NOTE: This article was first published January 2001 at Innovation Institute’s original website.
A Thought on the Subject. . .
Ralph Waldo Emerson once penned, “Build a better mousetrap and the world will beat a path to your door.” He never had to deal with modern retail buyers.
The Inventor’s Missing Link. . .
In their rush to visualize their inventions hotly selling in their favorite retail chain, the overwhelming majority of inventors—virtually all—fail to grasp the critical importance of the retail buyer and the retailer’s merchandising policies in charting their dreams. At WIN we have had a lot of experience with inventors who, claiming the superiority of their device, assume that Wal-Mart will, or at least ought to, carry their device. After all, their device was conceived to meet a need as they saw it; and their friends and relatives assured them that they had a good idea, if not a winner. As one inventor put it to us, “Wal-Mart will be very sorry if they pass on this wonderful opportunity.” There are a fair number of exceptions to this encapsulated profile, but it does seem to fit the majority of inventors.
Let’s set aside the issue of whether or not this inventor does indeed have a wonderful opportunity and focus on this inventor’s perspective for a moment. The inventor is looking at only one part of the issue at hand—his part. He hasn’t come to grips with the fact that there is a buyer involved who may have an agenda of his or her own. In addition, the inventors statement made it obvious he isn’t prepared to deal with, or react properly and beneficially, with a buyer at Wal-Mart or any other sophisticated buying organization for that matter.
At WIN, we advise a fair number of inventors their inventions lack commercial feasibility. Disappointment upon receiving such news is natural, but the vast majority of inventors accept it and are grateful for the impartial and honest advice. The inventors who are sometimes a little tough to deal with are those whose ideas have commercial potential and are referred to Wal-Mart for a formal assessment of marketability by an appropriate buyer. There, the buyer’s more intimate knowledge of the product area may reveal relevant Shadow Art which poses a problem for the inventor. In addition, corporate needs and merchandising policies also kick in. Sometimes, buyers recommend inventions and products for other channels of distribution, but this doesn’t always help reduce the frustration, keen disappointment, and, if you are reading between the lines here, occasionally outright anger, at having, in their perception, “been turned down by Wal-Mart.” To be sure, the vast majority handle such news graciously, but very few seem to understand it.
Where Understanding Leads. . .
Jason Clute was like other WIN inventors in that he was disappointed when the buyer told him he liked his invention, but he needed to get the product established before he would consider it. However, Jason understood where the buyer was coming from. He was a former retailer. So, Jason went about getting his product launched through other channels, and when he thought the time was right, he came back to Wal-Mart. Now about 5 years later, retail sales of his product line through Wal-Mart have topped $15 million, and Jason is a valued vendor at Wal-Mart.
Jason succeeded because he understood it took more than a better mousetrap to get on the shelves of a major retailer and he understood the needs and perspective of the buyer. He understood the buyer was basically a manager of a fair-sized business with a multitude of sometimes conflicting needs; a lot of products and vendors; a host of new products and a lot more products vying for the limited shelf space available for new or different products. Jason succeeded because he understood the culture of retailing and the business world, and he understood retail buying.
The Retail Buyer. . .
In many retail organizations buyers are very busy people. For example, the typical buyer at Wal-Mart is responsible for 8,800 SKUs (Stock Keeping Units). In addition, he or she has a stable of 500 vendors to manage.
Obviously, the buyer’s roles and responsibilities vary a good deal from one retail organization to another. However, aside from being busy, there are some significant commonalities among them inventors and innovators must understand these if they are to be successful in dealing with sophisticated retail buying organizations. Among these are the following:
- The buyer is your chief representative of the “channel captain.” He or she rules the roost. This is the person hopeful vendors must deal with. In sophisticated buying organizations, appealing to higher authorities rarely works. Those higher up in the retail organization will rarely interfere with a buyer’s buying decisions. They have to trust their buyers because they don’t have the knowledge or the time to interfere. Besides, they know it is not a good idea to split responsibility and authority. They know second guessing buyers and then holding them responsible is a very good way to destroy buyer morale. Don’t burn your bridges with buyers by giving them a bad time or attempting to appeal their decisions up the ladder. Do listen to them carefully, and if they make suggestions, follow through on them if you hope to reverse their decisions. If you feel the buyer overlooked something, state your case professionally and briefly. Don’t argue with a buyer. You will lose and you’re wasting time and energy. Buyers are not always right, but they have the right to be wrong. Work to build a long term relationship.
- Deal with your disappointment in a mature fashion. We received the following e-mail by mistake. The sender was not one of our clients, so it is not cloaked under our confidentiality policy. Apparently the individual’s product had been rejected by a buyer:
- Buyers are very busy people with a multitude of responsibilities. Few, if any, buyers have time to waste in chit chat or in listening to long detailed histories about the development of an invention or new product. Be brief, professional and to the point in presentations, conversations and correspondence.
- Because they are busy, buyers favor multi-product firms. The busier the buyer, the higher the one product hurdle. Understand that you are at a definite disadvantage with only one or two products to sell. You may be better off working through a distributor or a manufacturers rep (of related products) than by championing your own cause as they may have a better chance of getting through to the buyer.
- Buyers have a focused holistic view of their world. That is, buyers focus on their area of buying responsibility, but within that area their objective is to develop a balanced product mix that maximizes sales revenues/profits for their area. They are not as likely to be as interested in the virtues of your product (as perceived by you) as they are in how your product/invention fits into their overall product mix. They will quickly pass on even good products if the product doesn’t in their product mix or with corporate merchandising policies or strategies. Before you approach a retail buyer do your homework. Get to know the product line where your product best fits. If it isn’t clear, ask someone on the retail floor where a product like yours would best fit. If it is clear, ask anyway; it’s easy to be wrong. Build a case for your product. Show how, where and why your product fits. If you don’t have enough information to do this, you are not ready to talk to that retailer.
- Buyers abhor three things—customer complaints, empty shelf spaces and slow moving products. The first of these is their chief nightmare. Opportunities are often quickly passed by or dropped when customer dissatisfaction surfaces. For example, a buyer recently called a vendor after the second customer complaint reached his desk. He got excuses rather than solutions and dropped the product with the fourth complaint. To the buyer this wasn’t just an issue of a customer being dissatisfied with a single product in his line of perhaps 1,000 products or so; it was an issue of the customer being dissatisfied with Wal-Mart! As the buyer put it, “You can replace a product, but how do you replace a customer?”
- Buyers, at least most of them, were born skeptical. Don’t expect a buyer to take your word for it that the customer will love your product, buy your product off the shelf without benefit of promotion, or that he or she will still like your product after taking it home. Expect to ante up some proof.
- New products, particularly if they have not undergone rigorous environmental use testing, or do not have a substantial history of sales and satisfied customers, are always risky business. In the buyers mind innovation isn’t necessarily, or even usually , something to get excited about. The majority of buyers, particularly those in mass merchandise/discount stores would rather deal with products which have been pioneered by someone else. This reduces their level of perceived risk on both counts. Unless your device/product is radically new, don’t tell the buyer that, “There’s nothing else on the market like it.” First of all, he or she is very likely to know better, and you have just damaged your credibility by stating with that claim that you do not know your market. Second, this may be the last thing he or she wants to hear. Explain how your product fits in the product category the buyer is responsible for. Define your competition broadly. Outline your significant product advantages, but don’t exaggerate or major in minor product advantages. Know your competition.
- Buyers are concerned about more than your product. Expect them to ask a lot of questions about your enterprise. He or she isn’t being nosey. Rather, the buyer has to be satisfied that you are able to deliver the right product in the right quantities at the right quality at the right price at the right place at the right time. These are critical issues, particularly with a firm like Wal-Mart where distribution centers hold inventory for no more than a couple of hours to a couple of days.
This ban on xxxxx’BBQ sauce is downright stupid. Do you all not know that the people you choose to push away are the same folks that are your best customers! Kick the paying customer in the ——. While those others rob you blind. Sam is turning in his grave you sorry —-. By the way you lost a loyal customer.
This is a very good example of how not to deal with disappointment. Aside from being very un-business-like, the response guarantees the buyer will not be anxious to deal with this individual in the future. Was the buyer wrong in rejecting this product? Probably not – the last report I heard was that there were 86 different brands of BBQ sauce on the market, many of which are well known and established in the marketplace. Had Jason Clute dealt with his first disappointment in like manner, he would have missed out on a $15 million opportunity.
This list doesn’t exhaust all of the common facets of retail buyers. However, it does touch on some of the elements we have learned are important to building a good relationship with potential vendors.
Some Good Advice From Entrepreneur . . .
Karen Axelton’s article, “Scaling the Wal” in the January 1998 issue of Entrepreneur (January 1998, P.133) makes for some good reading. At the end, Karen offers the following advice:
To do business with Wal-Mart, you’ve got to know your product and market intimately. Don’t approach the retail giant unless you can answer the following questions:
- Where is the future growth in the market going to come from?
- How will your product or service help position Wal-Mart to take advantage of this growth (gain market share and control costs)?
- Who is your customer (age, income, median family size, geographical location and population size)?
- What is the overall size of the market/industry, and who is your competition?
- What added value does your product or service have over your competition?
- How will your product or service impact other related products or services in Wal-Mart stores?
This is good advice. Heed it.
The Last Word. . . .
If you are not ready to follow through on these suggestions, the chances are pretty good you are not ready to deal with the buyers at sophisticated retail organizations. There is nothing wrong with that. All of us need to improve or learn in a lot of areas of our lives. Your best bet strategy is to target the more informal channels of distribution relevant to your invention/product. As the writer of Proverbs once observed, “Do not despise the things of small beginnings.” (Proverbs). A new firm with one new product typically scares the dickens out of a national level buyer and with good reason. The odds are against such firms. Get your product established. Prove your mettle and develop a market introduction strategy for your invention/new product. Remember, before you will even get a chance to reach the customer, you will have to gain favor with those who act as gatekeepers to the marketplace, the retail buyer. Above all, he or she has a lot of alternatives; and you need the buyer a whole lot more than he or she needs you. For the buyer, there are always other opportunities..
Gerald G. Udell, Ph.D.
Copyright © 2001 by The Innovation Institute.
Permission to copy for free distribution granted to SCORE/SBDC’s