TGroup Marketing

The decline of the independent drug store

The 2008 NACDS (National Association of Chain Drug Stores) Marketplace Conference will be held from June 28-July 1 at the San Diego Convention Center in San Diego. This is the largest drugstore-related trade show in the industry. It's where buyers from most all of the major chains come to attend meetings, network and look at the latest in merchandise to stock their shelves. We were at the show last year and although it's a great show, we won't be going to San Diego in June.

While browsing the NACDS "Facts & Resources" page I saw that sales at "all drug stores" have risen from $50.5 billion in 1986 to $189.3 billion in 2006. In 1986, $30.2 billion of this was attributed to chain drug stores (about 60%). In 2006, chain drug stores' portion of total sales was $144.8 billion (about 76 %). It shouldn't come as a surprise to anyone that there are far fewer independent drug stores and local chains than there were 22 years ago. Where I live in South Florida I can think of just a few independents that are still around.

That means that there are fewer players to approach with new products and ideas so competition heats up. Add to this the fact that buyers are already overworked and over-stressed and you've got a new product launch landscape that is much more difficult to navigate than it used to be. It doesn't mean though that small businesses don't have a chance at finding success in the mass market. It does mean that now more than ever before, companies need to do their homework and be fully prepared before they approach a buyer.

Launching 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.

Simpleology

I'm evaluating a multi-media course on blogging from the folks at Simpleology. For a while, they're letting you snag it for free if you post about it on your blog.

It covers:

• The best blogging techniques.
• How to get traffic to your blog.
• How to turn your blog into money.

I'll let you know what I think once I've had a chance to check it out. Meanwhile, go grab yours while it's still free.

Some acronyms and retail terms explained

Here are some more retail terms and acronyms explained:.

Action Alley: The sales area of a store located immediately after entering.

ANSI: American National Standard Institute

Breakpack: A carton received in the warehouse with two or more inner selling units that can be broken down and shipped to the stores.

Case Pack: Merchandise shipped in full cases. Cartons cannot be broken into smaller cases.

CO-OP: An advertising allowance offered by a vendor, payable upon proof of an ad having been run.

FOB: Free on Board or Freight on Board - the point at which the ownership of merchandise passes to the purchaser. Used to indicate that the seller provides transportation from the factory to trucks, railcars or consolidators after which the buyer pays all the carrier charges.

Gondola: Primary merchandising fixture consisting of a base, free-standing vertical wall, and a number of four of sections of shelving.

Gross Margin Percent: The Gross Margin Percent is calculated as follows:  Sales - Cost / Sales = Gross Margin Percent.

Letter Of Credit: The method of payment for import purchase orders.

LIFO: Last In, First Out - A method used in rotating inventory.

LTL: Less then Truckload - mixed freight, not all the same supplier or purchase order.

MABD: Must Arrive by Date - The date in which a purchase order must be received at the warehouse. 

Master Carton: Several cases being shipped in one package. These can be broken down into the individual cases and sent to stores.

Master Pack: Carton received that contains more than one warehouse pack or shipping unit inside it. This is very common in certain orders, such as imports.

TI/HI: Also called Pallet Pattern. TI refers to the number of cases that make up a tier or layer on a pallet. HI refers to the number of tiers or layers on the pallet. A pallet holding five cases of an item on a layer, stacked four high has a TI/HI of 20.

Turn: Sometimes called a cycle. The number of times a product completes a cycle of moving through a warehouse generally measured within a year’s time.

UCCNET: Uniform Code Council Network - A not-for-profit subsidiary of the Uniform Code Council, provides globally-endorsed item registration and synchronization services that reduce the costs and delays associated with bad data. By utilizing UCCnet services, companies and their trading partners can achieve significant improvements in supply chain efficiency by using and exchanging information that is: accurate, up to date and compliant with industry standards.

Vendor Pack: Original packaged quantity or merchandise as shipped from the vendor.

Small business resources

Running a successful business doesn't happen by accident. Building a thriving company requires a great deal of planning and preparation. Two of the most important planning and goal-setting tools are the business plan and the marketing plan. A business plan is a document that describes an organization's current structure and status, where it expects to be several years in the future and how it plans to get there. A marketing plan outlines the implementation of the firm's marketing strategy and includes the specific steps the company will take to reach its target market. Both of these documents can be overwhelming.

There are lots of resources available about how to go about writing business and marketing plans. There are even some nicely designed software programs that can guide you through the process. A number of websites also offer some great free resources about business plans and marketing plans. For business plans, the Small Business Administration (SBA) has a very helpful site to assist in developing a writing a business plan. The SBA site has also got some very useful information and marketing plan development resources that can help you to develop a marketing plan.

Top 100 business blogs

I was checking out the StartupNation.com forums this morning and ran across a post about the top 100 business blogs. They are listed in order of their Technorati and Alexa rankings. The list was compiled by an entrepreneurial Brit named John Crickett. I haven't had a chance to check out all of them but there are definitely some great blogs on the list.

Working out of a home office

I was talking with someone last week who has a great product idea for the mass market. He asked me if it would be necessary for him to invest in setting up an office/warehouse before approaching the big retailers. I told him that no, it wasn't necessary given all of the technologies available today. In fact, it's down-right easy for someone working out of his or her home to appear to outsiders as a much larger business--particularly if you're able to outsource parts of your operation. This has worked really well for one of our companies for almost five years now and we sell our products to Wal-Mart, Walgreens, Kroger and lots of other giant retailers. We're able to do this by outsourcing as much as we can (call center, EDI, manufacturing, warehousing, etc). It's not so much the outside appearance of your company that matters but whether or not you're able to do what you say and fulfill your obligations. Here's a website that's got some great resources for home-based entrepreneurs: HomeOfficeLife.com.

Product launch process

This morning I read that about 45% of all new product launches fail. I think the actual number is probably a lot higher. I'd guess it's probably somewhere between 70% to 90%, depending on the type of company doing the launching. Do a search on "product launch process" and you'll get a million results and lots of different ideas. In a nutshell though, here are some of the basics:

1. Identify the need that you are trying to meet with your product or service. Someone might think that his idea of creating a line of swimsuits for guinea pigs is great, but is there really a need for that?
2. Identify the key features of your product or service that meet the need and learn how to describe how it meets that need. Here's a tip: Keep it brief. Remember that people have short attention spans and if you drone on and on you'll lose them.
3. Identify what sets your product or service apart from the competition. Why should someone choose yours over something else? Again, make sure you can get your point across quickly without wasting time.
4. Identify your customers. Do you have a niche product or service that is going to appeal so a particular segment of the population? Or, do you have something with broad appeal? If it's a product that you've got, think about this in terms of who is going to be the end user (consumer) and who will be selling your product to the consumer. If you have a niche item designed to target a specialized segment of the population, don't waste your time chasing mass marketers.
5. Develop your message. Make sure that your message is brief and to the point, tying your product's benefits to results.
6. If you are launching an actual product that someone can touch and see make sure that you pay close attention to packaging and display. You've only got a split second (if that) to capture the consumer's eye so do it well.
7. Create some buzz before you launch. Send out press releases, media pitches and talk to your local television and radio stations.
8. Develop a marketing strategy (before you launch). How are you going to make people aware of your great product or idea? Unless it's going to jump off the shelf, you'd better have a plan. This is especially true if you want to sell your product to the mass market. If a buyer is interested in what you've got, one of the first questions that he or she asks will be, "What's your marketing strategy and where are you spending your marketing dollars?" If you don't have an answer I can guarantee that your meeting will be very, very short.
9. Before you actually launch your product or service, think about potential obstacles and pitfalls. I'm an optimist but you don't want to be blindsided and left dumbstruck.

There are lots more things to learn but this gives you a basic overview of some of the things that you'll want to consider.

Think long-term

Just about every day I read or hear something that shows that many businesses today are focused on short-term rather than long-term results. With everything about our culture seeming to glorify instant gratification and immediate results, it's no surprise. Short-term thinking (and greed) has been behind some of the biggest corporate scandals we've seen in recent years. Besides just being greedy, these people were focused on doing whatever they could to make the numbers look good for the short-term. For a small business, this can be deadly. Here's a good example:

Several years ago, before one of our companies had its own Wal-Mart vendor number in the mens' department, we partnered with another company that had a couple of open SKUs. We supplied them the goods and they sold them to Wal-Mart on our behalf using their UPCs. We knew going into this that we had a hot item that people were crazy about so we went into it with great expectations. I don't remember exact numbers but I think we booked like 288 units per store in locations throughout the Northeast. We sent the orders over to our partner in the project where they promptly cut all of the orders in half--we were stunned (and angry) but they refused to budge. They shipped all of the revised orders. A couple of weeks later, we reviewed the sales results and saw that most of locations sold everything, with the remainder selling about 75-85% of the goods. The owner of the company told us that he cut the orders in half because he was more concerned about maintaining a good relationship with Wal-Mart than he was about making a quick buck. Had he shipped everything as we sent it, while some of the stores might have still sold nearly everything, other stores would have gotten stuck with a lot of merchandise that would have to be marked down.

He had developed a reputation that he wanted to maintain and protect. They trusted that everything he sold them was going to have a good sell-through and that they would not get stuck with excess merchandise that they'd have to mark-down. He was not going to risk hurting his reputation by possibly overstocking stores with goods. For us, it was disappointing but we also learned a valuable lesson about thinking long-term. When a buyer at Wal-Mart is making a decision about whether or not to renew a vendor agreement with a company, he or she is going to look at how well the firm's goods sell. Companies that have a lousy sell-through with lots of markdowns are going to get cut and those that have a solid track record of selling-through are going to get invited back to do business with Wal-Mart.  Now that one of our companies has its own vendor number with Wal-Mart (and other major retailers), we find ourselves routinely slimming down orders in order to preserve our reputation.

It's tempting to take the quick hit and go for the short dollar, but we've found that this is a dangerous strategy that can come back to haunt you and ultimately, hurt or destroy a business.

Turning your idea into reality

I was interviewed last week by a local television news station here in West Palm Beach. They were interested in learning more about one of our projects that is related to selling "hot market" sports event-related goods to mass merchandisers. The news anchor wanted to know where the idea originated (my business partner's teenage son), who were our first customers (Wal-Mart) and how did we make it happen. I had to think about that one for a minute but finally said that we just made the decision to do it, started moving ahead and before we knew it, it was really happening. He then asked if I had any advice for any would-be entrepreneurs. I replied that, "If you really believe that you can make it happen then you can."

That got me to thinking about the subject of turning ideas into reality. Lots of us have great ideas for new products or services but very few of them actually make it to market. So I did a bit of rooting around and found that these were the most popular tips for making a dream or idea a reality:

• Have a definite goal-be as specific as you can so that you can focus your energy on achieving that goal;
• Make a plan of action-you ought to have an idea of the route that you will take to achieve your goal;
• Keep your focus on the goal(s), not the obstacles that you encounter-focusing on the roadblocks isn't going to do any good so stay focused on what you want to achieve;
• Take risks-to be an entrepreneur you have to be prepared to take some risks: There's no way around it (whether they're baby steps or a giant leap, they're unavoidable);
• Maintain a positive attitude-a defeatist outlook isn't going to help you along the way. Even though it can be extremely (and I do mean extremely) tough sometimes, a positive attitude is indispensible;
• Keep pushing forward-keep plugging along no matter what. Don't let yourself get stuck in an endless rut.