From the Buyer’s Perspective: Impact of West Coast Port Delays

Sunday February 22ndTips for Retail Success Category

By Vanessa Ting

As of today (Sunday, 2/22) West Coast ports are expected to come back to life. The backlog will reportedly take up to 8 weeks to clear. So the impact to importers and retailers will be felt long after the labor contract dispute ends.

While all my clients who import felt the pinch (more like ‘crush’), some felt it more than others.

The companies that minimized the impact of port closures did so because they could:

  • Divert boats on water to the gulf coast ports (or be ready to pull that lever)
  • Leverage their safety stock in domestic warehouses (one client always keep 6 months of supply on hand)
  • Air ship some inventory as needed
  • Leverage their early (and heavier) orders placed in anticipation of Chinese New Year to fill the unexpected holes due to the port closure.

Why Inventory Management Is A Critical Skill For Working With Large Retailers

Generally speaking, those who manage their inventory well will have suffered less greatly than those who aren’t able to keep safety stock or have built a contingency plan. As a general principle, if you ship to large retailers, you should ALWAYS carry some level of safety stock. You should always have a contingency plan to “chase sales” or deal with the situation where demand outpaces inventory. There will always be some occasion where you have to chase sales. Even without a port closure.

You hear me preach often that there are three primary factors retailers use to evaluate vendors. Vendor execution is one of them. Times like these really expose which vendors are positioned to execute well and which ones are not. Inventory management is a key indicator of strong vendor execution. And while a huge port closure doesn’t happen too often, something unexpected in the supply chain almost always does. So this unusual event should serve as a powerful wake-up call to fine-tune your inventory management and supply chain operations. Or just as importantly, make vendors realize they are NOT ready to sell to big retail yet.

Will Retailers Hold Vendors Responsible For Port Closures?

So what impact did this West Coast port closures cause? We’re still waiting to hear the reported financial impact, but I anticipate it will be grave. I anticipate small retailers and small companies will have been hurt the most, as well as those who ship and sell perishable goods. I hope no business went upside-down financially as a result, but I wouldn’t be surprised.

But the one possible relief is that retailers may not hold vendors accountable for the loss revenues due to short supply. It’s an opinion based on my experience, but in practice, we’ll see how retailers handle it.  I’m no lawyer but your contracts with retailers may have a force majeure clause.

“The force majeure clause in a contract excuses a party from not performing its contractual obligations due to unforeseen events beyond its control. These events include natural disasters such as floods, earthquakes and other “acts of God,” as well as uncontrollable events such as war or terrorist attack. Force majeure clauses are meant to excuse a party provided the failure to perform could not be avoided by the exercise of due diligence and care. However, it does not cover failures resulting from a party’s financial condition or negligence.”  Source:  Yahoo Small Business

It would seem a port closure qualifies as a force majeure event.  Ask your lawyers about this if retailers put pressure on you.

As unreasonable as most retail buyers may seem sometimes, this is one time they may not hold you at fault for inventory shortages or late in-store dates. Some retailers have reportedly sent out letters to vendors saying they still expect on-time deliveries. But when it comes down to it, I will be shocked if any retailers force chargebacks upon vendors for late deliveries or loss days of sales.

What Can Vendors Do Moving Forward?

So what can you learn from this?  Plan your inventory better. Build contingency plans for foreseeable events like Chinese New Years.  Keep abreast of news (subscribe to industry newsletters, join trade organizations, or easier – read the news daily) to anticipate somewhat foreseeable events. While I did say this event likely qualifies as force majeure, the reality is that it was somewhat foreseeable. The news reported that we should all expect a port slowdown because of this simmering labor dispute. I’m not sure anyone expected a closure to actually happen. And I’m not sure there would have been much time to proactively respond to the port slowdown and subsequent closures anyways. But the lesson learned is to plan for the unforeseeable within reason (as much as your cash flow and financial position allows) and proactively communicate with your retail buyer .  Doing so will hopefully help future headaches become more manageable.

From the Entrepreneur’s Perspective: Inventory Management Considerations – West Coast Port Delays

Saturday February 14thTips for Retail Success Category

If you do not provide on-time delivery of your product, you are going to give yourself and the buyer a headache. And, it’s going to cost you and them.

Now, more than ever, if you are importing from Asia, you and your retailers are at risk for significant impact/delays due to the West Coast port dispute. There is no telling when business will return to normal. As such:

  • Get your product on a boat or plane much sooner than you normally would have in order to avoid not having product to sell. Boats are backed up…and you are looking at 3+ weeks in delays.
  • Start manufacturing ahead of schedule to allow for this delay.
  • Consider what impact this will have on you financially (do you have the cash on hand to pay for this inventory that will need to be produced sooner than expected and for it to sit on a boat for weeks on end and/or pay for it to be air freighted at a higher cost?).

The Product-based entrepreneur’s headache when evaluating inventory needs:

We are faced with managing cash flow. We don’t want to manufacture and/or import too much inventory because that costs us in manufacturing fees, shipping, storage, and possible financing. However, we can’t under produce because then we are not selling product. And, clearly we need to be selling product to keep all cylinders running.

We must properly project inventory needs. This is a best-guess game based on familiarity with the past, present, and future landscape of our business, industry, and outside influences.

The past: review prior sales data. What have you done month over month, year over year? How does seasonality impact your sales? Did you have past press hits, place ads, and/or participate in promotions that may have skewed your sales? Did you launch at a new retailer where their initial fill impacted your sales? Did you lose any accounts that need to be accounted for? Keeping “financial notes” (notes that impact your sales positively or negatively) throughout the year is one way to remind yourself of these types of influencing factors when you are reviewing past numbers.

The present: Take into consideration any trends that may influence your sales, positively or negatively. You can stay on top of trends by subscribing to industry newsletters/digests, reading headline news, and reviewing media calendars (often posted on national magazine web sites). How are outside influences, like PORT DELAYS, going to impact your business? For example, if your competitor is unable to get their inventory to their retailers on time due to port delays – and you can, that means more sales for you because there is less on shelf to compete with.

The future: You know that Chinese New Year (CNY) is coming up. It’s the same time every year. During CNY, manufacturers shut down or operate on skeleton crews and exports become much more costly and difficult to coordinate. This is supply/demand at its finest. We importers still need our goods; there are less workers to get it to us. Plan for it so you are issuing POs in November, manufacturing in December and/or January, and shipping in January, thus avoiding unnecessary inventory shortages or costly shipping charges. Also, back to those PORT DELAYS…negotiations may continue for many more months. Plan ahead.

The retailer’s headache:

When shelves sit empty, the retailer is losing money. The buyer is evaluated based on many criteria, including how much revenue he/she contributed to his/her category. You don’t want the buyer popping Advil at your expense. Read Vanessa’s upcoming blog on the retailers’ perspective.

 

 

From the Buyer’s Persepctive: How To Price Products For Wholesale and Retail

Saturday January 17thTips for Retail Success Category

By Vanessa Ting

There is plenty to consider when creating wholesale and retail price points.

Here are the primary considerations using the most simplest, rudimentary explanation. Note: Pricing for profitability can be more complex. But we are keeping things simple since this is a blog.

1) Bottoms-Up Pricing: Start with your COGS and add in all your other expense line items (e.g., promotions, duties, international shipping, insurance, etc.). Then add your internal profit margin (this is a personal decision). What results is your Wholesale Price. From there, add your retailer margin (most common is keystone at 50%, but it varies by distribution channel and product category) and what results is your Retail Price.

Note that large retailers will request ELC or FOB pricing, if your items are imported. ELC=Estimated Landed Cost (Your wholesale cost with shipping to US included) FOB=Freight On Board (Your wholesale cost assuming the retailer would take ownership of your inventory at the international shipping departure point. Larger retailers usually have better shipping pricing because of the volume they import).

As a checks and balance, you’ll want to run the price point above against the next step of “Tops-Down Pricing”

2) Tops-Down Pricing: Look at the brands that would sit beside you on shelf. Look at their claims and benefits. Do they have more “bells and whistles” than your brand? Less? Your market-acceptable price is one that is priced relative to the other brands and where you all fall on the “bells and whistles” spectrum. Remember that most retailers create 3 pricing tiers, called “Good/Better/Best” and you’ll want to occupy one of those tiers. And you should aim for a pricing tier that is currently unoccupied. If not, your brand positioning must be significantly differentiated from the other brand in your pricing tier. From whatever retail price point you arrive at based on the competitive landscape, work backwards. Subtract the expected retailer margin to arrive at your wholesale cost.

Compare your Bottoms-Up price points with your Tops-Down price points. They should be in the same ballpark region. If not, you likely have an inflated COGS and need to work on getting those costs down. Or, you’ve got tons of margin upside (yay!). Unfortunately, margin upside isn’t usually the case.

TIP: Again, I’m generalizing tremendously here. Take the above suggestions and apply your own research (starting with Romy’s blog post on this same topic) and instincts. And you will be better off than most who fail to do the “Tops-Down Pricing” analysis. Most default to the “Bottoms Up Pricing” method only and end up with retail price points that are not sustainable or rejected by  consumers and consequently, retail buyers.

3) Test-And-Learn: Most importantly, test your pricing. Test it online or in a “test and learn” set of stores. My clients are familiar with the tremendous value of “test and learns”.

4) Channel Pricing: Don’t forget to create MAP policies (Minimum Advertised Price) and wholesale costs and retail pricing by channel. Your pricing (and in some cases, product configuration) should differ by retail channel. See my LinkedIN post on the topic of channel management.

 

 

 

From the Entrepreneur’s Perspective: How to Price Products for Wholesale and Retail

Saturday January 10thTips for Retail Success, Uncategorized Category

Several factors must be considered when establishing your wholesale and retail pricing. You have to price up (make sure you are covering your costs) and price down (what will your target audience bear). There’s no one right answer or easy solution. It takes a lot of research and often trial and error. Minimizing those errors through planning and organic growth are good strategies for long-term success.

  1. Think through your long-term distribution plan. If you are only planning to sell online via your own website and never, never through a distributor or retailer, that’s one thing. It’s highly unlikely that this is the case though. You will likely be selling through a distributor and/or a retailer, and everyone wants their cut, which means you have to factor in margins of approx. 30% for the distributor and 50-60% for the retailer. Additionally, consider your various distribution channels, both nationally and internationally, as they will have different margin requirements, set up costs (i.e. license/registration, insurance, EDI), MOQs, shipping/handling costs, etc.
  2. Cover your costs and factor in a realistic profit margin. In # 1 above, you have priced down. Now price up. Budget for COGS, and all your below the line costs (i.e. insurance, marketing, payroll, storage/handling). How much do you need to sell your product for and make a profit?
  3. Project sales movement over time. The greater your volume, the greater your economies of scale. Set your wholesale/retail where you can land the sale – while keeping in mind that as you scale up your volume you will help to drive your unit cost down.
  4. Define your ideal customer/target audience – this includes distributors, retailers, and the end consumer. What are they willing to pay for your product? Pricing too high or too low can greatly impact your sales movement, and the perception of your product. And changing pricing over time is no easy feat.
  5. Research your competition. What are your competitors charging? How do your products compare? Walk store shelves. Go online. How do their features/benefits compare to your product? Is yours more or less premium? Factor these answers into your decision making.

From the Entrepreneur’s Perspective: Top 3 Traits of a Successful Product Entrepreneur

Tuesday December 16thTips for Retail Success, Uncategorized Category

There are many attributes that I would consider to be critical to a product entrepreneur’s success; however, the following are my top 3 picks.

Are your decisions well thought out? Are you willing to go the mile? Can I count on you?

  1. Strategic. Without a sound business strategy, you will be distracted by all the “shiny objects” dangling in front of you. There are always going to be many opportunities before you; however, which ones you choose to pursue are going to be critical. Make sure that those opportunities are in alignment with your goals.
  2. Persistent. There is not a day that goes by that is “easy” as an entrepreneur. Even when things are going super well, there are challenges, even if they are good ones. And when the going gets tough, the tough need to get going. The most successful entrepreneurs are going to dive deep…they are going to evaluate the problem and find creative and strategic solutions.
  3. Accountable. If you tell someone you are going to do something, do it. If you are unable to follow through on that commitment, be proactive and explain the situation succinctly ALONG WITH your proposed solution. Providing clear expectations leads to trusting relationships.

From the Buyer’s Perspective: Top 3 Traits of a Successful Product Entrepreneur

Wednesday December 10thTips for Retail Success Category

By Vanessa Ting

Man, this is meaty topic. In my 15 years in the consumer product and retail space, I’ve seen a lot of product companies thrive and fizzle. And I have my own tech product entrepreneurial experience to draw from. Needless to say, I have strong opinions on this topic.

I would agree with Romy  that being Strategic, Persistent and Accountable are all traits critical to success. I would add the following three traits to that list.

1. Bias for Action – As they say, anyone can have an idea but execution is king. Execution is what sets your idea apart from competitors.

The first line in the job description of an Entrepreneur should be “problem solver”. Every day on the job, you’re faced with different problems to solve. The first problem you solve as an entrepreneur is the one your very own product provides a solution for. And this problem solving continues with putting out fires and blocking and tackling all the issues that arise in your day to day operations. So being solution-oriented is an important trait to have as you embark on the marathon of entrepreneurship.

And by the way, retail buyers look for vendors who are decisive, can anticipate problems, come up with 3 solutions to each, and execute the solution seamlessly and without delay.

2. Quantitative – Be numbers-driven in every decision you make. You don’t have to be good at math. Just be comfortable enough with it.

Many companies make poor financial decisions because they never “ran the numbers”. That will always be my “go to” response for any business decision made. I’ve seen entrepreneurs price their products too low, thereby squeezing their own margins making it virtually impossible to continue their business. I’ve seen companies agree to high costs of goods without any thought to how it might inflate their retail prices and end up sitting on inventory that no one wants to buy. I’ve seen vendors agree to markdown coverage that results in them earning no profit on a wholesale order. I can go on, but you get the idea.

As a buyer, I would avoid working with vendors who did not show their ability to crunch or analyze numbers. Even now, I shy away from clients who don’t demonstrate this competency. It sets no one up for success. This trait is crucial.

3. Long-term focused – Being long-term focused means making decisions that won’t close doors on opportunities in the future. It means making decisions that are good for the long term health of your company, even if it means making less money today. That may seem like it contradicts my point above about “running the numbers” but it doesn’t. Being long-term focused means evaluating not just one, but multiple data points before making a decision. And among the multiple data points you will consider, one will be the numbers you run. Another data point will be the long term effect on your brand or business. And there will likely be many other data points to consider in combination with these, such as the interests of your investors or your exit-strategy. Being long-term focused prevents you from making decisions in a silo.

Making decisions in a silo happens a lot.  Here is a dramatic example to illustrate my point:

Many first-time product companies don’t know to manage their pricing and product portfolio across various retail channels (google: Channel Management or Channel Conflict). They’ll sell the same product with the same price at Nordstrom as they do at Target. And while they will make more money today selling in both stores with the same SKU, they will soon begin cannibalizing their own sales at Nordstrom and eventually lose Nordstrom as an account. At the same time, no other prestige retailer will want to work with them either. And if their volume and profitability at Target and other mass channels can’t offset the profits they lost by eliminating the prestige channel…well, you see where I’m headed. So don’t make short term decisions that bankrupt your money-making opportunities for the future. Be strategic, like Romy says, and anticipate how your decisions will play out over time.

From the Buyer’s Perspective: Ways to Share Gratitude With Your Retail Buyer

Wednesday December 10thTips for Retail Success Category

By Vanessa Ting

Retail buyers don’t often times show their gratitude to their vendors. But trust me, they are grateful. They may just show it differently or not have the opportunity to express it. I’ll give a tip at the end of this post on how you can finagle a “thank you” from a buyer.

It’s unfortunate that some buyers don’t show their gratitude more. Because our success relies heavily upon our partnership with you, our vendors. Your marketing wins bring us sales.  Your clever product launches bring us category growth. Your strong brand sales bring us job recognition from our Senior Buyers and DMMs – and in some cases, year-end bonuses and promotions.

Let me share a story about vendor gratitude. I had many great vendor relationships while working as a buyer. In fact, we are still friends to this day. This one particular vendor was a fantastic one because we worked as a team – this included taking risks as a team. Some risks paid off handsomely which benefited both of us/our companies. Some risks backfired. When they backfired, I had to have the hard conversation of  “markdown coverage” . That meant I had to put them in a difficult spot and ask for a sum sometimes as high as $1 million. That feels really crappy. But despite it all, we liked working with each other and still do to this day.

In my humble opinion, the reason this vendor and I still have a strong working relationship is because we express gratitude for each other along the way. We celebrate wins *together* which makes it a little easier to swallow the setbacks *together*.  In my experience, vendors and buyers who don’t express gratitude for each other are short-changing their relationship. It is not intentional on anyone’s part. Some people just forget to be appreciative. I’ll write more on how to remind them in just a second. When gratitude fails to exist, there is no commitment to one another. There is no motivation to dig deep and find a mutually beneficial outcome.  That leads to untapped potential and short-term (zero-sum) solutions.

So yes, you can benefit from expressing gratitude to your buyer. Tell them how much you appreciate that they took a chance on you. Or simply thank them for their time or for that valuable piece of feedback.

And to echo Romy’s words, buyers are human too. My mom passed away unexpectedly during my time at Target (which is the reason I left my awesome job to return home). There were a handful of vendors that showed compassion and grace with a few kind words. I remember each and every one of those vendors and their words. And I am forever grateful for them. Did they earn special treatment from me after? Not consciously. But I bet I was more lenient on them than other vendors who merely saw me as an obstacle to get through.

This leads me to my tip on how you can earn gratitude from your buyer. It’s simple. Express your gratitude to them first. Point out the successes the two of you have achieved together and acknowledge them. Chances are, they will acknowledge you back and thank you in return. See? Super simple. Gratitude works that way. Give, give, get.

Happy Holidays, friends. We are grateful for you, your interest and your feedback. Thank YOU for reading our blog and best wishes for a wildly successful 2015.

From the Entrepreneur’s Perspective: Ways to show Gratitude ALL YEAR and Why This is Important In the Retail Setting (or Any Setting)

Monday December 8thUncategorized Category

It’s that time of the year when many people feel added pressure due to the holidays. Whether the additional stress is compounded by health issues, meeting or achieving personal and/or professional year-end expectations, or getting ready for upcoming visitors or travels, it’s a good time to remind ourselves that someone else likely has it worse than we do. Be patient. That person who just irritated you is likely going through something. Breathe. And keep breathing through the situation. It likely will result in you feeling better about yourself because you didn’t react. This amazing gift that you are giving to others and yourself can be carried forward ALL YEAR.

Why is this important to you? Besides the fact that it’s just the right thing to do, it means better relationships, and these relationships matter to your business. These relationships may be the difference between you having your product on the store shelf, or not. Buyers are super busy (one of my buyers once told me she received 400 emails daily), but they are people with feelings, too. So, show that you CARE so the buyer WANTS to read your email, answer your phone call, meet with you in person, and/or give greater attention to your product than he/she would otherwise if they didn’t know you cared.

5 Ways to Show you Care

  1. In your daily/weekly/monthly communications with your buyers, show your human side. You can certainly start off each email/phone call with a kind salutation and/or personal note. It takes just a few seconds longer and it’s far more engaging Examples: Happy Friday! Do you have something fun planned for the weekend? I am taking my 12 year old son to see XYZ game; how is your daughter doing post knee surgery? Did you have a nice visit with your grandchildren? Show that you CARE. You will be amazed at how a relationship can develop if you SHARE just a tad about yourself and ASK questions. Keep it succinct (as I mentioned above, they do receive 400 emails daily, after all!), but show your human side.

Personal Example: I am teaching my 12-year son who is navigating the pre-teen years that it’s important to ask questions of others. It shows his friends that he cares about them and that the result will be deeper relationships. My last conversation was just last night when I asked him whether his “girlfriend” had a Xmas tree. He said he didn’t know. I said that it was nice that he was sharing a picture of our tree with her, but that it would be nice to find out from her if she had a tree or would be getting a tree, and what their family tradition may be around getting a tree, and that he could share some of those details with her about what we do as a family. I am trying to teach him to get beyond just surface details.

  1. Honor their schedule. When you ask for a phone call or meeting, suggest a timeframe – and stick to it. Example: “Can we talk next week for just 15 minutes? What day/time will work for you?” And, whatever you do, stick to the timeframe that has been suggested or allocated. At the designated cut off time, you can state, I realize we are at our cut off time, shall we stop and I will follow up with you via email? You are showing the buyer that you are mindful of their busy schedule. If they want another 10 minutes of your time, awesome. But let them make that choice.
  2. Say your “pleases” and “thank you’s”. Who doesn’t want to hear those words?! When you ask and receive, do you say those simple words? Personal example: I just had to make a request of one of my distributors which would result in her having to do work for me that she likely didn’t want to do. My request to her thanked her in advance for her willingness to help. I received a reply within a few minutes. The result: I received forward and timely action. I am not her top priority, or even close to it! But, my request was probably stated a whole lot nicer than others may have asked. Do you want to do things for those who ask nicely or those who don’t? Yup.
  3. Send a simple gift or hand-written note card to your buyer (or his/her assistant!) expressing your gratitude. This can be done during the holidays, but it can also be done in March and/or August. Note: some larger retailers have strict gift policies. The buyer may not be allowed to accept any gift, or a gift valued at more than $25, as an example. You should have received an email from the corporation advising as to their gift policy.
  4. Pick your battles. Be effective, not necessarily right. We all want to be effective and right, but there are times when we can not have both. So, the question becomes, which is more important to you? That may mean compromises on your part and/or letting go of your ego. I am not talking about compromising on your values. You can and should always honor those, but there are many things that you can let go of that are simply not to your benefit to argue. LISTEN to your buyer. Hear what he/she is telling you and then work through the issue without placing blame. You and your buyer ultimately want your product to be successful on his/her shelf.

 

 

Retail Buyer Decision Fatigue: It’s a real thing!

Thursday November 13thPresentation Pitch, Resources & Recommendations, Tips for Retail Success Category

By Vanessa Ting

We’ve all joked at one time or another about how tired we are of making decisions. It’s a REAL thing! “Decision Fatigue” is a term coined by social psychologist Roy F. Baumeister and very much affects how we make decisions and our moods.

Case in point, a few months ago when I was in the throes of wedding planning, I was overwhelmed by the volume of decisions. “Blush-pink or ivory-blush napkins? Do you want the same shade table linens or a contrasting color? Do you want to match your flowers or complement? Will your cool tone shades clash with the gold mercury glass candle holders?” and on and on. I was paralyzed by the sheer volume of options in front of me and I just stopped caring. I told the vendors to pick. And then I’d go home to my fiancé cranky, stressed and tired. Not fun for anyone.

Can you relate?

Well, this dynamic happens with retail buyers too. Especially during their buying cycles. Imagine having to select 100 SKUs for your shelf assortment. To arrive at those 100 SKUs, you probably have to sift through 500 SKUs just to narrow your options. Compound that with the number of vendors who send samples and pitches unsolicited. That’s easily another few hundred additional SKUs pouring into my inbox or the mailroom. Shoot me now.

It got to the point where I was too tired to make a decision on what to eat for lunch. I would stand dumbly at the expansive Target cafeteria hoping someone would just direct me on what to eat.

Get what I’m saying?

So considering the overwhelm a buyer encounters. What can you do to facilitate their decision making? What can YOU do to DIRECT THEM ON WHAT TO BUY?

As a vendor, your best move is to take the onerous chore out of sifting through pitches and help the buyer figure out which ones are truly worth considering. Take the buyers’ guesswork out of determining whether your brand represents good sales potential. Only YOU have the POWER to limit the number of questions a buyer has to ask to narrow in on the information he/she needs to make a decision.

You may think you have done that already. But have you really? Are you opening as many retail accounts as you thought you would have by now? Are you getting a response (yes or no) from retail buyers? Are they buying?

If you cannot confidently say yes to those questions, then you are not presenting your pitch in a way that facilitates decision making.

And based on my years as a retail buyer, only 5% of all submissions I’ve received presented the information in the way I needed it to make my decisions. So chances are, you could do a better job.

My job, and mission, is to teach as many small product companies as possible the right techniques in hopes that 5 years from now, retail buyers see a significant difference in the quality of pitches they receive. I will reduce their “decision fatigue”. And I will increase the number of stores your brand is sold in, meaning more sales for you.

So help me with my mission – and check out more information about how we can do this together

 

This was originally posted on www.retail-path.com/blog/retail-buyer-decision-fatigue-its-a-real-thing

 

Fishing for some Shark Tank entrepreneurial lessons?

Tuesday November 11thResources & Recommendations Category

My guess is that you answered yes if you are still reading.

So, dive deep. Today in The Huffington Post I’m quoted (in slide 3) in an article called “Shark Tank Contestants Share Their Top Lessons Learned.”

Enjoy!

–Romy