MISTAKE #47: You focus on the wrong retailers

Just like the last article talked about the risk of trying to sell against the wrong competitive item, it is easy to make the mistake of trying to sell to the wrong retailer.

A lot of my work is connected to Walmart.  Their overall size and number of stores typically put them at the top of any list when it comes to potential sales.

Even limited distribution at Walmart can produce more sales than getting full distribution at most other retailers.

So many vendors naturally view Walmart as the tip of the spear for their selling strategy. 

Win with Walmart first, the logic goes, and then every other retailer will want to get their hands on your product.

Vendors decide Walmart is right for them.  Few consider if they are right for Walmart.

But there are several reasons this might not be such a great idea (and this same principle may apply to retailers you are focused on other than Walmart):

The Walmart shopper might not reflect your prime prospect:  Just because 85% of America shops at Walmart doesn’t mean they are primed to buy your product.  Walmart is great at selling general market, high-volume items, but is not necessarily the best early retail partner if you’ve got a new niche item trying to attract a small segment of the population.  The size of Walmart stores makes it easy for it to get lost on the shelf while your item competes against a lot more items for attention.  However, Walmart can be great at taking an established niche product and bringing it more into the mainstream.

Walmart is in the business of satisfying demand, not creating it:  Walmart wants to carry products people are already looking for and already buying.  They expect companies to invest to create this demand before the product is sitting on their shelf and in their distribution centers.  Getting on a Walmart shelf is a reflection of demand, it is not a tactic to create it.  In reality, it is easier for Walmart to say yes to items that are already demonstrating sustainable sales at other (perhaps regional) stores.  They are looking for proven niche items ready to go mainstream. 

Winning big also increases the risk of failing big:  While a multi-million dollar P.O. from Walmart sounds like it would be a dream come true, remember that a big bet like this could exaggerate the failure points in your business.  Everything from order fulfillment issues, to excessive damages to dealing with unsold products lost on shelves and in backrooms, could create headaches and losses that far exceed the profit windfall you thought was awaiting you.

Everyone else is thinking the same way:  Going for distribution at Walmart is like applying for the Harvard MBA program.  You’ll be selling against all the biggest and brightest and most motivated companies.  The bar is much higher because the potential rewards are much higher.  And everyone else knows it too.  Being the head of the class at smaller retailers might be barely passing at Walmart.

Walmart will expect the best cost and lowest everyday price:  Depending on what other distribution you have, gaining distribution at Walmart could mess up the relationship and support you’ve built with other retailers.  And any perception of favoritism you give other retailers could backfire when you try to gain Walmart support just like attempts to offer the lowest possible cost to Walmart could put you in the red if any costs get out of control.

Maybe you’re not gunning for launch day distribution at Walmart, but you’ve probably ambitiously sought distribution beyond your comfort zone because the bigger numbers are just too tempting.  You go after Kroger instead of developing a base of regional grocers.  You target Home Depot and Lowes when you should be trying to get established at Menards.

A MORE REALISTIC APPROACH

I don’t want to discourage anyone from swinging for the fences, but I also believe more products would find success if they took a more realistic approach.

Believe it or not, Walmart regularly extends its line review invitation to niche or regional products they've noticed in the market and believe have potential.  

But not as often as they tell potential new vendors no and encourage them to first establish sales history at a smaller retailer and share the results at next year's line review.

CHANGE YOUR PRIORITIES

Instead of going after the biggest possible year one sales, consider going after the strongest year one sales.

Find retailers who have a shopper profile that is a tight fit with your prime prospects.

Find smaller stores where your product is more likely to get attention from the buyer and noticed by shoppers.

Build up operational experience and sales data to trigger envy among larger retailers so they’re already sold before the line review meeting.

Plan to quickly learn from and fix the many mistakes you’ll inevitably make.  Plan to introduce a version 2.0 that isn’t in beta.

Trying to initially sell your product to the wrong retailers increases the chance of getting a NO, but it also increases the chance that a YES won’t lead to the results you anticipated.

Successful products have a plan to grow their business over years, not months.

Consider this exercise:

For a moment, remove the sales potential or volume forecast difference across retailers.  Only consider what retailers are the very best fit for your product and why.

Now, consider what is the minimum sales volume you would need from each of these retailers to be viable both at that retailer and with your production capabilities.

Eliminate any stores that don’t meet this minimum.  I’m betting very few come off the list.

Now rank the remaining stores based on the best combination of fit and sales potential, placing a little more weight on the fit.

Let this guide your year one sales priorities. 

12 months from now, I’m willing to bet you’ll have learned a few important lessons, but also had more success and established a more solid business with those smaller retailers that are a better fit than with any larger retailers that were a poor fit.  

I’m also willing to bet those bigger retailers will not only have more interest in your product, but the opportunities will be both bigger and with less risk now that your product has established a presence and sales history.