retailer, so be prepared for the time it takes to make sure you’re addressing their individual requirements.
The best response? Always consider your brand in relation to specific retail accounts. Focus on metrics that benefit the broader category, such as velocity, movement, dollars per store per week, or profit margins. By demonstrating that you understand a category, it’s easier to prove that your product adds value to it. After all, if retailers do share one trait, it’s that they want your brand to help their business grow.
Also, don’t forget to watch how your competition behaves within the category. If there are certain price clusters or promotional strategies that seem effective, try emulating them, and measure any benefits. There’s no point in reinventing the wheel for every storefront, and the opportunities leveraged by competitors might be good benchmarks for your own strategies.
Data visualization is an incredibly useful tool for managing new accounts. They allow you to generate engaging data stories that appeal to retailers based on factual strengths and opportunities. Yet data has many uses for on-shelf products as well.
New brands still need to generate weekly reports, measure velocity, and prepare long-term promotional strategies that attract customers to your shelf. And a lot of retail buyers won’t even take a meeting with prospective vendors if they don’t bring data-backed brand and category plans to the table.
These needs are especially challenging to address if you don’t have access to a full analytics team. Thankfully, Bedrock Analytics can help with a data visualization platform that manages syndicated metrics for a fraction of the cost.
For more details, take a look at feature articles like “How To Make Your Products Stand Out In Crowded Categories” or drop us a line and get a product demo today!