TLB Consulting Blog

How long will it take to place my product into a retail store!

by Timothy Bush on 07/10/11

Under the frequently asked questions category "How long will it take" is by far the most prolific question asked.

This is not surprising as vendors are anxious to see their products on the shelves of big retail and finally be rewarded for the long hours it takes to conceive, create, produce and market a retail item. No one in the final stages of bring a product to market is without significant battle scars, however in the foxholes of product development there are no pessimists.

There is no exact science when it comes to determining how long it will take to sell product into retail, however items generally fall into one of two categories. 1. Products that have a clear category and dedicated shelf space already in a retailer. An example of this could be flash drives. Perhaps your company has developed a new type of flash drive that will blow the market wide open. In a case like this we would only have to convince the buyer to purchase our new and innovative product not to create brand new space on the shelf as they are already selling like items. 2. Products that are brand new to the market and have never been sold before. Items like this create double the work, not only do you have to sell the benefits of the new item you have to help the buyer understand where they would merchandise this new product and why taking a risk on it will pay off.

Although the newer items to market will generally take more time and work you can expect the process to take 3-18 months or longer. I know this seems like a long time, however unless you are Sony, Campbell's, Johnson & Johnson or like companies the process will be lengthy and the sooner you begin the faster you will see results.

Below I have created a best case scenario to help illuminate the process. For the purpose of this example we are going to say that the buyer loves the product out of the gate, they don't go to China, get sick or go on vacation during the process. This example begins during the preparation phase.

Sample evaluation, pricing strategy and presentation prep - 30 Days
Sending the presentation to the buyer and receiving a response - 30 days
If requested sending samples to the buyer - 15 days.
Review of the samples by the buyer 15 days.
Filling out of vendor paperwork, negotiating the contract, receiving all necessary signatures, being approved and receiving your vendor # -30 days.
QA testing on the product or 3rd party audit on the manufacturing facility - 30-90 days if required
Cutting a PO - 14 days.
Lead time to manufacture the product - 60 days.
Delivery time to the retail warehouse - 15-30 days depending on where it is coming from.
Distribution time to the stores - 15 days.
Time to get paid - 60 days.

Remember the above is best case and even if we take out #6 above we are still looking at 91/2 months to complete the process with one retailer. There could also be the scheduling of a face to face meeting required which will add time.

The idea of the above example is not to discourage, but to encourage. The sooner you start this process the faster you will achieve your goals.

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5 Common mistakes companies make when selling their products to Costco. #5

by Timothy Bush on 03/24/10

#5 Hoping Costco will drop their current product for your product.

All to often when thinking about how to get product on the shelves of the best retailers in the country most manufactures think of better pricing, better cost and a better made product. Confident, they march off to their local retailer headquarters armed with these three elements and believing this alone will get them placement and remove their competition.

Before you make this mistake, a mistake made by many who came before you, please remember this: "You must be able to provide more than a great product at a better price to unseat the incumbent vendor."

What could be more important to Costco than better pricing and a better product? Listed below are three main factors that will hold Costco back from making a vendor switch even in the face of better cost.

1. Shipping and Logistics: Your Company's ability to ship to all of Costco’s depots on time and with consistency is of great importance to Costco. Their floor plans are ever changing and if your product is late it could lose placement. They will also look at your ability to flow product to your own warehouse for them to pull from. Costco will not do transfers from location to location, therefore it is important for them to be able to flow goods to certain locations in smaller quantities from your warehouse.

2. Defect rate: New members and membership retention are the two engines that keep Costco moving and they will protect these like angry pirates on a treasure ship. A key factor in Costco’s image is the quality and durability of their products. Although your company will be paying for returns and defects Costco will not maintain an item with a large defect rate.

3. Depth of product line: Costco is interested in the vendors they partner with doing well. To this end they will work with current vendors on a multitude of products if they are available. This reduces their need to set up and train new vendors, obtain hard to get signatures and take chances on untested companies.

Costco is always looking for great products at tremendous value. If your company has such an item and you wish to replace a product currently in Costco please take into account and nail down the above items first. For a complete strategy on creating a partnership with Costco please contact me directly.

Here's to Conecting your product with the right people.

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5 Common mistakes companies make when selling their products to Costco. #4

by Timothy Bush on 03/24/10

Installment #4 "Thinking you should take your product to Costco first"

I am old enough to remember shopping at Costco or even Price Club back at the beginning. The value available was tremendous, as is true today; however the brands carried were not as recognizable. Back then we had to take Costco’s word they were as good as or better than what we were used to. This is not true in today’s Costco as top brands are begging to get into one of the world’s top retailers. The days are far gone when brands like Tumi, Sony, Panasonic and Calvin Klein would turn up their noses at the thought of selling to a club store. Today, not only are they selling Costco, but Costco is a large part of their overall business. Costco’s business model has shifted from selling items at a value to selling top brands at a value. It is exactly this brand name value statement which is the cornerstone of Costco’s business model and something they protect at all cost.

How is the above relevant to you and your pursuit to sell your product to Costco? Today Costco is looking for products with current distribution in mainstream retail. It is very rare today for Costco to be first to bring products to market in any category. Costco maintains their value statement by selling products or variations of products for less which are currently in other retailers. It is hard for Costco to show a value on a product that is not sold anywhere but Costco.

So the question shifts from how to sell your products to Costco to, how to gain distribution on your product in preparation for selling it to Costco. TLB Consulting specializes in creating a strategy for your product with the end result being placement in Costco. When taking your product to Costco you want to be able to answer the below questions:

1. Where is this product currently sold?

2. How long has it been on the market?

3. What is the average retail price point of this product?

4. Can your pricing structure and distribution model support a 20% discounted retail. 5. What is the sell through of your current retailers?

Each circumstance is different as is each product which is precisely why preparation must be a key factor in your overall retail plan. There is no substitute for firsthand knowledge when creating your strategy. TLB Consulting can help you identify your company’s short and long terms goals, increase your brand awareness and open up multiple lines of distribution. Let us build a strategy for you. Feel free to email me directly at Tim@tlbconsulting.com.

Happy selling

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5 Common mistakes companies make when selling their products to Costco. #3

by Timothy Bush on 03/24/10

Installment #3 - Thinking you can leave logistics to the end

As a company Costco has made it their business to perfect the movement of merchandise. If you have ever been fortunate enough to be in a warehouse prior to opening you know exactly what I mean. It is like a freeway in there, forklifts going 20 MPH, pallet jacks rumbling by and scaffolding towering above you. They even have a designated area for you to stand so you do not get hit. Costco works on the cross dock system meaning everything that hits their backroom is staged to go out the next morning, there is nothing permanently stored in the backroom. The end result to all of this movement is increased value to their member. The faster and more cost effective they can be at bringing products to the selling floor the more money they save and pass on to the member.

How does Costco manage this process and continue to move it forward? They make it a requirement to become a vendor. There is significant cost related to logistics and should be evaluated prior to giving Costco final pricing.

Below are some of the logistical items related to doing business with Costco:

EDI - Electronic Data Interchange is required by Costco warehouse in order to launch a full campaign. If you are not yet EDI compatible and starting from scratch this can be quite expensive. If you need help getting set up on EDI feel free to email me, TLB Consulting can offer you very competitive pricing on EDI set up.
Delivered pricing - Costco will usually require delivered pricing to their Depot. This means whatever price you quote them should include shipping to all of their facilities. Costco has Depots all over the country and you will need to cost average shipping to all of them in order to know how much to build into the price.
Display cost - Will your product have a display? If so Costco usually wants this for free. Build this into your cost to ensure you are covered.
Packaging - Remember there are no sales people pushing your product at Costco. Your packaging and copy is there to be your silent sales person, don’t skimp on this area it can make or break you.
Pallets - Costco usually requires a special pallet as product will probably be sold on the pallet you send your product on. CHEP pallets are most common at Costco and can be costly.

I am not trying to scare you away from Costco by giving you this information, just the opposite. Costco can be the best retail partner you have ever had, however if you are unprepared and provide them with a cost that does not take into account the cost of doing business with Costco you could end up making far less than anticipated.

Don’t hesitate to contact me directly to learn how TLB Consulting can help you successfully navigate this process.

Here is to your sales.

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5 Commom mistakes companies make when selling their products to Costco. #2

by Timothy Bush on 03/24/10

#2 - Believing Costco will change their business model for your item

It is no secret at this time of year the wholesale and retail business is crazy. One unique characteristic of Costco is they will accept product all year round as long as it fits into their business model. While most retailers are already finished with their merchandising plan for the rest of this year and are already working on 2011 Costco is still willing to look at product as they are interested in treasure hunt items.

Costco has been successful over the years by sticking to what works and not compromising their formula. It would be a mistake to think they are going to alter their long standing and time tested business model for any one item.

When deciding whether your product is right for Costco, it is imperative to put your product into Costco’s model to see if it will work and if you can live with the result. Preparation is the key here! If you do not know how to prepare for a meeting with Costco and how to see if your product will work in their model, then feel free to contact me.

Outlined below are a couple of main features to their business model that will get you started.

Brand – Costco is generally looking for items with an established brand image although there are some limited exceptions to this rule. If your product is new to the market then you may want to gain some distribution and brand awareness prior to taking it to Costco. TLB Consulting can help you create an overall marketing strategy for your product prior to taking it to Costco.

Value – Costco must be the lowest price or offer the most value in the market, no exceptions. Costco’s members pay a premium to shop at Costco therefore Costco will not bend on offering value. As a rule they generally like to be a minimum 20% below any advertised price. It will be important to look at your current distribution and evaluate how selling to Costco may disrupt your current sales.

Packaging – Costco has made their packaging and pallet displays an integral part of their overall value statement. The faster Costco can take a pallet display from the truck to the sales floor the more value they are able to offer their members by keeping their overhead low. Be prepared to understand and adhere to their packaging requirements. Note: Costco moves product around the sales floor daily and the more mobile your product, then the easier they will be able move it without damaging the display.

If companies are lucky, they get one chance to sell their products to Costco. Doesn’t it make more sense to be prepared and know their business? You will go a lot faster and farther if you are in the same boat rowing with Costco and not against them.

Happy selling.

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5 commom mistakes companies make when selling their products to Costco.

by Timothy Bush on 03/24/10

Installment #1 - Item Value

Having the opportunity to sell your products to Costco is an exciting proposition and could be a huge game changer for your business.

With over 400 warehouses in the US alone which cater to an average 30,000 members per week it would not take long for the right item to make a HUGE impact on your bottom line.

However; before you go planing your next European vacation, here is one common misconception which, if avoided, could make a major difference between who goes "On Vacation" and who has a "Staycation".

Believing Costco's #1 goal is making money off your item:

If you are in sales, the phrase "you are going to make SO much money off this item" has escaped your mouth more than once. We have all been there at one time or another. You want so much to convey how viable of a product you are offering, you may get over zealous with the aforementioned phrase. Although there may be retail companies out there that are very interested in how much money they will make on any item, Costco is not necessarily one of them . Of course, everyone is in the game to make money, but even more important to Costco than money is "Member Value". Offering their members Significant Value is the mantra that marches through every buyers head! Memorize this! Not violating the member's trust with items that do not offer value is the foundation Costco is built on and it is what keeps their membership renewal rate Over 85%! When items have value, they sell! Members spread the word and they sell even more! Eventually the word will reach a non-Costco customer who will then buy a membership to take advantage of the value, and so on and so on. Are you getting this? Value drives sales! When speaking to Costco, speak about the Value your product will offer, either in $'s off or More in the box. Buyers always appreciate when you know their business model!

Happy Selling...

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