What is the best way to get your product in stores?
One of the main problems that you face, as a manufacturer or brand owner, is how to get your product in stores approved and exhibited. In this article, I will describe the structure of the grocery supply chain and the options you have to get your product in stores so that you can decide how to approach the market.
Type of grocery retailers
There are six types of retailers where consumers can buy your products. Below there is a brief description of each.
Conventional supermarkets are the basic community supermarkets offering a range of food and produce, canned goods and meats, and a smaller, less robust number of non-food items, such as school supplies or over-the-counter medications. They have a large number of stores and a presence in more than one state. Kroger, Walmart, Publix, and Whole Foods are some of the well-known conventional supermarkets.
Limited Assortment Supermarkets
Like conventional supermarkets, the limited assortment supermarket offers food products, but in reduced volume and at a lower price. They also have a large number of stores and a presence in several states. Aldi, Save-A-Lot, and Trader’s Joe are the best-known limited assortment supermarkets available to shoppers in the U.S.
Independent stores have a food product offering similar to that of supermarkets, but at a lower price like that of limited assortment stores. They are normally regional supermarkets with a few stores.
Supercenters combine a full-size grocery store or supermarket with a full-size general merchandise store all under one roof. Consumers can take care of all their food needs here, as well as find housewares, auto products, toys, and clothing. Walmart is the most popular supercenter in today’s market, but other contenders include Meijer and even some Target stores.
Warehouse clubs are large bulk grocery stores that require a membership. Stores like Sam’s Club, Costco, and BJ’s Wholesale are warehouse clubs, which offer bulk shopping at reduced prices. Warehouse clubs facilities are reminiscent of a traditional warehouse: a big area with racks, shelves, and bins, with products often displayed in the shipping boxes delivered by manufacturers or distributors.
Convenience stores are a small grab-and-go type of establishments that you can find at the corner in many neighborhoods. A convenience store is typically attached to a gas station or is part of it, but may include a small assortment of food items such as bread, eggs, and milk, as well as a host of other benefits like a coffee bar, snack shop, and soda fountain.
Sales by type of retailer
The graph below depicts the https://www.statista.com/statistics/1094057/retail-sales-by-channel-us/sale of groceries by segments where traditional grocery channels are conventional and limited assortment supermarkets and independent markets, and non-traditional channels are Supercenters and Clubs.
How to get your product in stores of supermarkets, limited assortment stores, supercenters, and clubs?
The process for registering as a vendor into supermarkets, limited assortment stores, supercenters, and warehouse clubs is pretty much the same. What varies is the rigor and timing of the process. In general terms, a vendor registration and approval process has four steps.
Step 1: Vendor request form
The first step for your company to be approved to get your product in stores of traditional channels is to fill a ”vendor request form”. It can be a downloaded form or an online registration. In this form, the vendor provides company information, a contact person, food certificates (like FDA audit), proof of liability insurance, and a description of the products. This form is relayed to the buyer responsible for the category of the product (cookies, snacks, beverage, etc.). This form is processed pretty fast; some chains do it automatically.
Step 2: Product information
When the vendor is pre-approved he must provide detailed information related to the products, like GTIN, SKU, description, manufacturer, units of measure, packing, price levels, and nutrient information when it applies. This is done in different ways depending on the supermarket. It can be online or a template that is uploaded or sent by email. This process is also fast and basically depends on the time you take filing the information.
Step 3: Request an appointment
If some of the products are pre-accepted then you need to schedule an appointment with the category manager. All supermarkets have a schedule to review categories and that is the moment when new products might be added. This is the bottleneck of the process since the frequency of this review varies from one chain to another. Some of them do it once a year, others twice a year. It helps to find out the category review schedule so that you can plan to minimize the waiting time.
Step 4: Present products and market plan
On your appointed day you must present the product, deliver samples, and show sales history in other channels and any marketing actions you plan to do. If accepted, you can start selling the product in stores or directly to their distribution centers. This is a critical step since the time allocated to each vendor is short. Be prepared with a short speech and support material that gives the manager all the information he needs to make a decision.
Authorization to get your product in stores of independent and convenience channels
The process is simpler than that of traditional markets and the decision is taken faster.
Step 1: Request an appointment with the buyer. There is no yearly schedule for these meetings. Just call and ask for an appointment.
Step 2: Present the products. The bigger independent stores, like Sedano’s, might request company information previous to the meeting. In the smaller ones, the presentation includes the company and the product information. Most Independent stores do not have central warehouses, so you must deliver the product to the stores. Be prepared to answer how you will do that. If you were convincing enough, the buyer can decide on the spot and you can start selling the product.
How to get your product in stores
Since traditional and non-traditional markets account for 92% of the sales, it is natural to target those markets. From that figure, independent stores have the smallest portion of the pie. But since the big players require sales history, the wisest thing is to start with independent stores. There are three possible ways for a manufacturer to reach the stores:
- Through a broker
- Through a logistics operator or wholesale distributor
- Through a direct store delivery distributor (DSD)
I illustrate them in the following graphic and then I will define each of the actors and their pros and cons.
Broker: Is a sales agent that represents a manufacturer or a brand owner to present and manage their products with retailers. Brokers have established relationships with retailers and can often help you get your product in stores faster. Brokers don’t buy products upfront; they usually charge a lump sum for the first six months and then a percentage of sales, typically between 5%-10%.
The main drawback with brokers is that they do not always provide the level of service necessary to pioneer a new line at retail. A significant amount of time is needed to successfully introduce new products and brokers usually have multiple brands under management.
Retailers Distribution Centers (DC): They are central warehouses of big retail chains. For example, Walmart has 150; ALDI 25, and PUBLIX 27. DCs consolidate the needs of the stores in their area and place orders directly to the manufacturer or distributor. Instead of delivering store by store, the distributor delivers in the DC and they are the ones delivering to the stores. Selling directly to Distribution Centers Is the most efficient way to deliver products. However, it is very difficult for a product to be approved for purchase from the retailer’s distribution center. A product usually requires solid and proven sales performance before being accepted to be delivered through the retail distribution center. It is very unlikely for ethnic products because they focus on specific clusters based on demographics.
Wholesale distributors or Logistic Operators: They are big companies that offer warehousing and distribution services with a low margin of commercialization. They cover a wide geographical area comprising several states and have a strong relationship with supermarkets. They often work as a third-party distribution center for a retailer, receiving electronic store orders. KEHE and UNFI are two of the most known.
Brand owners like you, that are approved to get your product in stores or supermarkets, face two challenges: to make a profitable drop size and cover the geographical area required by the supermarket. For this reason, many manufacturers opt for this channel because they have these two issues covered. However, since Logistic Operators have very big portfolios and do not have merchandising teams, you risk having your product buried in the catalog and, if sold, with a lower display rate in the store.
Distributors and DSD (Direct Store Delivery): Like a broker, distributors have relationships with high-volume retailers and can assist you in the process of getting your product in the stores. But, unlike a broker, a distributor purchases products upfront and resells them to retailers.
Since distributors take ownership of the product, they also stock inventory, take orders from retailers, manage the inventory on the shelf, service the retailer’s needs, introduce new products into retail, deliver the products to the stores (DSD – direct store delivery), handle the returns, and normally assist in any product recalls. For these services, distributors take a margin, typically in the range of 20%-30%.
It is certainly appealing to have this long list of responsibilities taken off your plate, but it’s important for manufacturers and brand owners to realize that working with a distributor could mean losing control of the retailer/buyer relationship. Additionally, since distributors represent many brands, smaller companies may get lost in the mix.
I hope this article has been helpful. I will continue to publish information related to Warehouse Management, distribution practices and trends, and the general economy. If you are interested in this article or want to learn more about Laceup Solutions, register to keep you updated on future articles.
You can watch how this process work in this video about How to register in Walmart.