So you have a fantastic product. Your family and friends love it. You believe it is unique and offers consumers a solution and will make their lives better.
You also believe in your product, so much so that you want as many consumers as possible to be able to buy it in stores all over the country.
How do you do this? How do you approach a major South African retailer and convince a buyer to list your product?
There are three distinct phases in this process.
• Getting your product ready to list, or “listing ready”;
• Approaching a major retailer and presenting your product and negotiating the terms under which you will supply your product; and
• Once listed, now what? How do you ensure that the shelves are full at all times, orders are processed and your product is promoted to the millions of shoppers that walk up and down the aisles of the major retailers each and every day?
Major retailers stock between 10 000 and 15 000 SKUs (stock keeping units) supplied by more than 1 000 suppliers. A stock SKU refers to each individual line item (e.g 2.5kg, 1kg and 500g). Buyers are starved for time due to managing the complexity of the supply chain, the multiple promotions taking place and the many price changes that happen daily.
You will be lucky to even get an appointment with a buyer to present your product so you must make the most of the opportunity when you do manage to get an appointment. This is the challenging environment that a small business faces when approaching a major retailer in South Africa.
As an entrepreneur, you have an unshakeable belief in your product, however this is not enough. There is a very clear process that must be followed to ensure a successful listing. All this work must be done before you even think of approaching a retailer. Here are a few short tips on how to go about preparing.
Step 1: Is your product really that different or unique? Really?
Every entrepreneur will answer YES! Different and unique might not be practical or cost effective to produce. There are two types of innovation. Products that define a whole category. They are completely new and there is nothing like it.
Think back to when shower gels were introduced, moving consumers away from bath soap. Same result, just a different product that meets that need. Then there are products that are the same, but achieve the result faster, cheaper or better. Think of the new washing powder tablets that were recently launched.
“As an entrepreneur you have an unshakeable belief in your product”
When you sit in front of the buyer, you must be absolutely 100% sure that your product will fit an unmet need. As a small business, the only way to compete is to provide a niche product that is unique and different.
Step 2: Is your selling price the right selling price?
This is not your cost to the retailer, but rather the final selling price on the shelf. This is generally the very first question a buyer asks. How much does it cost? The answer is twofold. How much the consumer is willing to pay and how much profit is in it for the retailer. This discussion will ultimately determine if your product gets listed or not, no matter how fantastic it is.
Small businesses don’t have big budgets to launch products. A new washing powder was recently launched, and it is alleged that the launch budget was R100 million. You cannot make a mistake with setting your selling price; you only get one chance to get this right.
Your selling price includes the trade margin for the retailer, and additional promotional discounts. However, this is not straightforward either, because there are different trade margin expectations for different categories. As a rule of thumb, food categories are lower than toiletries and cosmetics.
So, why is trade margin so important?
Retailers buy the stock, keep it on their shelves, and pay for it in 30 days (hopefully), during which time they need to sell it. All this costs money, and the trade margin ensures that the product is not ultimately sold at a loss.
As a smaller local brand with a limited marketing budget, the trade margin on offer might be the only reason a retailer lists the product.
There is an incentive to balance the higher profit with the lower volumes. Most importantly, cheaper is not always better. If you believe in your product and have done the market research, fully understand the value that it provides, and if it meets a need that is currently unmet then ensure that your price reflects this.
Step 3: The packaging holds it all together.
You might be very passionate about that beautiful silver foil label and that nice pump, but after travelling a 1 000 km on a pallet on the back of a truck, thrown around in the back of receiving, and finally arriving on the shelf, it won’t be so beautiful anymore. Give serious thought to the packaging. Yes, it is part of the brand identity, and there is amazing research on the power of iconography, but all that does not matter if your product ends up on the bottom shelf looking like it is ready for the dustbin. Make sure it fits on the shelf in line with the competitors.
The shape and size, must ensure maximum “shelf utilisa-tion”, to get as much stock on the shelf as possible. Be very mindful of how your product is going to travel right through the supply chain. Expiry dates and best before dates are crucial, and must be managed at store level. Retailers won’t tell you this; their expectation is that you know this already. This pre-work to get “listing ready” is what sets one small supplier aside from the hundreds out there.
Step 4: The admin maze
Retailers don’t have the time to hold your hand and explain the different rules and regulations that govern packaging in South Africa. And big suppliers have an army of administrative assistants. Make sure that all products are properly registered; are your barcodes registered with GS-1?
Do your labels comply with the new labelling regulations?
Do you have business contact details on each label?
What is the primary and secondary packaging? Shrink wrapped or corrugated outer case which is barcoded?
These must be done before approaching a retailer. When that buyer starts nodding and says, “I want this in my stores yesterday” you don’t want to delay the listing any further. Some of these registrations are lengthy. Go in prepared. You are now ready. You have a fantastic product, your selling price is carefully researched and you have done all the relevant administration and registrations. Go ahead, pick up the phone and call the buyer.
Theo Wilscott has more than 15 years’ experience in the fast moving consumer goods industry having worked in various sales, marketing and buying roles for blue chip companies like Unilever and TigerBrands. Theo is MD of Ignition Route2Market Consulting, which assists small business to get “listing ready”, facilitate and setup appointments with buyers at major retailers and provide coaching and support.