SKU View: Developing a Retail Channel Strategy
In our monthly “SKU View” series, food entrepreneur leverages the expertise of mentors at SKU, an Austin, TX-based consumer product accelerator, to provide timely insights into issues impacting early-stage food and beverage brands.
AUSTIN, TEXAS — Entrepreneurs can be overwhelmed by the growing number of opportunities to sell products. Established retail channels such as grocery stores, clubs, and natural or specialty and alternative models, including pop-ups and smart vending machines, all present advantages and challenges that emerging brands must address.
“There are several factors to consider when developing a channel strategy,” said Scott Siegel, SKU mentor and founding partner of MomentumCPG, an Atlanta-based consulting firm. “Components range from where your primary consumer is buying, price, package size, packaging, packaging, display vehicles, sales method, distribution model, buying occasion, margins, regional or national distribution and trade promotion strategy. The most important thing is to know who your main consumer is. Who are they, where do they shop, when do they buy and how much are they willing to pay?
Mr. Siegel partners with emerging brands to create winning sales strategies, sustainable sales processes and build teams. He began his career as a traveling salesman for Frito-Lay and held positions of increasing responsibility in national sales, field sales, operations, marketing, broker and distributor management, drop shipping in-store, omnichannel and business strategy in several consumer packaged goods companies. , including Welch’s, Keurig Green Mountain and good2grow.
He shared ideas on how brands can fit in and stay on retailer shelves.
food entrepreneur: What are the advantages and disadvantages of each distribution channel?
Scott Siegel: When deciding which channel to start with, you need to consider the pros and cons of each channel.
Let’s start with e-commerce; benefits range from ease of entry and measurable customer acquisition. Cons may be the weight and costs of the ship depending on the category, or if you have to sell by the case, the price may be too high.
Natural/specialty is where consumers seek out product discovery and innovation, and they expect to pay more. The biggest challenge is the limited number of stores.
The grocery channel is where consumers traditionally shop, so there is high foot traffic and stores are located across the country. Both the cost of entry and the competition can be high. The mass channel, like the grocery store, has a large national footprint, high foot traffic, and a wide variety of shoppers. Challenges can be cost of entry and supply chain.
The final channel to consider is the club. The club chain sells large size packs and offers high priced rings. The challenge can be finding the right packaging size for the brand’s primary consumer.
What alternative or emerging channels should brands consider, and why?
Mr Siegel: There are also emerging or alternative channels to consider. Alternative retail, which mixes physical and digital, can be a way to reach consumers. Think pop-ups, smart vending machines and micro-commerce. This allows you to meet consumers where they are.
Another emerging channel is hyperlocal retail. The reason for the hype is clear, as the hyperlocal delivery model offers both convenience and efficiency to both seller and buyer. Since products are delivered to customers in a relatively shorter time, the popularity of the hyperlocal marketplace model is growing rapidly.
Once you’ve identified the top retailers you’d like to get into, what are the tactics for connecting with buyers?
Mr Siegel: Once you have identified the right channel, how do you secure a meeting with a buyer? There are several ways. The first is to partner with the right sales agent (broker), or you can sell directly. Depending on which way you choose, there are things to consider.
Let’s start with your brand story. The brand story should address consumer needs, category opportunities, and how your brand addresses the need and opportunities to drive incremental category growth.
When emailing the buyer directly, keep your email clear, concise, and compelling. Consider areas like a descriptive subject line and even a video in your email to grab buyers’ attention.
If you bring or send samples, be sure to stand out. The sample box should be branded and the little things count, like including a handwritten note. Also be sure to leverage your network – you never know who knows who. And, if at first you don’t succeed, try, try and try again. Getting that first meeting can be a journey.
Once on the shelves, how can you increase your chances of staying there?
Mr Siegel: You have now met the buyer and he has authorized the distribution of your brand. Then comes the most important part – velocity (UPSPW – units per store per week) and ensuring you stay on the shelf. This is the job of the brand and not that of the distributor.
So what can you do to make sure you stay on the shelf? Depending on the retailer, many have specific programs you can participate in to let consumers know who you are, where to find you, and the price. Launch a social media campaign to reach your key consumers and let them know where they can find you. If you can get consumer emails, even better. You can now communicate directly with them.
Conduct store audits and talk to consumers and store employees to gather feedback and adjust as needed. Develop the right promotional plan for your product which includes understanding the major seasonal holidays.
Determine how you are going to have multiple distribution points in the store, from shippers to PDQs. Stay in touch with the buyer at least quarterly to keep them informed of the investments you are making in the brand and its consumer, and don’t forget to share the results. The last part is having a strong supply chain. The last thing you want is to be out of stock on the shelf.
Again, there are several things to consider when developing a channel strategy. Taking the time to do the work and research upfront will pay dividends. Finally, remember that comments are a gift. Take your story on the road, listen to feedback and adapt.