Many new entrepreneurs dream of one thing: seeing their products on the shelves of “big box” mass retailers like Wal-Mart, where it’ll reap millions of dollars in sales. While this is certainly a worthy goal, it’s important to understand that a) this should rarely be a starting point and b) the reality can be a lot different than the fantasy. I’ll explain why and offer some alternative routes that will help grow your product or company in a way that’s more organic, more controllable, and possibly even more successful in the long run.
The Big-Box Fantasy
When I began launching my products into the marketplace I dreamed of massive sales through national retailers, thinking this was the ticket to success and that it had to happen right away. What I learned, however, is that it can actually be an enormous risk, particularly during the early stages of a business when inventory, capital, and human resources are relatively limited.
Fact No. 1: You’ll need a large inventory. Many mass retailers require that you ship them inventory in advance in guaranteed quantities. This does not translate into guaranteed sales. In other words, you’re basically selling on consignment. For a startup business, this can mean risking thousands or even hundreds of thousands of dollars to manufacture products that potentially won’t sell. In addition, some retailers will require that you alter your packaging to fit their exact specifications, which can mean changing the size, design, and other elements of your product package. This can leave you with unsold inventory designed specifically for one retailer, rendering it difficult to sell elsewhere.
Fact No. 2: There may be hidden fees. Many mass retailers, like discount stores, drug stores and supermarkets, charge a fee to place your product on their shelves. In addition to the production and packaging fee, you may also be charged return shipping fees for a product that doesn’t sell. In some cases, these ship-back fees even include added costs for the laborers who pack the boxes. And if that’s not enough, you’ll also be faced with the challenge of warehousing the unsold product.
