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Current retail trends place a lot of pressure on companies—high entry costs, higher customer expectations, and complex logistics. In a year when e-commerce is booming, why would anyone share their hard-won success with a big-box or marketplace partner? The answers are fundamental to trade.
In a recent webinar, Flexport moderated a discussion on the topic with Mark Williams, Managing Partner at On Tap Consulting. Ultimately, major retailer partnerships take work, but can result in golden rewards for the companies that make the grade. Here are the takeaways from the webinar, followed by a transcript excerpt.
The Allure of Retail
Modern marketplace retailers may drive a hard bargain at times, but they can turbo-charge sales by exposing products to their own highly cultivated markets. That can lead to banner years for profits.
Then, there’s the magic moment of knowing your goods made it into more customers’ hands—ambition for its own sake, but still totally valid. Flexport calls this seeing your products “in the wild.”
And the Pitfalls
To overcome the stumbling blocks, companies need a firm grip on the complexity of retail partnerships.
While it’s true that transparency makes logistics and operations easier, increased visibility is a tightrope act on the customer-facing side. Prices are easy to compare, and reviews are everywhere. Williams recommends ensuring products are fully baked before going to market. Work out any kinks well before goods hit shelves.
The big retailers know they hold competitive advantages and preserve their positions with stringent vendor standards. The entry costs are steep. A couple decades of retail consolidation means mistakes cost even more. Companies that can’t meet big-box benchmarks get less lift or outright dismissal, leaving them with fewer options for wide distribution.
Mastering retail partnerships takes shrewd strategy from end-to-end. For example, retailers issue routing guides to vendors; twenty-page documents full of requirements for distributing into their networks. Each retailer has its own routing guide—and they’re subject to change.
In these instances, an agile freight forwarding partner can help forge the path into retail distribution. Streamlined booking requests and detailed shipment tracking, including transoceanic and local maps, can ease the strain of meeting cargo and carrier specifications. Exception management tools can help ensure companies satisfy the terms of their agreements.
On the Flexport platform, supplier management tools help keep the supply chain moving. A recent Flexport poll showed that over a quarter of respondents find balancing supply and demand relative to sales forecasts to be their greatest logistics challenge out of the options given.
That makes sense: Currently, a bullwhip effect is jumbling supplier responses to demand trends. Technology can help smooth out a bullwhip effect and help keep brands in good standing with retailers by keeping their finger on the pulse of their SKUs.
Williams lands on a simple tip: limit inventory complexity while onboarding with retailers. That way, as more doors open, sales targets are easier to meet, resulting in the partnership support companies need to avoid burning cash or diluting their own efforts as they grow.
For more practical advice, read the transcript excerpt below. For the full insider dialogue and audience questions, watch the webinar Logistics Launchpad: Getting Your Product into Customers' Hands now.
Logistics Launchpad Webinar Transcript
Ted Boeglin: Hello everyone, and welcome to our Logistics Launchpad Webinars series. I am Ted Boeglin, and it is my absolute pleasure to welcome you to this webinar series where Flexport and our friends at OnTap Consulting talk about the needs of fast-growing businesses. I'm the general manager of Flexport's small and medium business group, where it is our mission to make global trade easy for everyone.
And today, we are talking about one of the most important topics, which is getting your product into the hands of your customers. Sounds like an essential piece of making global trade easy to me. Okay. I'm also very lucky to have two fantastic co-hosts with me. Both are truly experts in their field. I'll start off with Mark Williams. Mark leads the sales OnTap division of OnTap Consulting, where he also serves as managing partner and has helped dozens of manufacturers launch and grow efficiently at retail, including companies like Tile, Eargo, and SimpliSafe. Prior to OnTap, Mark led sales teams of numerous venture backed consumer electronics companies, including Anki, Kobo and Flip Video. So, welcome Mark.
Mark Williams: Happy to be here.
Ted Boeglin: Hello everyone, and welcome to our Logistics Launchpad Webinars series. I am Ted Boeglin, and it is my absolute pleasure to welcome you to this webinar series where Flexport and our friends at OnTap Consulting talk about the needs of fast-growing businesses. I'm the general manager of Flexport's small and medium business group, where it is our mission to make global trade easy for everyone.
We also have Michael Hajatian with us. Michael leads Flexport's warehousing organization globally. Since the teams launch in 2017, Flexport's warehouse network has grown to over 36 CFS facilities, consisting of five Flexport operated sites in 31 partner facilities in Asia, the US, and the EU.
Prior to joining Flexport, Michael was at Amazon, where he was a product and operations leader, building out their reverse logistics capabilities for their trade in and rentals program. Welcome, Michael.
Michael Hajatian: Thank you, Ted, for having me. I'm really excited to be a part of the conversation.
Ted Boeglin: We have a fantastic set of topics today for everyone. We'll start off with the essential question first, which is, you know, why are we talking about getting your product into the hands of customers? Why is that so important to us?
Then, we'll go to a very pertinent question, which is retail. Why, when, how—that's really Mark's area of expertise. So he'll help us there. Then, Michael's going to lead us through a conversation on distribution and fulfillment networks, making sure that all of your sales and marketing decisions are paired with the right operations decisions.
We'll talk a little bit about how you experiment in the right ways. The nature of experimenting with your product and these decisions has changed over time, and we're going to give some useful tips and tricks on how you can experiment with your product the right way.
And then, we're going to wrap up with a couple other items. So we're going to talk about selecting the right partners for your journey. And we're going to include some pro tips from Mark and Michael from some lessons learned the hard way over time, and we'll end with some Q&A.
So, why are we here, right? And at the end of the day, you know, it's all about these magic moments that everyone's looking for. So if you're a business owner or a business leader, what you really crave is that feeling of making a product that people want and getting that product in their hands, and then seeing, and hearing their excitement and happiness. At Flexport, we call that “seeing our customers products out in the wild” and truly nothing makes us happier.
So, in pursuit of these magic moments, one of the key questions is why is it so hard? Why does it sometimes feel like there's a lot of friction on that journey of making a great product and actually getting it to your customers? And we're really going to attack that from two different angles. Mark is going to help us attack this question from the sales and marketing angle. So we're going to talk about decisions that you can make along that sales and marketing journey. And Michael is going to help us analyze it from the operations and distribution decision angle. And it's really important that those two strategies play nicely together. So if they're not in harmony, then, then oftentimes you can get bad outcomes.
The good news though, is when you make the right decisions, you can unlock growth and you can get more of these magic moments. So why is it challenging though? And what are some of the demands of the modern marketplace that have made this an even more relevant topic? Well, there were some recent trends that have undoubtedly put pressure on your decision-making in your execution.
Demands of the Modern Marketplace
Ted Boeglin: Namely consumers have really changed their expectations for ease of purchase, ease of return, and then the ability to both consume reviews and give reviews. And the reality is that a lot has been written on this. This is not slowing down. If anything, it's speeding up. And this has implications for the decisions that you make in sales, marketing, and operations.
The next trend is that standards have increased for delivery. And again, you know, I had this very succinctly summarized to me by a business leader who said it used to be big beats small, beats slow, and a lot of the retail partners that you're working with have fully digested this, meaning that they are expecting more speed, higher consistency and overall higher standards for how they work with you.
The third trend that we're seeing is retail consolidation. Mark can tell some good stories and I'm sure he will on this webinar about visiting various retailers 20 years ago when he was making certain sales decisions and that landscape has changed dramatically. We now have fewer retailers that exercise much more power in the marketplace. And so, getting it right with those retailers is much higher stakes. Oftentimes there isn't a second chance with those retailers, so it's no longer a safe space to experiment. And so we've seen much more pressure on your execution at the retail step because of this consolidation.
The good news though, is that both Mark and Michael have navigated these questions successfully for years. So through the course of this next hour, that we've got them, they're going to give you very practical advice on how to navigate this landscape effectively so that your business can grow. You can be profitable and you can get more of those magic moments with your customers, which we all crave so much.
So, without further ado, I'm going to pass it over to Mark and he is going to tackle that very substantial question of retail. And, and so I would love to pass it off to Mark who will dive into the next topic. Asking the big question...Retail?
Mark Williams: So that is really the question why retail? And the obvious answer is, is a chance to sell a lot of products. Hopefully make a lot of money. Retailers also have a ton of customers. So this could be a great way to drive awareness of your product, especially if you're launching a new product or a new category.
Of course, why not retail? Well, it's pretty expensive. I'd say most suppliers that haven't yet worked with retail, have some understanding that working with retail can be expensive. They know retailers have margin requirements, there might be some advertising marketing dollars you need to spend, but, oftentimes, you don't understand the operational complexity that comes with working with a retailer.
And if you don't get all the operations in place, you could wind up burning a bunch of money. So the goal is to be like the top there, where retail helps you drive a lot of cash, but at the same time you're doing it right. So you're not burning a lot of cash. So, Michael, I know the operational side is your area of expertise. Why don't you share some context there?
Michael Hajatian: Yeah. Thanks Mark. So from my perspective, it really just all starts with, you know, in retail, it's the concept of the routing guide. So if you're not familiar with the routing guide, it's a document that most major retailers publish that is going to lay out the rules and requirements for distributing into their network.
So, maybe asking yourself, well, what makes this complex? Right? Well, there's a couple of things here from a routing guide perspective is that no one routing guide is the same. So if your strategy is to go on to 10 different retailers, unfortunately your team's going to have to get familiar with 10 different routing guides.
The second thing is, is that routing guides are not static documents they're continually changing, right? So for example, if you have five months under your belt distributing into the Best Buy network and you're doing well at it and Best Buy decides to change the routing guide, unfortunately, your supply chain is going to have to adjust.
And then the last thing I'll call out here is, is that rotting guides are long. Okay. They're not just quick one page, you know, documents that you can skim through. Unfortunately, they're dense documents with a lot of details. They cover things like cargo specifications, carrier requirements, and trucker appointments.
So, again, it's not necessarily an easy read. These are 20 page documents. That again are very dense with a lot of details. So, you know, in summary I think that the complexity is really driven from the routing guide and how those things are always changing. Just one other quick comment here on the routing guide or a little tip or trick here, generally speaking, the larger the retailer you're going into unfortunately the stricter that they're going to be with you meeting those routing guides, and then there's also consequences.
So, if you're already fulfilling into the Amazon FBA network, you're, you're very familiar with probably chargebacks backs and fees. That is not unique to obviously Amazon, every other retail is going to have something similar. So you'll always be on the watch out for the charge backs and the fees you know, even worse yet you could have your shipments blocked or potentially even be blacklisted for future shipments, if you're a repeat offender.
So, just a few things to call it out a call out there on operational complexity in the retail space. So Mark, I'll kick it back to you and we can keep going.
The Role of Retail Today
Mark Williams: Thank you. So love to start with a poll just to understand kind of where everyone is right now in your process of working with retail or your sales channels generally.
And the question here is what is your biggest sales and marketing pain points with your sales channels today? Now we're going to talk about the operational and logistics pain points a little bit later. So for now, just on the business side, the marketing and sales side, you know, is it that you're trying to figure out which retailers and key sales channels to sell through. Have you figured that out and now the challenge is trying to win placement with those retailers and sales channels that are appropriate for your business. Do you have waste placement in the places you want, but now you've got to figure out how to expand those sales, or is it profitability? You got a lot of distribution, but you need to improve profitability.
So, I'll give it a few seconds here. People that record their answers.
All right. Well, one that's near and dear to my heart. And when you place them with retailers, yes. Yeah, it's, it's, it continues to be complex to identify the right retailers. And then of course, knock down the doors to get into those retailers. And growing sales is also it looks like that's a close second there. Once you get into the retailers, figuring out how to grow your sales is another key one. So thank you thank you for those responses.
I want to start by sharing a bit of an analogy of how I think about retail. I think of retail as a fancy sports car. You know, if you take the time to figure out how to drive, you know, work the gearshift when to accelerate, when to brake how to corner. You can go really fast. You can accelerate. You can have a lot of fun. You can win the race. At the same time, imagine stepping behind the wheel of a powerful sports car. And the first thing you do is you step on the gas before you've learned the fundamentals. You might look like this poor chap that crashed his car, and then you're back to burning cash.
So, again, retail is very powerful. It can help you accelerate. It can help you sell a lot of product, but you have to have the fundamentals in place really before you hit the gas and try to accelerate. I also want to talk about the changing role of retail over the course of my career in the past couple of decades.
So, you know, 20 years ago as a consumer, if I wanted to learn about the latest technology, I might walk into a local Best Buy store, maybe even a Comp USA or a Circuit City ,and I would walk down the aisle and I would actually physically pick up the products. I would see what competitive products are on the shelf. I would read the box and I would make a decision about what products to buy to the large extent, based on what I saw at the brick and mortar retail store.
Consumer's consideration process, their discovery process, and understanding what products to buy has changed a lot in reverse for the past two decades. So now most consumers will start their consideration process outside of the store. By the time they walk into the store, they've already looked at websites, they read reviews. And so the implication here is before you ever get into a brick and mortar retail store, make sure that your online presence is strong. You figured out the fundamentals, why people buy your products, how to message that product. And then you can go into the brick and mortar retail store. Industry consolidation as Ted mentioned has also become pretty significant. So it used to be that when I would start selling a product into retail, if I wanted to reach 80% of my addressable market, I had to get on an airplane and go to a dozen different cities, meet with 10 or more retailers. And then I could potentially reach 80% of my addressable market.
Today there's been a lot of consolidation. There's some benefits as an example. Now if I get to Minneapolis and Seattle, I can probably work with enough retailers to get to 80% of my addressable market. At the same time. It means that each individual retailer is that much more important. So if I launch a trial with a given retailer and it's not successful, it's pretty hard for me to make up that volume somewhere else. So again, before you launch a trial with a particular retailer, make sure you understand the fundamentals, make sure you have the resources available to be successful at that retailer. And then you'll have the best chance for success.
Another difference is that transparency is high, both in terms of product reviews and pricing and promotion. Two decades ago, I might've gotten away with launching a good but not great products at a retailer. As long as I had a strong brand and I could get pretty broad distribution. Today, I don't care how strong your brand is. If you want your products and it gets two and a half, three stars on Amazon, you're not going to sell a bunch of inventory. You're not going to sell a bunch of sales, get a bunch of sales. So really you have to make sure that your product is fully baked, that it delivers on the promises. If your marketing says it does X, Y, and Z, but really it only does X and Y, and you're still working on Z, maybe pause before you try to expand broadly.
Pricing and promotion is also transparent. Again, 20 years ago, I might've been able to get away with running a promotion with one particular retailer. Today, if I run a promotion, a price promotion with a given retailer, even if they're a small one, it's not long before Amazon is likely to match. And once Amazon matches, then everyone else follows. So any promotions, any price changes you make need to be on a national basis for any given product. So what are those core things you need to learn before you expand broadly?
It's really the basic product market fit questions. So, who is your core consumer and why are they going to buy your products? What are the demographics of your consumer and what are the behaviors? What are the right price points and promotional strategy? How do your customers learn about your products? And then once they learn about your products, how do you nurture them through your consideration cycle, all the way from awareness to interest to purchase. Does your product deliver on its promises? Again, if you say your product is going to do these three things, make sure it really does those three things. And here's kind of a pro tip, you know, what does your product seasonality curve look like?
Test & Learn Before Expanding Broadly
Mark Williams: So, in this slide, I have a graph of the seasonality curve from our products that I worked with earlier in my career it was a sub $100 consumer electronic product, and it was a very giftable item. So as you can see there, you know, it's really, we sold half of our total units in the last two months of the year. So from a forecasting perspective, this is really challenging. So many times the manufacturer has to decide in June or July, how many units you're going to build for the holiday season, so you can get those units into retailers in September and October and sell through them in November and December. So, if you understand your product seasonality curve, or at least the category seasonality curve, you can use this as a way to help forecast more efficiently.
So, say I'm sitting in July and I look at my May, and June sales. Well, I know if I know my seasonality curve, I know that my sales from those two months should equal about 13% of my year sales. Whereas November, December is half of my total sales. So I can just multiply by four and I can get a pretty good idea of how many units I should build for Q4.
All right. So where do you get answers to these questions? Well, I'll give you a hint. It's probably not brick and mortar retailers. Brick and mortar retailers again are great at driving volume, but the feedback loop is pretty poor and the amount of time it takes to actually implement anything you learn can take a really long time.
So, compare that for example, to your own website, where you have almost complete information. On your own website and you can do AB testing on messaging, you can do AB testing on pricing. As soon as you learn something, you can implement it almost right away. So your own website gives you the best opportunity to test and learn about messaging, about pricing, about promotions, really understand what works and what may not work. And then you can implement those quite a way quite quickly to see how that works.
Amazon is typically the next step. So the way in which consumers will shop at a place where you have competitive products, just one click away, maybe different from the way in which they shop on your own website. So part of the reason you want to go to Amazon or another online retailer is to understand how your core consumer interacts with your products and your core product messaging when there's a competitive environment. When they sing about Amazon specifically, they do have quite a few tools that can help you actually test those core messages, understand who's buying. And again, online retail is a good place to learn, to take those things and then put them into practice when you expand more broadly at brick and mortar retailers.
All right. So when is the time so accelerate again, once you've validated those fundamentals, once you've figured out the sales and marketing questions, whose your core consumer, why do they buy your product? What's the right pricing and promotional strategy? And when the cost to acquire a customer is in line with your business plan.
So, I think it's a common misconception, that if you can get your product in a lot of doors, you'll naturally sell more units, and do some more efficiently. You certainly may sell more units if you expand your distribution, but typically it is actually less efficient to sell at brick and mortar retail than it is online.
So, if your business model says, you can spend $20 to drive a sale and you're spending $30 online, that's probably not the right time to expand your brick and mortar retail. You got to get your customer acquisition cost in line before you try to expand broadly.
Again, brick and mortar retail is like a fast race car. It can help you go really fast, but it also guzzles a lot of gas. Finally, you really got to make sure you have the right operations and logistics in place to support your growth. So, Michael, again, I know that's your area of expertise. I'll hand it off to you.
Understanding Supply and Demand, How Many SKUs, Vetting a 3PL, and Building the Infrastructure
Michael Hajatian: All right. Thank you, Mark.
So, all right. You want to, you want to expand, right? Well, we gotta figure out your operations capabilities before you can do that. Right. You want to execute? So I think first off, I just want to start with a goal, right? What is the goal when you're building out your supply chain network, your distribution network.
And to me, it's really about understanding the trade-offs between costs and responsiveness, and then also the cost of unfulfillable orders versus having too much inventory on hand. So in this next kind of slide here, I've touched on four areas that I think are places you should consider before making the leap and expanding into the retail channel.
So, I think the first one is the most difficult. It's really understanding the interplay between supply and demand. And unfortunately those two sides of the equation are rarely in perfect sync. You know, on the supply side, again, that's really where operationally your organization can make a, you know, a change or excuse me, make an impact. So that's where you look to your operations organization.
And on the demand side, it's really where you're going to have to work with your commercial leaders or sales teams, really, to understand some of the things that Mark's already talked about regarding seasonality, velocity, and the like.
So, on the supply side, some of the things that, you know, from an operation standpoint that I think are worth considering, and really understanding deeply the answer to these questions is first and foremost is how quickly can you bring the product to market? Or how quickly can you get it to the retailers door. Right. And that all starts with the supplier.
So, when you're taking a look at your supplier network, one of the questions I always have is, well, how reliable is that supplier network, right? And reliability isn't necessarily always around hitting cargo, ready dates. Right. You know, reliability also comes down to, are they producing the right SKUs at the right quantities? Right? So if you think about the life cycle of a shipment, it all starts at the supplier, and again, you really want to evaluate the liability of your supplier within your network.
The second thing is, is how you're gonna get your inventory into the country? Right you have a lot of options, air, ocean, you know, with air again, you have something that's very quick, but, unfortunately, very costly on the ocean side, you have the reverse, right? So again, understanding those trade offs between cost and responsiveness is huge, but then also understanding the, the, the risks of stock-outs right, or your reputation with a particular retailer.
And then lastly, once you get the product into the country, right, how do you build out the transportation network to connect it all? You know, the transportation network is hugely important. If you think about suppliers and warehouses and ports as the nodes, the transportation network is the thing that connects those nodes.
Then, if you look at the demand side again, I don't want to go too much into this, but again, you need to be able to match supply and demand. Obviously looking at things like seasonality, velocity, the breadth of your product catalog. These are all things that you should be considering when you're trying to actually, again, develop your distribution network.
And what I'll say here is, is from a supply and demand perspective. Again, they're not going to be in perfect sync, always. So the, the role of your distribution network is to be able to manage the fluctuations in supply and demand to, again, make sure that customer orders don't go unfulfilled and then also make sure that your costs of goods sold are managed properly.
Stepping into the next thing that I would kind of consider decide on the complexity with which you want to go into the retail market with. Again, kind of a decision that you have to go into jointly with your commercial teams, but how many SKUs and into which retailers are you going to? Not rocket science about what I'm about to say, but obviously as you increase the number of skews and the number of retailers are going into, you're increasing the permutations and the risk within your supply chain.
So, from my perspective you know, Mark talks about, you know, testing and expanding. I think even when you decide that you want to go into retail, it's a very good thing to try to test in the retail channel and expand from there. So my suggestion is to minimize complexity to start. Okay. I think it does two things: one, it allows you to gain trust with the retailer and your customers. And then secondly, it allows you to build confidence within your own organization, around your operations before scaling.
The third thing to consider is just inventorying your existing capabilities, right? You're probably fulfilling orders some way, somehow right now, right? You're doing e-com you have an infrastructure set up, you have processes set up, you have systems set up to be able to do that now. You know, depending on your strategy and where you want to go, it's just doing a simple gap analysis. Where are you today? Where do you want to go? And where are those gaps? Right. And at this point of the exercise, what I see happen most often is is that, you know, the brands you know, have to make a decision. Is this something that they're going to manage in house? Or is this something that they're going to work with a 3PL with. Most oftentimes when you're looking at a, you know, SMB or emerging customer most oftentimes they're going to look to a 3PL to be able to do that. The experience isn't there in house, and there's a large number of 3PLs who do this, who do it well and can really help you and your organization make sure that you execute on the requirements operationally that the retailer has.
So, really quickly, if you decide to go to a 3PL just some quick tips here around vetting, pretty standard stuff, but it's a discovery process. When you're going and looking at a 3PL ask the questions, who are your clients? Can they provide referrals? What retailers are they distributing into currently? And does that match your strategy and where you're going? And then lastly, can they provide metrics on client churn as well as client retention? Right? So those are the questions that you'd want to be asking.
But on the flip side, you want to make sure that your 3PL is also asking you good questions, right? If a 3PL is asking you good questions, it's usually a sign to me that one they've been through this before. Two, that they can execute on your requirements because if they're abstracting the right answers out of you, to be able to understand what needs to get done and aligning with your strategy.
And then thirdly, which I think is, you know, very important that maybe doesn't always get called out is just that they can price the projects or your business out better. Right? You want to be able to manage your margins. And the more information that you give to your 3PL obviously the better pricing that you can get.
The last thing I'll say here on vetting, a 3PL if that's the route you decide to go is just going, you know, ask to do a tour of their warehouses and their facility, right? Conducting a simple eye test can go a long way.
You know, clean facilities, organized facilities, facilities that prioritize security and safety are good indicators of how your inventory is going to be treated if you don't own it in your own supply chain, right? So the goal is to get the inventory to the retailer, not damaged in the quantities that they want within the specifications that they require. Right? So if you're going to go contract it out to a 3PL my suggestion is visit their sites, take a look at these things again, because how they treat their own facilities and other clients cargo is a good indication of how they're going to treat your own cargo and how it will show up at the retailer's door.
All right. So you've understood the supply and demand and design maps between the two, you're deciding when the complexity you've inventoried your existing capabilities, you've done some type of gap analysis. Right now you need to build the infrastructure before expanding. So building the infrastructure again is the physical infrastructure, the warehouses, where do I need to be located?
And how do I connect at all with the transportation network? I think the transportation network is one of those things that's an unsung hero in this whole thing that makes this thing work. With respect to your transportation network. If you go to the 3PL route, don't always assume that the 3PL is going to provide the transportation network. And if they do, don't always assume that it's reliable. On the flip side or retailer may provide you with the transportation network carriers that they want you to work with, or that they required you to work with. Again, just because they give that network to you doesn't necessarily mean it's reliable. So again, get very familiar and comfortable with the transportation network, because honestly, that is the thing that connects it all together to make sure that things are working smoothly.
I'll finish this off with the last piece, which is systems. There are so many different people that are gonna be touching your product throughout the supply chain operations. There's the suppliers, there's the truckers, there's the warehouse men. There's all these different people and they're all going to be running on different systems. So having an understanding of how these systems will work together, how you're going to have visibility and how your partners are going to have visibility into inventory and transit, orders, receipts is hugely important.
And I think the other thing to consider is how are all those systems going to talk to one another? Right too often, I see data being transposed manually between systems. And obviously that's a gap. That's a risk. You don't want that to be happening.
So, building out your physical infrastructure, the nodes and the trucking network to be able to connect those nodes it's just half the battle, right. And making sure that from a systems perspective, it's all connected is hugely important, hugely beneficial. I'll end this, this kind of piece on the operations with a research and a study that I just saw done by PWC, which was saying digital champions investments are 8% more productive on the revenue side and 7% more productive on the cost side.
So, basically again, it's this, this highlighting the importance of systems. Highlighting the importance of visibility and transportation within your operations and ensuring that you have that end to end visibility, right? It's going to pay dividends with you both from the top line as well as the bottom line. All right. And with that, I'll pass it back to Mark to go through the rest of the slides.
Choosing the Right Retailers
Mark Williams: Thanks, Michael. All right. So now you figured out the fundamentals, you know who your core consumer is, why they're going to buy your products. You got your pricing and promotional strategy in place, and you've got your operations ready to go. So how do you choose the right retailers? But my first trick is that the 80/20 rule is still alive and well. Most brands that I work with will find that the top two to four retailers are going to represent 80% plus of their sales. Chasing the long tail can make you dizzy. That's another thing I like to say.
So, I have many stories of working with small regional retailers, where I actually spent more time. Working with them, trying to get them up and running to get 10% of the sales. So again, focus your energy on those biggest retailers that are going to drive the most volume.
Common misconception also, is it more doors equals more sales. More doors definitely equals more complexity and it can equal more sales, but there's also cannibalization to worry about and share shifting your sales from one retailer to another. An example, I experienced with this working with Best Buy launched a product we were selling about a unit per store per week, which makes us happy. It makes Best Buy happy. We then opened up a couple of new doors and suddenly our sales at Best Buy fell from a unit for store per week to about two thirds of a unit per store per week. Our total sales went up, but we were share shifting some of those sales to other retailers. And so now some of those marketing opportunities we previously had with Best Buy when we were meeting their expectations became harder to achieve because we were a little bit below the targets that Best Buy wanted to achieve.
So again, more doors doesn't necessarily equal more sales. It can, but it certainly equals more complexity and you also have to be ready of cannibalization and share shifting your customers from one retailer to another.
All right. So what are the filters I use when I think about which retailers to choose? Again, looking at some of the biggest retailers here, I think about first of all, versus how many units can they sell? Can they drive a lot of volume? If there are three to five retailers that are going to matter, make sure you're working with those retailers that can drive 80% plus of your volume.
Okay. If you're launching a new product and especially if you're launching a new category of products, make sure you're working with a retailer that can efficiently and effectively tell your product story.
So, this is a bit of a matrix that I put together to talk about how I think about this. You know, if you think about a retailer, like an Apple store or a B8TA or your own website, there's, they have an amazing ability to tell your product story. They have a lot of tools that help you tell your new product story. You know, compare that to a Walmart or a Target, which is great at driving volume, but you're not going to find someone to tell you about the new product walking into the big box retailer.
So, the one exception to this I've found is Amazon. Amazon does have a number of tools which helps you tell your product story efficiently. And it's not uncommon that Amazon is going to be the biggest retailer you work with even after you're in all the retailers, you want to be.
A couple other important things to consider it, of course, is are the retailers demographics aligned with your own? So if you're selling a consumer electronic products, Best Buy is a natural fit. If you're selling a health and beauty products, it's probably not going to be Best Buy, but Target makes sense.
And then what's the overall cost of doing business with each retailer? Some big box retailers you can figure out a way to work with them for maybe 30% of your MSRP. Other retailers, specialty retailers, they're going to want 50% plus margin. Once you factor in all the various costs. So, what does your business plan allow for? Can you afford to work with those specialty channels or do you need to think of that really as marketing and then work with the big box retailers to drive volume.
Pro Tips (Lessons Learned the Hard Way!)
Mark Williams: All right. Pro Tips. So, everything in here is a lesson I learned the hard way. So do what I say, not what I did. One of those first things I learned is that getting onto a retailer shelf, it's really 10% of the battle.
Everybody loves flying out to a retailer, having a successful meeting, getting the first order. High-fiving that's just the start. The hard part isn't selling the hard part is sell through. So getting the product off the retailer shelves and into the hands of consumers is really where your team needs to be focused. So if you figured out all those fundamentals, we touched on earlier, that's, what's going to allow you to drive, sell through. And ultimately it's sell through that drives sell in. Figure out those fundamentals before you expand probably.
Another lesson learned the hard way here. Your forecast is wrong. The day I get my forecast, right, is the day I buy a lottery ticket and say goodbye to all y'all. So recognizing that your forecast is wrong, just you need to weigh strategically, is it better to build more inventory? So you make sure you don't leave any sales on the table, but you may find in January 1st, you're sitting on a bunch of inventory and your cash is tied up and that inventory, or is it better to be more conservative and bet a little wider and recognize you made the sales on the table? So that's a decision that will be made on a case by case basis, but just recognize your forecast is wrong. And then you need to decide, is it better to have a little too much inventory, but not leave sales on the table? Or is it better to be more conservative and not have cash tied up on January 1st in your inventory?
I touched on this before more deals started more doors does not necessarily equal more sales. It certainly equals more complexity, but you have to keep in mind that cannibalization is common and you want to make sure that you are successful with each retailer you work with.
All right, expanding broadly, retail is expensive. Retailers love taking margin. They love charging fees. They're gonna, you're gonna spend a lot of money on marketing with the retailer. And sales teams are expensive. Plus there's all that inventory you're going to have to build in June to support the sales in July, or sorry, the sales in Q4, and you may not get paid for 90 to 120 days. So make sure you have a big line of working capital, whether that's through your VCs, whether that's through your bank or even through Flexport capital.
Consider working with a manufacturer's rep. So many of you may be familiar with the concept of the manufacturer's rep. For those of you who may not be a manufacturer reps are typically third parties that are based in the city where the retailer is based, and it's usually staffed by ex employees of that retailer.
So, for example, when I want to go sell into Best Buy with the new products, I'll work with the manufacturer's rep who is based in Minneapolis. Again, staffed by a bunch of ex Best Buy employees, so they understand that people who work at best buy, they understand the culture. They have all the backend systems experience to help new brands sell into a retailer and then manage the ongoing business.
And eventually it actually becomes more efficient to hire your own team, put a national account manager in charge of each of the channels. But frequently when you're first starting out and you're looking to knock down doors, I know that was the thing that seemed hardest from the poll we did was actually getting into those retailers. Finding a manufacturer's representative that's you know, knows the buyers, understands the systems can help you craft your story and effectively manage your ongoing business could be a way to say book cost and complexity.
Last thing here of course, as we discussed, make sure you have the right logistics capabilities in place to support your growth. It's certainly more fun to win the race than to crash the car. So Michael, back to you for some tips there.
Michael Hajatian: Thanks Mark. Yeah. I think just two general things here, you know, we've already touched on it is play the long game, right. So we talked about failing to execute on kind of the retailer's requirements , it's going to have a longer-term implications for you as a brand, right. So I think here's, again, make sure you're confident with the decision and your operations capabilities before taking the leap. Right? Because the worst thing that you can have is, is at least from an operational standpoint, being blacklisted from an inbounding freight into that particular retailer.
And then the second thing I'll say is here is again, take time learning the routing guide. You know, again, you want to protect your margins here and really these chargebacks and fees can really have an impact on your bottom line. To go even further here, you know, from my experience and what I've seen, the most common chargeback that retailers are giving to brands and suppliers is around the advanced shipping notification. The ASN and the window with which it's sent, and how it's being transmitted. So just a little pro tip here. This is where I see a lot of dollars being charged back to, to brands is around just ASN compliance.
So again, play the long game, make sure you can execute before scaling. And then be really, really you know, in the details or at least your operations teams are in the details with respect to understanding the routing guides. Because again, that will help you protect your margins. So with that I'm going to kick it back to Ted, and Ted is going to help us moderate a Q&A.
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