Much of the heavy-lifting in establishing a startup is typically thought to be at the very beginning, when the unique, marketable idea is being crafted. With the pressure to think of a brilliant product concept weighing heavily on them, startups may end up charging full speed ahead on an idea without much of a distribution plan to bring it to fruition. In fact, startups typically have the best chance of success with retailers if they have a clear distribution strategy in mind from the beginning.
A Desirable Price Point
Retailers will quickly decide if they will work with a startup based on your item’s price point. Before you choose the final price of your product for end customers, you have to consider all the payments you must make to actually produce and distribute the product—you may have to pay retailers, distributors, taxes, and logistical and packaging costs. Retailers will typically desire a 60 – 70% markup on your product, and distributors may expect between 40-50% markup.
A good rule of thumb for choosing the price of your product is to pick a price that you know your item will sell for, and then divide that by 4. This division accounts for the expenses that you will incur through manufacturing and distribution. If you don’t expect there to be a profit from a proposed sale price, it’s time to rethink your manufacturing plan in order to set a reasonable price that will attract retailers.
The Yomee yogurt maker, the winning startup at the April 2018 Startup Launchpad Investment Competition, is a good example of a startup that can easily attract retailers with it’s fairly simplistic, but attractive design. At $99 USD for a starter bundle, the Yomee is at a similar price point to other kitchen appliances, but does not appear to require complicated production. The pods that are input into the yogurt maker are additionally inexpensive and easy to assemble on a massive scale, as they are simply compressed rice starch and live active yogurt cultures.
Retailers are looking for products that they can sell in large quantities and make continuing revenue from. Again, this is where a product like the Yomee yogurt maker really shines. Perhaps the most attractive part of a startup like the Yomee is the business plan based around the required purchase of Keurig-like pods to make each serving of yogurt. This signals to retailers that the Yomee will continually provide profit through the sale of pods at a price point that customers are more than willing to pay– $1 USD per pod.
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