Making it onto the shelves of a major retailer is an absolute game-changer for small businesses, but with great volume comes great responsibility.
The fact that roughly half of all small businesses fail in their first five years is a constant reminder of the importance of continued growth – and the dire consequences of not pursuing that growth thoughtfully and deliberately.
If you are considering taking the plunge with a large retail chain, it’s critical that you anticipate potential challenges and preempt them with solid solutions. Before you strike a deal with a merchant, take time to ask yourself some key questions about how you plan to address the unique demands of big box retail. The fate of your business depends on it.
Is your supply chain solid?
The volume of sales that big box retail brings to your business is a blessing if you are prepared to meet the challenge, and a curse if you aren’t.
Winning shelf space in a large brick and mortar chain is only the beginning of your journey. Major retailers like Lowes, Home Depot and Walmart have high standards for their vendors. If your initial pitch convinces your buyers that you are capable of keeping up with their demands for product, they will expect you to hit the ground running and follow through.
Big box retailers have no tolerance for faltering on your ramp-up schedule and will expect orders to ship on time, even in the face of widespread supply challenges. Businesses that can’t uphold their end of the contract can quickly become caught in a vicious cycle of hefty fines and production issues.
Can you afford to sell big box?
Large retailers invite lots of competition on price. When your products are shelved directly beside your competitors’, brands must be ready to explain to consumers why they offer the best value.
This challenge is made more complicated by financial obligations to your buyer. Large retailers like Home Depot and Lowes expect their vendors to contribute to their rebate programs and advertising efforts, and they may also charge fees to use their internal vendor systems or portals.
Most retail vendors find that they have to allocate 12-15% of their sales to reinvest in these retailer-required programs. Make sure that your margins can support your merchant’s demands without making your products cost-prohibitive for consumers.
Is your marketing up to a major retailer’s standards?
Although you will be expected to financially contribute to their advertising budget, retailers ultimately plan to capitalize on your marketing efforts, not the other way around.
Be prepared for your prospective buyer to look closely at your marketing plan and evaluate its effectiveness. A fantastic product and a proven track record of sales will not substitute for a world-class promotional strategy in the eyes of a major retailer.
How’s your data management?
Getting a foothold in a big box chain does not make you any less responsible for tracking detailed metrics about your products’ performance. In fact, the merchant will expect you to be a consummate expert on your numbers, from overarching programs down to each individual SKU.
Large retailers like Lowe’s, Home Depot and Walmart live and die by the data, so come prepared to exceed their expectations or partner with a data management firm that can keep a watchful eye on performance metrics.
Do you have a strong team?
In the world of big box, details matter. Because the depth of knowledge that your big box retailer expects is so vast, a VP of Sales can’t be expected to manage the merchant relationship alone.
Ideally, your core team will also include marketing, insights and analytics, and a dedicated expert on your specific buyer. Different big box retailers have unique programs and approaches to merchandising. Learn the nuances, and don’t assume the strategies that work in Home Depot will also succeed in Menards.
Remember that communication is key. Present a united front and be prepared to be highly responsive to your merchant’s questions and concerns.
Are you prepared for some pushback?
Going big may have consequences for your existing sales relationships. If you were stocking the shelves of smaller businesses before your big box debut, they may be frustrated by first-fill agreements with major retailers, as well as the new demands on your time and attention. It’s also expected and understood that large chains will pay less for the same products.
If you want to mitigate the resentment these businesses may feel as you step into big box, it’s a good idea to offer different SKUs to smaller buyers and major retail chains. Preventing large and small businesses from competing directly on price can preserve your relationship with both.
Are you willing to be a team player (literally)?
Big box has its own culture, and finding your place in it is crucial to maintaining a good relationship with your merchant. Major retailers will regularly host charitable social events like auctions and golf tournaments – and participation is often expensive. Although these aren’t mandatory obligations, your presence will be expected.
The fact that the largest and most influential companies on earth are still owned and operated by people means that relationships are inescapably important. Ensuring that your business is well-represented on the putting green can have measurable impacts on your future.
Are you all in?
The decision to pursue big box retail is a fork in the road. It really isn’t possible to partially commit or explore on a trial basis.
Holding back on marketing and production as you go into your ramp-up is like going out in the rain with half an umbrella – it’s a good way to guarantee that you will both lose your investment and hurt your partnership with your retailer.
Properly preparing for the volume your merchant will expect requires you to scale your business. However, once you do this, you will quickly come to depend on that volume to cover your investment in labor and manufacturing. If the demands of big box prove to be too much, it won’t be possible to seamlessly revert back to operating as a small business.
Before you raise the stakes, be certain that you’re ready to manage new expectations and demands. Identify gaps in your business’ growth strategy before they have a chance to become costly mistakes, and don’t hesitate to look outside your company for assistance with category or consumer research.
When approached thoughtfully, securing space on a big box retailer’s shelves can be your company’s biggest win to date. Lay the groundwork now, and you’ll take that big step with confidence.