It’s easier than ever to get a product out into the world, but for startups this means it’s also increasingly difficult to rise above the competition and get noticed. This means startups really want to get their product into retail outlets, and the retailers are going to be looking at three different purchasing channels: importer, brands, direct procurement.
This is what Christina Hao, founder of Shenzhen-based Buyer Central, outlined in a recent presentation.
As she discussed, there are primarily four types of brick-and-mortar retailers that will help determine the purchasing channel:
- Supermarkets: Walmart, Target, Costco, Best Buy, etc.
- Department Stores: Macy’s, Bloomingdale’s, Nordstrom, Neiman Marcus, etc.
- Specialty stores: Brookstone, Apple Store, Pottery Barn, Crate and Barrel, Urban Outfitters, etc.
- Drug stores: Walgreens, CVS, Rite Aid, etc.
Other buyers include television networks like the Home Shopping Network and e-commerce sites like Amazon. For those willing to handle orders themselves, though, getting listed on Amazon isn’t difficult. Third-party sellers are now now account for about half of Amazon’s e-commerce sales. Getting into Best Buy or Brookstone is a bit more complicated, and the channels through which they buy their products have different advantages and disadvantages.
For large companies that need to keep a stable stock of certain products in their stores, direct import often makes the most sense. This is the route companies need to go for their in-house brands such as Walmart’s Great Value and AmazonBasics. This requires working directly with suppliers.
Alternatively, these stores all carry name-brand products, be it Dell or DJI. For this, retailers typically buy products from the brands themselves.
The last method retailers might use is an importer. Importers bring in products themselves and then sell to retailers. This is probably the best route for getting a new, unknown product into a big-box retailer.
Direct import is the clear outlier here because it’s generally for large retailers making large purchases of widely distributed products.Since this requires working with the manufacturers, more favorable terms can be negotiated. Retailers can decide exactly what they need, whether that includes an OEM or a product development team. The pitfall of direct import that it usually requires less flexible means of payment such as a letter of credit or possibly open account.
Brands and importers often accept open account payments, but they may also take wire transfers. This form of payment makes importers easier to deal with, which is good because these are the organizations on which most startups must rely.
Unlike direct import, though, importers have strict timelines and thus short lead time for samples. This is perhaps the biggest downfall for startups. Startups preparing for distribution should be thinking about these schedules well in advance, especially since they’ll want to know exactly how to ensure their products are on the shelves for the holiday season. Careful planning can help mitigate the pitfalls of a short sample lead time.
For the startup trying to build a brand, importers make the most sense when starting out with wide distribution. Going this route can help a startup market its own brand and get a foot in the door with an importer’s customers. It also makes it easier to price compare when looking for distributors.
Importers aren’t ideal for everything, though. They won’t help with after-sales problems and they don’t like paying for samples or deposits. For the startup that’s ready for distribution, though, these issues are easy to deal with.
For more information on this and related topics, you can reach out to Christina Hao on WeChat:
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