OTS 121 | US Retail Misconceptions

 

Business around the world is not necessarily the same as business in the US. There are a lot of specific things that go on here that don’t go on anywhere else. There are a lot of companies that want to come to the US but they have these misconceptions perhaps because they’ve talked to people in other countries and thinking that it might be the same here. If you’re just getting started in business, you may be having some of these misconceptions, too. The bottom line is if you have these misconceptions and don’t know how to sell your product, at some point get you’re going to on the phone with a buyer and be shell shocked. Learn four common US retail misconceptions so you’ll never walk into a meeting and all of a sudden be tongue tied or lose your train of thought and forget the key points you were going to say.

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Four Common US Retail Misconceptions

We wanted to take a little bit of time to set the tone for the year. I do a lot of helping clients prepare for their year and get things straight and understand what their goals are. I also need to do that for myself, need to do it for the show, and I need to do it for my business. That’s what I’ve been doing. We’re going to talk about some misconceptions that companies have when they’re wanting to bring and sell products in the US. I have one question that I’m going to address after that. We have some great podcasts coming up.

We have a podcast with the Founder and Owner of SOCIAL Sparkling Wine, her name is Leah. She is fantastic and you’re not going to want to miss that. Let’s get into this. It comes up a lot because business around the world is not necessarily the same as business in the US. There are a lot of specific things that go on here that don’t go on anywhere else. There are companies that want to come to the US, but they have these misconceptions and we’re going to clear up some of those here. This probably will help you also if you’re getting started in business because these are universal to US big retail companies. You may be having some of this misconception too because you’ve talked to people in other countries and you’re thinking that it might be the same here.

Misconception number one, retailers are not going to pay upfront for your product here in the US. In other countries, they may buy a container, pay upfront for it and then they’re going to flow the container themselves and it’s all good. No, that’s not going to happen here. Retailers in the US are going to always require terms. They’re always going to require 30 days, 60 days, 90-day net terms to pay. With regard to payment terms, most retailers in the US, big box retailers, are sitting right around net 60 days. What that means is you need to be able to put your order in, so they place an order. It’s not net 60 from when they placed the order. It’s generally net 60 from ROG, which means Receipt of Goods.

You need to be able to pay for the product and then wait for the product to be made, shipped, delivered, and then 60 days from then is when you’re going to get paid. That’s a big misconception because those types of terms don’t always exist overseas. When companies are coming to the US, their expectation is, “They’re going to pay me upfront so I can use that money to build my product.” No, they want to start selling your product before the invoice ever even becomes due. That’s when you might want to look into factoring if you’re having a problem securing the funds to make your PO.

Number two, retailers will not place a container or more order before testing the product. I don’t speak in absolutes, but this is on average. Especially today, most retailers are going to test your product in X amount of stores before they will decide to move forward. For instance, with Costco, they’re going to test your one pallet per warehouse for ten warehouses. They’re going to test it for seven days and you have to do an average retail sales of $500 per warehouse on average over the course of a seven day-period. If you’re looking at Walmart, they could test your product in 50 stores, they could test it in 300 stores.

It depends on the buyer and what they’re trying to accomplish. Bed Bath & Beyond, in the 60-store range or 30-store range. Target could be 30, could be 500. Everybody’s a little bit different depending on the product, but the key is you’re going to have to produce that product and get it there and they’re going to test it. During the testing period, most companies will let you know that that product can come back to you if it doesn’t perform. There’s always going to be that little bit of risk when you’re trying to get a product into a retailer, but the reward is worth it if it works out.

Number three, retail buyers make decisions quickly. That is the misconception of the decade. Retail buyers, while they’re looking at your product, are managing hundreds of millions of dollars’ worth of product that’s already in the stores. They have promotions going on. A million things are going on. For instance, if you were trying to sell your product to the small electrics or kitchen electrics buyer for Costco, that person manages $600 million before they’re even looking at your product. You’re trying to insert yourself into the middle of a freight train that’s going full speed and that’s going to be difficult. It’s going to be difficult to get ahold of him. It’s going to be difficult to pin them down. It’s going to be difficult to talk to them on the phone and it’s going to be difficult to get them to agree to take a look at your product and give you some time, but it can be done. It’s done every day.

I just spoke to a Costco buyer who agreed to take a look at some samples. It gets done. You have to be patient. It’s not like you send your product off. You pick up the phone and they say, “Please, send me a container load.” It would be great if it was that easy, but it doesn’t work that way. If it was that easy, anybody could do it. You guys aren’t anybody. You guys are entrepreneurs. You guys have awesome ideas. You guys are making products. You guys are taking them to market. Anything worth doing is going to take a little bit of time. Give the buyers a little bit of a break. They are not purposely blowing you off. They simply are driving a freight train going 100 miles an hour and you have to figure out how you’re going to jump onto that train. That’s not always easy.

Last, success in other countries means success in the US. This is something I hear all the time. “We’re killing it in Germany, Italy, Korea. It will automatically sell here in the US.” There is some truth to that but there’s also no truth to it. Human nature is human nature. Something that tastes good is probably going to taste good all over. Cultural differences from country-to-country mean a lot and something that’s huge in Germany, for instance, doesn’t mean it’s going to be huge in the US. You may have to tweak it a little bit. You may have to change your packaging a little bit. You may have to speak to the US culture a little bit.

Anytime, anywhere you’re selling your product, that’s noteworthy. It’s definitely noteworthy. If you’re selling your product in Europe and it’s killing it, you definitely want to let the buyer know that. The buyers’ always going to say or think, “That’s Europe.” It’s not indicative of that sales here in the US, but it’s better than never saying it at all or not having any sales at all. People buying the product, people making the choice to buy your product are always a big deal. It always means something. I definitely would mention it if you have sales no matter where they are.

Keep those in mind when you’re thinking about bringing products to the US and if you have questions about those, reach out to us because we bring products from all over the world to the US on a monthly basis. That’s what we do. There’s probably nothing that we haven’t run into or combated. If you have a specific question about getting products to the US from other countries, definitely reach out to us. I wanted to mention this one question because it came up.

I have a potential client that listened to a podcast where these two guys on the podcast we’re talking down about bringing products to big box retail, and how big box retail is an unattainable goal that will drain your money. You’re never going to see success, the retailers will screw you, there’ll be backend cost and it was a mess. The interesting part about it was that the factual things that they talked about were all true. There are going to be backend cost. There are going to be expectations. There are going to be nickeling and diming if you don’t do things right. The retailers are not out to screw you.

OTS 121 | US Retail Misconceptions
US Retail Misconceptions: If you don’t know what you’re signing, don’t sign it.

This was the one thing, and I’ve said it before but I’m going to say it again. If you remember anything about this particular question, remember this. You, as the supplier, are always the last person to sign the agreement. What does that mean? If you don’t know what you’re signing, don’t sign it. If you do sign it and you find out that there are costs that you weren’t prepared for, there were charge backs because you’re not labeling your product correctly, it’s only on you. You can’t look at the buyer or the retailer and say, “They’re out there taking all my margin and this and that.”

No, you signed it. It’s all in there. If you read the vendor agreement word for word, it’s all in there. They don’t hide it. Here’s the thing. If you don’t understand what you’re reading, find someone who does. If you don’t know what backend costs are associated with doing business in big retail, find someone who does because whatever you pay that person to help you, whether it’s TLB Consulting or not, is going to be ten times worth signing a contract that is not going to be beneficial for you later. Signing a contract where you’re not making any money because you didn’t know what was involved.

Retailers are not out to screw you, they’re out to protect themselves and protect you. The way they protect you is letting you know what’s coming. Sometimes it’s in big, bold, brutal writing. If you don’t label your product correctly, we are going to charge you back this amount. How do you fix that? Label your product correctly. Every retailer has a routing guide and the routing guide is specific, detailed instructions on how to label the product that you send them. How to do it? What kind of pallet it should be on? How tall it should be? Very painstakingly specific. You have to read through it. You have to hand that over to the person who’s handling your shipping and manufacturing so that they can read through it and understand exactly what they’re doing.

If you remember anything, don’t sign anything that you don’t understand. Don’t get excited that Costco is interested in your product that you forget to understand what the deal entails. Don’t be blinded by the fact that Target wants to put your product in 1,800 locations that you don’t understand what they’re expecting logistics-wise or how much product they’re going to need, or the nuances of their system that you’re going to have to learn. Find someone who can help you with that if you don’t know and have never done it. Do not go into that big of a deal blinded, because then you’ll be like this guy that was on this podcast, whining about how this retailer ate through all his money.

If I was able to be on that podcast, I would’ve said, “Those are all common things. Those are all things I would have warned you about.” We would have made accrual accounts. We would have held money back. We would have built that into your pricing. We would have done a hundred different things to make sure that you are protected, however, I wasn’t there. You can’t be mad at the retailer because you didn’t know. It’s not their job to teach it to you. It’s your job to learn it. It’s on you to do your due diligence. I’m not sure I can beat that to death anymore, but it’s super important that you understand that.

I’ve been working on our business plan. We have a lot of cool things coming up with a podcast that we’re excited about and I’m not going to release any of those quite yet. I’m excited to take the podcast to, not necessarily a different level, although that would be cool, but we’re going to be incorporating some other things, some book reviews, some stuff and information about sales tactics. The bottom line is if you don’t know how to sell your product, you’re going to at some point get on the phone with a buyer and be shell-shocked. I remember I had a client that we were selling jalapenos to the Midwest region of Costco, which was in Chicago.

He emailed me, and this is what I’m talking about. He knew that he didn’t know what he was doing. Specifically, he went as far as got the meeting because he was a certified minority-owned company, shot them to the top of the list and got this appointment. He was like, “I don’t know what to do.” He phoned me up and said, “Would you go to this appointment with me?” That was the start of our relationship. We get to the appointment and he was all set to do the pitch and I am not lying when I tell you that he sat down and couldn’t get out one word, not one word. It was like his mouth was glued shut. He looks up at me with this panicked look on his face. I went into action, pitched the product, it was all good but he had never done it before.

When you sit down with a professional retail buyer of probably one of the world’s top retailers, it can be intimidating if you’ve never done it before. He couldn’t even figure out why it happened. It lasted pretty much the whole meeting. When we were done, he was, “I’m glad that you were there. I don’t know what happened.” It happens. I would be remiss if I said I have never walked into a meeting and then all of a sudden been tongue-tied, lost my train of thought or forgot key points that I was going to say.

All those things have happened to me. I’ve never clammed up where I couldn’t get a word out of my mouth but in over 100 buyer pitch meetings around the world, I have had moments where I messed up. Of course, it happens. I don’t even remember why I started talking about that, but again, you have the foresight to know, “If something goes wrong, I’m not going to be able to fix it. I don’t have the experience. I don’t know necessarily what I’m doing. I don’t even know how to put together a buyer deck that we’re going to take with us,” and so he reached out to someone who could help him with that. Don’t be afraid to do that.

We’re talking about cool things that we’re going to do. Sales, at some point you’re going to have to sell your product. Along with teaching you how to get into big box retail, we’re also going to teach you some sales techniques. We’re going to be talking about in the moment, how to combat a buyer that’s just staring off into nowhere. I was in a pitch meeting for a product and all the buyer could talk about was how loud the item was. The whole entire meeting, I could see it swirling down the toilet because she was like, “This thing is super loud.” What do you do then? How do you combat that? That’s all stuff that we’re going to get into. I’m excited about that. It’s going to be super fun. I look forward to that.

If you’re enjoying the podcast, I want to hear from you. I’m not going to take no for an answer. I want to hear from you. I want to talk to you. I want to hear your questions and understand what you’re dealing with so that we can do our best to help you. I also want to connect with you, whether that’s through our closed group on Facebook, which is called On The Shelf Now. I want you to get involved in that so we can start collaborating with other likeminded people that are doing what you’re doing and start sharing some key information.

I want you guys to connect there too. I want to hear from you on Twitter, @TLBConsult. I want to hear from you on Facebook, @TLBConsulting. Don’t forget, closed group On the Shelf Now. If you want to reach out to us in more of a personal way, feel free to shoot me an email. You can find that on our website TLBConsulting.com. I want to connect with you in a bigger way so that we can start getting to the bottom of some of the issues that you’re having and talk about them on the show. I’m looking forward to that. Until then, I look forward to seeing your products On The Shelf.

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