The maker community has been both a driver and a benefactor of the production prowess of Shenzhen. That makes Hong Kong’s neighboring city the perfect place for a conference featuring leading voices in the maker community. Startup Launchpad head Ben Wong had an opportunity to address the audience of the Global Maker Sustainable Innovation and Development Forum on August 10, during which he went over five simple rules of distribution.
The maker community is perhaps best known for amateur tinkering and open-source hardware, but many people use this hardware and knowledge gained in the community to build their own products and brands. When the research and development is finally wrapped up, though, a whole new host of challenges awaits, most notably in getting a product to market. For people on the path towards distribution, here are the five things they should keep at the forefront of their mind according to Wong.
1. Understand available distribution channels
Wong noted in his speech that about 90 percent of spending worldwide still happens offline. China may have a larger online market share, but it’s still miniscule when compared to consumer spending offline. Much of the world still likes showing up to brick-and-mortar stores. Major offline distributors like Walmart, Target, Best Buy and Brookstone matter a lot when it comes to introducing a product to consumers.
E-commerce is great and growing quickly. It shouldn’t be neglected. However, to really build a brand, startups should be thinking about how they can ensure consumers will be able to physically see and feel a product.
2. Find the correct pricing strategy
Getting the price right is important. A product can’t be sold for wildly different prices in different venues, otherwise there’s not much incentive for a company like Target to pick up a product. Offline retail chains don’t want to compete with much cheaper options online. They also need to make a profit, which might mean a markup of 50 to 70 percent. Meanwhile, the distributors the retailers work with typically look for a 40 to 50 percent markup when purchasing products at the F.O.B. prices.
3. Have a well-thought-out marketing plan
A brand’s story and looks are important, but marketing is a lot more than that. Distributors want to know that a product will sell. So of course strong messaging to consumers through logos, packaging and other components related to product display play into that. So do seasonal sales and promotions.
Around 70 percent of all consumer spending happens in November and December in the US. Similar patterns exist around the holiday seasons of other countries. The US being such a huge consumer market, though, means trade shows like the ones from Global Sources happen every April and October because lead time is usually around six months. This is the time to meet suppliers. Distributors want to know you’re ready for the holiday season.
Businesses may also have to make a pitch for the best possible product placement within a distributor’s store. Wong uses the example of a modular phone case that can add on things like a barometer or glucose monitor and sells for considerably more than the average phone case. Placing it next to other phone cases could invite unfair comparisons.
4. Manage your supply chain management well
Perhaps this should go without saying, but supply chain management is incredibly important. Startups need to have to have a firm grasp of what’s happening in their supply chain and how to manage it from when they initially procure materials to handling maintenance for consumers. More importantly, they must ensure that products are made to meet multiple product certificate requirements (i.e. CE, UL, FCC, etc.).
In-country support is another consideration. DJI, the world’s largest drone manufacturer, initially struggled when handling returns from consumers. Its success illustrates how brands can address and overcome early challenges in supply chain management.
5. Ensure the brand isn’t one-hit wonder
When executed properly, all the above steps should help build brand loyalty, thus providing it some longevity in the market. A brand’s goodwill should be used to build out new product offerings that align with user interests. Retailers are not going to sell only one SKU of your brand. If they like you, they’ll be sure to ask, “What else do you have in the pipeline?”
For more on Wong’s five points, check out his interview with Forbes contributor Jay Sullivan.
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