What is the process of getting into retail? On this episode of Freedom Fast Lane, Ryan Daniel Moran speaks with Riley and Nathan Judd. During the show, the trio discuss what it takes to pivot and be ready for the channel, what the profit margins look like, who should avoid going into retail, how to rise above the noise, and the parallels between the two different verticals of online and retail.
If you are doing the online side of retail well, you could be sitting on a gold mine by using the assets as leverage into the retail side of things. Most people get into retail without assets or a way to make it profitable for the retailers or the know how to market themselves well.
Meet Riley & Nathan Judd
The duo has been in the retail space for 16 years and started in Utah with a small company in the health food store channels. When the pair left, Nathan was the VP of Sales for one of the largest skincare companies in the world, while Riley was overseeing the vitamin and supplement channel. They went to Vegas and got into the energy drinks category, and secured about 40K doors of distribution in one year. They moved on to help the fourth largest beverage manufacturer in the world and established their distribution model. The guys wanted to get back to their roots and get into the supplement and skincare world, and have helped brands small and large get distribution from Macys, Bloomingdales, GNC, and 7-Eleven.
What makes the difference between products that succeed in retail and those that fail?
Riley and Nathan get 50 to 100 brands sending products samples to their officer per month. The stores are looking for something that is new, not just taking business from an existing brand. When you present something with a new story and message that fills a need, that will be the most successful. Having sales history from Amazon helps the success of a brand in retail, but it also depends on the brand story.
When a brand is presented to Riley and Nathan, one of the first things they look at is the packaging. It must be retail-friendly packaging. The packaging of what sells on Amazon should be completely different to what is on the shelf. There is the opportunity to build the story below the product, and what Riley and Nathan try to do is consolidate the story on the packaging so the consumer can understand what the story is on the packaging within 10 seconds. How is your product differentiated between every other product out there? There are 10 different products on the shelf, but why is one a top seller? It is usually the brand that understands how to tell the story the best. The ones that fail are the ones that have the same product but try to price cut in order to get the customers. If your marketing and story approach is that you are a cheaper alternative to a product that is already selling, it’s a flawed strategy from the start. This is different in the internet world where driving down of prices is feared.
What Makes a Good Brand Story
The number one mistake is that their box and packaging isn’t retail-compatible. Make sure to take a picture of the product on the shelf. The packaging will look different in a store with glass shelves and florescent lighting. The box may look amazing, but if you don’t know what the product is, then it’s a fail. Put the story on the side of the carton so when the person turns it over the person is compelled to purchase. Stories often manage to get past customers’ ‘BS meters.’
Pricing and Retail Margins
There are two approaches to taking sales online. A video sales letter approach is where you have to price your products high enough to pay for all your traffic, with the point being to get people into an ‘upsell’ so you can sell more. The Amazon approach is where price is the first thing we see, followed by reviews. This tends to be price-competitive, and margins are 30-50%.
Each channel of distribution has different margin requirements. You need to understand your product and where it fits in the marketplace. Walmart may require 40%, and GNC requires 60%. However, the biggest mistake is companies not understanding their product rollout strategy. This is the most critical thing a new company can do. The margin requirements will be a lot steeper at the front end, but as it progresses through the product lifestyle, will get better. The best strategy is to build up brand awareness through product specialty stores before going into a Walmart. You can’t do the reverse and launch in Walmart and go to a specialty store.
Getting Into the Stores
We think it’s all about quality and branding, but at the end of the day, it’s exposure and who you know who can get you out of the black hole and in the door. Even if you get into the retailers, it’s not a home run, which is why the prep work at the front end is so critical. What works for you on one channel or in one retailer might not work on another. The product strategy and lifecycle is critical in every individual channel.
Be aggressive, use your assets, and do what nobody else has done. The list and customer database are core assets, as a lot of people in retail don’t have that. This can then be your point of difference.
The brands Riley and Nathan pass on are the ‘me too’ brands. You can see when an owner is passionate about their brand through the way they position their product, look, and marketing message. It’s not about who spends the most, but the accounts who are creative and differentiate from the other six brands they sit next to on the shelf. The winner is never the ‘me too’ brand. In all retail situations, it is always about the retailer helping the consumer on the floor. The sales people have to be incentivized in order to pay attention to the brand and sell it on your behalf. This needs to be a well-rounded approach with good follow-through with information.
What Retailers Look For
Retailers want to know that you are behind the brand. Buyers used to handle 7-10 brands, and now each handle 70 brands, so they want to know that you are going to manage your business and drive people into the stores to buy the product. This involves leveraging the assets you have and running advertising, training the staff, and doing whatever it takes. If the business is a husband and wife team, then it’s best to get a service to do the staff training for you. This training can be done for $80-$500 per store.
Leveraging Amazon to Retail
Before online came to fruition, it was all about radio, print, and television. The retailers were slow to pick up online marketing. No one understands how big Amazon is and how well businesses can remarket to customers. Amazon’s pricing structure doesn’t match retail, which is why Ryan believes there will be a wave of high-priced products on Amazon in order to pivot into retail.
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