Breaking into Starbucks

Walmart superstore store front building and sign

Breaking into a major retailer is possible, but are you ready for the game?

The New York Times has a must-read article on one entrepreneur’s winning efforts to get his products shelved in Starbucks. Read it. Seriously. And take notes. Although cursory, like everything else published in the Times, the article covers every major issue entrepreneurs must deal with when approaching, selling, negotiating, and dealing with a major retailer, from getting them to answer the phone to ramping up to meet their stringent pricing, shipping, and inventory requirements.

The story of one entrepreneur, Jamie Bird, is worth quoting in full to give you an idea of just how tough and expensive it is after you persuade the retailer to take on your product:

Jamie Bird of Grand Rapids, Mich., was contacted by Target after her Wet Happened? diaper bags were featured on a blog for parents in the summer of 2007. A buyer for the chain invited Ms. Bird — who had been hand-sewing the bags from her basement — to join Target’s Parent Inventors program, which gives products made by and for parents a 12-week test run in Target stores.

Ms. Bird flew to Minneapolis at her own expense for a one-day orientation program. Among the many required steps, Ms. Bird was told to design new packaging for her bags, find a manufacturer, contract with a warehouse that used Target’s specified electronic inventory system, and buy a $5 million insurance policy with liability coverage. Ms. Bird estimates she spent $22,000 to get ready for the Parent Inventors program before Target placed its first order.

“They have all these hoops you have to jump through just to start selling,” she said. “I was getting sick just thinking about how much I was spending and worrying that my bags wouldn’t sell.” Ms. Bird says the test run worked out well, but she is still waiting to hear whether the retailer will continue selling the bags.

My takeaways:

  • Knock on every door and knock on each door over and over again: Two of the entrepreneurs made decisions about retailers and just started phoning and knocking at the door. The reality is this: if you phone executives at major retailers, they don’t pick up. If you write them, they don’t read. If you try to meet them, they’re pleasant, but don’t get back to you. The prize goes to the persistent. Daniel Lubetzky was able to break into Starbucks by pushing his product for years and, when Starbucks decided to revamp their menu with healthier foods, he was still there, knocking at the door. The actor Chazz Palminteri once told me that the secret is not to knock at the right door, the secret is to knock at every door. I’d add to that: and knock and knock and knock and knock.
  • Look for the game changers Daniel Lubetzky was able to squeeze his product on to the limited space of Starbucks shelving because Starbucks started to reinvent itself. Always keep your eye on the retailers who are changing, reinventing, or adopting new retail strategies. Retailers are interested in one and only one thing: getting the most money off of each square inch of shelving (there’s a reason that one of the basic analytical tools for determining retail profitability is called a “squinch” analysis, for square inch analysis). Your job in pitching your product is to convince them that they can make more money off so many square inches of shelving space by putting your product in that space. While they’re always looking to up the profitability of their shelving space, they’re more receptive to your profitability pitch when they’re rethinking their entire shelving strategy. Get to know that strategy and construct your profitability argument around it.
  • Be prepared to spend a lot of money. I have helped people develop products that have made it into stores like Target and Wal*Mart and I can tell you from experience that these bruisers don’t play nice. They are tough negotiators and expect you to meet, at your own expense, their packaging, inventory control, shipping, and price demands (Wal*Mart has put more than one company out of business with its Spartan demands on price reductions). Unlike selling on the Internet, where you’re competing with big companies like Proctor & Gamble on your own terms, on the shelves of Wal*Mart or Sears, you’re competing on their terms. Retailers expect you to be just as good and just as responsive. As a small business or start-up, landing a major retailer literally means selling your soul to them. Your company has to gear up to respond to their needs as readily and promptly as Colgate-Palmolive does. Every step of the process and every part of the relationship will involve a significant outlay of cash and a steep learning curve.
  • The game gets serious. Once a major retailer opens the door, the game gets serious. It’s not like being discovered waiting tables in Westwood and being offered the lead role in a movie. The executives and managers you deal with are better than you are and they are out to provide value for their customers at the greatest financial advantage to themselves. You are competing with companies with multi-million dollar market research budgets and even more massive advertising budgets. These competitors have perfected the art of researching, advertising, and packaging products to get consumers to buy them. Your competitors are experts in manufacturing and JIT shipping. You’re now playing on that field, so you have to get serious about things like market research, promotions, packaging, pricing, and operational efficiency. Selling through the Internet and small retailers is putt-putt golf; Target and Wal*Mart requires a Tiger Woods game.
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