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Business Know-How Q & Asm
Selling to
Retail Stores Dear Janet, I am assessing distribution options for a new line of accessories (upscale purses, scarves, jewelry). Ideally, I would like to get into some of the upscale department stores. Since I am not familiar with entry into these channels, could you kindly point me in the right direction as to how best to get started in making such contacts and getting the outlets interested in distributing my products? Where is the best place to get more information on supplying goods to retailers? --GM Dear GM, As I was getting ready to answer your question, I asked retail consultant, Alan Zell, if he had any insights on the department store business that he'd like to pass along. Alan worked for more than 25 years in his family's Zell Bros. fine jewelry business in Portland, Oregon and now consults to small businesses. The "few comments" he sent back present such a good picture of the industry and how to get into it, that I decided not to add any of my own. Here's what Alan has to say: "Whether one realizes it or not, selling to department stores can be a boon or a bust . . . heaven or hell. "But first, we have to define "department stores." They are almost a thing of the past. What we have now are a few chains such as Federated, Belks, Target, May Company, Penny's, Sear's and Montgomery Ward, to name the most prevalent ones. What has taken the place of the many department stores that were in most cities are the "category killers" such as Wal-Mart and Office Depot and Costco, some chain theme stores, and then some catalogue houses. "Department stores are a trade show for the public. If one goes back in the history of commerce, one would find that they grew to the size they are because the started small and began to expand or buy out other small retailers. It was an economy of size that prompted this growth. "If one wants to sell the department stores one should be aware that the bigger the chain, the harder bargain they drive. They are, they believe, rightly or wrongly, that they are in the catbird seat. Also, the bigger they are the less open they are to new lines. They look to lines that are well established in their industry or merchandise category. That means that they expect their suppliers to do the advertising and promotion that will make the public aware of the name and/or items. "A few will look for lines or items that are "blind" in that they have no established, in the publics' minds, suggested retail price. They are looking for long mark-up items that they can run at that price for a time and if the situation warrants it, offer it at a discount and still have some mark-up in it. "The "bust" aspect of selling to these big operations is that they will take some unauthorized discounts and other advantages such as taking 9 months to pay the invoice and still take the cash discount; they will take advertising, freight, shrinkage and anticipation discounts even if they are not warranted. This can come to as much as 15% to 20% of the invoice. The attitude being that if you want to sell them that is the price you pay them for them to pay you. "Catalogue houses and department stores that have catalogues do it differently. Here, they don't buy stock. They buy, most often, enough to cover emergencies. They expect the vendor to have enough on hand to take care of the mail orders as they come into the mail order office. Besides which, they will expect the vendor to pay for their share of the cost of producing the catalogue. "This means that anyone jumping into this fray needs to have their "terms and conditions of sale" well spelled out and to make sure that it is part of their price lists. It may even call for several versions of one's prices. Some firms want the price to include such bells and whistles as shrinkage, advertising and freight allowances while others want "net, net, net" prices without all the frills and then they'll take them off as described above. One of any buyer's responsibilities is to spend their firm's money as efficiently as possible . . . so when one sees these things happening, while it may not be pretty, they are just doing their job. "But, don't despair, selling to retailers is not all bad. It can look rosy. In some communities, one can find a few local or small chain stores, but they are a dying breed. Lastly, while not department stores in the usual sense of the word, there are the small multi-line stores, usually with a theme, that are going into the rejuvenated shopping areas that are bursting on the scene. And then, one shouldn't underestimate the small specialty shops that dot the map. When they are all in the same vicinity they offer among them the same variety that a department store offers the public. Many are looking for the lines that the big stores do not offer as they can't compete . . . some big stores are selling goods for the same as a small retailer retails these goods for. Besides which, small stores pay faster and don't take all the unauthorized discounts. "This is where reps come in. They have had to change their ways of working. It used to be that they would spend the majority of their time with the big chains. The little guys got whatever time was left over. In some cases, reps would use sub-reps to call on the little stores. Well, it ain't that way today. Some big firms such as Wal-Mart say that due to their volume they don't need the rep to call on them and they want the commission usually paid to the rep for themselves. That means that reps have to look for other ways to make money. They do this by two methods: One, call on smaller retailers and call on them more often; two, take on lines that the smaller retailers are looking for. "So, as a supplier to the retail market, seek out the reps. Ask some stores that might be potential candidates for your line who they believe is the best rep that calls on them. Interview several reps, see what other lines they have that would cause them to call on the same type of firm you believe your goods could go into. They are your best bet for getting into all types of stores both large and small, that is their profession. And, lastly, don't begrudge them the commission you pay them. Without them, you wouldn't have the exposure or sales you're enjoying." Alan J. Zell, Ambassador Of Selling, About the author
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