TGroup Marketing

Getting your stuff on the floor

I talked about how important it is to follow up to make sure that once your merchandise is delivered, it also makes it on to the selling floor. A couple of recent incidents made me think of a few more things that are good to know so that maybe you won't have to deal with the same headaches:

1. Pre-load your display with your product before you ship. I was just talking with someone who shipped merchandise to a couple hundred drug stores (to the distribution center). The merchandise was on two pallets and the displays were on the third. The displays didn't make it to the stores so the product went on the shelf without the display. This was bad because it's a new product and the display tells the story very nicely. It was a big hassle to get the displays out to the stores but there's still no guarantee that they will make it on the shelves. A LOT of times, even if you ship the displays along with the merchandise you can't count on them being used. These folks are extremely busy and if it's not something that they can just open the master carton and put on the shelf, they usually won't go to the trouble.
   
   • Speaking of displays, don't invest a ton of money into making long-lasting ones. You can plaster "DO NOT THROWAWAY-PLEASE REUSE" in a hundred places on the display but it's still going to end up in the garbage. Most displays are disposable and a new one comes with each shipment. Again, these folks are busy and are used to getting disposable displays. Unless it's just too big or too heavy to haul off to the trash, there's a pretty good chance that your display is going in the garbage when it's empty.
2. If shipping a hanging display (sidekick) make sure to stick a few extra hangers in the box. Clips have a habit of getting lost somehow. If the clips aren't right there when they go to put out your display, then it's probably going to end up on the floor.

The point is that if you want your products to make out to the selling floor in a particular manner, then it is your responsibility as the manufacturer to do whatever you possibly can to make sure that it happens. That means no assembly, no complex instructions, no having to make two or three trips to the back room, no putting shirts on hangers, etc. Big manufacturers might be able to get away with shipping unassembled displays or whatever but I can tell you from experience that 99% of the little guys can't. So, do yourself a favor and do whatever you can to make it a short, quick trip for your goods to go from the back door to the selling floor.

A few retail terms defined

Here are definitions of a few common terms used in the retail industry.

• Planogram-this is a schematic drawing of store fixtures that illustrates the placement of each product. If your product is in the planogram, that generally means that it is a regularly stocked item and will be on the shelves (or whatever type of display they are using) along side similar products. Getting in the planogram has its ups and downs but more about that later.
• Mark down dollars-I mentioned this recently but here it is again: This is when you offer the retailer a discount on the wholesale price of merchandise that they don't sell (so they can pass the savings along to the consumer) instead of a guaranteed sale.
• Sidekick-this is a display that hangs in the metal cages that you see at the ends of aisles in mass merchants, grocery stores, drug stores, etc. This is usually flexible space but not always.
• POP (Point of Purchase)-this is a merchandise display. POPs come in all sorts of shapes and sizes. They can sit on a counter, be free-standing, hang on the wall or go just about wherever.

There are lots more (power panel, power wing, etc.) but these are a few of the more common ones that you might run across.

Moving at the speed of a giant

Becoming a vendor with a chain or mass merchant requires a lot of patience because these large companies typically move at the speed of drunken snail (unless you're in the hot seat, then they want it NOW). Generally, the time it takes to get vendored ranges anywhere from one to six months (or sometimes more), but it depends on the retailer, their policies and their bureaucracy. For example, there are seven layers of approval to navigate before a company completes the process at Wal-Mart. It can be done in as little as a month but it generally takes a little longer. At least at Wal-Mart everything can be done online, which speeds things up a lot.

At K-Mart, they're still doing things by hand (literally). I received a K-Mart vendor application in the mail recently that weighed about four pounds. Every single page had to be filled out with a pen and in order to be able to fit everything in the allotted space, I think you have to be one of those artists who can write someone's name on a grain of rice. I soaked my hand in a bucket of ice when I was finished. Luckily, I had the good sense to make copies before loading the application and all of the required attachments onto a pallet and hoisting it all into the back of a semi for its trip to their home office because after it arrived, they promptly lost it and needed another copy. I just received a vendor application for JC Penney in the mail too and it looks to be about the same size as K-Mart's.

In any case, the point is that becoming a mass merchant vendor requires patience, determination and tenacity. Be sure to read everything carefully and have a clear understanding of what they require before you get started. A simple mistake (for instance, the Wal-Mart system doesn't accept commas in address lines) can kick out your application and send it to the back of the line where it might linger for eternity.

Alternative to guaranteed sale

If faced with a situation where a buyer is insisting on a guaranteed sale in order to close the deal, you might consider offering markdown dollars (MDD) as an alternative. While each retailer has its own system for managing MDD, here is basically how it works when offered as an alternative to a guaranteed sale:

• After a specified period of time (six - eight weeks, etc.), rather than sending the unsold product back to you the manufacturer (or distributor), the retailer reduces the selling price of the item(s). With MDD, you are offering the retailer a specified reduction in the price paid for the goods should they have to reduce the price to clear out the remaining inventory.

An advantage of offering MDD is that you are getting some money for unsold goods rather than having them sent back to you. Here's an example: A manufacturer sells a shirt to a mass merchant for $7.25 who in turn retails it for $14.99. At the end of six weeks the selling price of any unsold shirts is reduced to maybe $7.99. In offering MDD, the remainder of the shirts are billed to the retailer at $4.00 (or whatever the manufacturer and retailer negotiate). This way, you are able to cover your costs and the retailer is happy because they sell the rest of the goods and are still able to get a decent profit margin.

Here are a couple of potential disadvantages of offering markdown dollars:

• There are lots of ways for retailers (usually at the district or store level) to manipulate MDD and some have been known to do so in order to unfairly take advantage of it at the expense of the manufacturer or distributor;
• Usually, the retailer will want to withhold payment of some or all of the invoices for up to 90 days.

This is by no means a comprehensive overview of markdown dollars but it should at least give you a general idea of how the system works.

Following instructions

The assumption that I don't need to read the instructions has been a problematic fault of mine that has caused headaches and dollars. Here is just one example:

In Wal-Mart Department 3 (stationery), we pay the freight so doing invoices is straightforward--it's just the cost of the goods and that's it. In the Mens Department though, Wal-Mart pays the freight. Earlier this year, the first time we did business with this department, our total order was for almost $200,000. We shipped the goods and then invoiced Wal-Mart, adding the freight cost to each invoice. When the payments arrived I noticed that each invoice was paid minus the freight. I thought it was just an oversight so I called Invoicing at their headquarters and informed them of the error and was told to re-submit the invoices. I ended up going through this several more times but did not receive payment. I then tried invoicing each store but still no luck. After a couple of months I finally spoke to someone in Invoicing who fully understood the process (I'd spoken to lots of people but no one could identify the problem). She was very nice and asked me if I had read the Wal-Mart Supplier Guide--particularly the part about shipping freight collect. I told her that no I hadn't, it had somehow slipped my mind.

Afterwards, I did read that part of the Supplier Guide and learned how to prevent this from occurring again the future. Since then, we haven't had a problem. However, because of our failure to read the instructions beforehand, we had a heck of a time getting reimbursed for the $30,000 in freight. It took almost nine months to get it. We were actually very fortunate because I think Wal-Mart probably would have been within its rights to deny the payment being that we did not follow their instructions for billing the freight charges to them.

In dealing with other large mass merchandisers, we've had a few other issues with getting paid as well. But, after some hard learned lessons, we realized that reading all of the instructions and asking all of the questions beforehand was a tremendous time saver and a great way to avoid future problems. So do yourself a favor and learn from our mistakes.