Launch a new product in the mass market

Just about everyone with a great idea for a new gadget dreams of launching a new product in the mass market. It used to be a lot easier for a small company to launch new products than it is today. Years ago, a small company with a new product or idea could start with neighborhood retailers, first building a local customer base and then fanning out across the region, the nation, or the globe. But the retail landscape has changed tremendously with huge chains with thousands of outlets dominating the market today. Over the last 15 years countless small chains and independent operators have either been swallowed up by their larger rivals or just gone belly up because they couldn’t compete with the behemoths. This makes it much more difficult for small companies to launch their products because a) there are fewer retailers to approach and b) there are thousands of companies competing for the attention of fewer and fewer buyers.

Twenty years ago, trade shows could often be a cost-effective way to introduce a new product to thousands of potential buyers but like retail, the trade show industry has seen a wave of mergers, acquisitions and drop outs. A lot of the trade shows that used to cater to the small- and mid-sized operations have seen their attendance dwindle and lots of them have just disappeared entirely.

U.S.For example, the North American Men’s Sportswear Buyers (NAMSB) show used to be one of the biggest apparel trade shows in the US but now it’s gone. For years, NAMSB was the trade show that retailers of all sizes attended to check out the latest and greatest upcoming styles. It was also where some now-famous names got their start in the mass market. At a NAMSB show (many) years ago a friend wanted me to meet the owner of a new company that she knew was going to be hot. We walked up to a small booth staffed with just one guy showing off his new t-shirt designs—his name was Stussy and a year or so later his company took off. For him, the NAMSB show was the ideal springboard to success. Today though, there are fewer shows to choose from and they’re a lot more expensive, making them a bigger gamble. So if you’re thinking about doing a trade show you’d best be prepared to do your homework, invest some money and do it right or you’ll be setting yourself up for failure.

What does this mean to a small business with a great product or idea? What it means is that yes, it can be tough to launch a new product in the mass market but it also means that a company can hit the big time a lot faster today than in the past. So what is the secret to selling to Wal-Mart or other large retailers? For the novice, the answer is that there is no easy answer—launching a product in the mass market is not for the faint of heart but it can be done. The answer lies in doing your homework:

  • Know your business—how are you going to produce the product and how will you distribute it? Do you have the capacity (production and financial) to meet the demands of the mass market?
  • Know your product—what sets your product apart from the competition? What makes it unique? What is its special appeal?
  • Know your retailer—where does your product fit in the store and how are you going to display it?      Research your target vendors—what are they looking for in new products? What is their process for reviewing new vendors?
  • Know your customer—who is going to buy your product and why are they going to buy it?
  • Know your marketing plan—how are you going to get the word out about your product to your      customers?

Knowing the answers to these questions will help prepare you and your company for successfully launching your new product in the mass market.


Selling to mass merchants

Many of the large chains such as Wal-Mart, K-Mart, Target, Office Depot and many others, have standardized the manner in which potential new vendors submit new products for review. I don’t want to depress anyone before even getting started but in the overwhelming majority of cases, a rejection letter will arrive so fast that you’ll think they sent it out before even looking at your proposal. We recently presented a really great product to Walgreens. This product has a solid track record of sales in other large chains, is strong financially and is really very innovative, but the Walgreens team flat out rejected it and wasn’t interested. However, when went another route through a regional office–they just loved it and set the company up as a new vendor right away. The product will be hitting the shelves in about 200 Walgreens stores later this month. Usually, there are lots of different ways in which one can get a product listed with the major chains so if you get rejected the first time but really believe in the potential of your product, don’t get discouraged and look for other ways to get past the gatekeepers.


Selling products to Wal-Mart

Whether you love it or hate it, as the world’s largest retailer, Wal-Mart isn’t going anywhere any time soon. The company has more than 4,000 stores in the United States alone and thousands more spread out in more than a dozen countries around the globe (source:Wal-Mart).

Wal-Mart deals with approximately 60,000 different vendors from all across the globe. Each year, approximately 10,000 companies try to sell their products to Wal-Mart, but only about 200 make the cut. Those aren’t very encouraging odds. That means for every 100 new vendors that walk through the doors at the company’s headquarters in Bentonville, 98 of them are going to walk out the door disappointed.

Lots of folks might think that getting a Wal-Mart vendor number is the key to success but believe me that is not necessarily the case. In fact, if the relationship isn’t managed properly it can actually be nothing more than the kiss of death. I’ve seen it happen to a number of small firms–particularly those where Wal-Mart sales accounted for the majority of their business. Disaster struck when they got so wrapped up in focusing on Wal-Mart that they neglected everyone else. When the relationship with Wal-Mart when south and they realized that only a small percentage of their sales come from other customers, the companies went belly up.

If you are fortunate enough to get a Wal-Mart vendor number, the key to success is two-fold: First, the relationship with Wal-Mart must be properly managed; and Second, don’t ignore developing relationships with other customers.


Some things to consider before doing business with Wal-Mart

Whether you have a small business or a large corporation, doing business with Wal-Mart can be a double-edged sword. On one had, it can quickly give a small firm a huge boost in sales. On the other hand though, it can turn off existing or prospective customers because once they find out that you are selling to Wal-Mart they say, “Why bother? I’m not going to compete with them.” In the long run this could diminish your brand and ultimately, be unhealthy for the company.

In our manufacturing company, we don’t tout the fact that our products are sold in Wal-Mart to prospective customers. It’s not something that we try and hide but we don’t go around shouting it from the mountain tops either. In one case, we were approached by a high-end department store that really liked our concept but they were not interested any more once we told them that we were also selling to Wal-Mart. In the end we took the basic idea and reconfigured it so that it had a completely different look and would not be confused in any way, shape or form, with what was being sold at Wal-Mart. The department store buyer loved it and went about completing the deal. That has actually worked out quite well for us and do something similar whenever possible.


Preparing your company to sell products to Wal-Mart

Before mass marketers sign the dotted line on your vendor agreement they will thoroughly investigate your company and be sure that it is financially stable and capable of fulfilling its obligations. Large mass marketers sometimes hesitate to do large-scale business with a very small firm unless they feel secure about its ability to fufill orders and maintain sufficient cashflow. While rapid growth sounds good it can also be the kiss of death if a business is under-capitalized. We’ll discuss that in greater detail in another post.
Most mass marketers will require you to be listed with Dun & Bradstreet and will review your report before moving ahead with the process. Wal-Mart requires potential suppliers to purchase the report ($75) themselves. Firms that are rated as “risky” will not be invited to complete a vendor agreement and instead, will receive notification that they must improve their financial position before moving ahead. Several times we have seen where potential suppliers have been rejected due to a Dun & Bradstreet rating of 7 or more. Large retailers are generally very strict about this and don’t allow much wiggle room at all so be sure to check your D&B report beforehand.