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April Harris of the dessert company Keeping You Sweet, Melissa Butler of The Lip Bar, and Gwen Jimmere of Naturalicious have several things in common: They are black entrepreneurs who have managed to set up their own businesses, and they have managed to do business with national companies Retail partners like Target, Ulta Beauty, Sally Beauty and Whole Foods.
Even with unique product ideas and passionate customers, getting into the big retail stores has not been easy, and everyone has learned valuable lessons, from pre-pitch research to post-pitch operations, on how to build meaningful retail partnerships for a growing one small business. They recently shared with CNBC some of their early wins and failures, mistakes and hard-earned business insights.
Here are 9 lessons they want to share with entrepreneurs in hopes of winning a pitch with their dream retail partner.
Gwen Jimmere, founder and CEO of hair care brand Naturalicious, was on the other side of the table: she worked in global communications and advertising at Ford before starting her own business. Ford was one of the first to build its brand on Facebook, and Jimmere says it is vital for entrepreneurs to build an online “tribe” that can be gathered behind their brand and used as part of a pitch. It shows the consumer community that you can attract to a retail partner.
This is especially important for brands that are competing with the increasing entry of celebrities into the consumer market and are more likely to have immediate sales successes in stores. Retail partners will be looking to deal with sales and social media exposure, and according to Jimmere, national retailers want to see at least 10,000 followers on Instagram as evidence of a brand’s popularity on social media.
April Harris, founder of New Jersey-based Keeping You Sweet, which makes gluten-free and vegan cheesecakes, says that if you haven’t already, you need to research your existing online presence as it may be the main attraction for these affiliates. She started out with local delivery and local whole foods and was introduced to representatives of Amazon (Whole Foods’ parent company) through the latter relationship. Amazon mentors, enlisted to work with Whole Foods delivery partners, showed their associated search results that they didn’t even know existed. Thousands of searches for her name sparked Amazon’s interest in a possible partnership.
From a trading partner’s perspective, the best payoff for the least amount of work is when you can bring in a community that they know is already following you and buying whatever you say to buy. “You have to keep these screenshots to prove it,” says Jimmere.
But it’s not just about the total number of pursuits or searches. The geography of your social footprint is key to doing business in store. Jimmere says when she started promoting Sally Beauty, the company was impressed with her sales growth but was less certain that buyers from multiple markets would come into stores to buy.
“That brought us to Sally Beauty because – even though they had never heard of us and were only in a few whole foods at the time – we could prove the geography of my tribe and the overlap with their businesses,” she recalls. “Start storing all that social media content geographically,” adds Jimerre, not just for an initial pitch, but also when you want to expand your retail presence with a partner after an initial deal.
Social media approval isn’t enough to win a pitch, she says, because you need to be able to make the connection between social media presence and the way people are brought to specific stores and products are made from be brought to the shelves.
“When a small brand doesn’t have a lot of money to spend on retail marketing, which is a lot of money, it may be more beneficial to stop at a handful of local stores that are easy to get to or get hold of family or friends to help you prove that you can work regionally and then nationally, “says Jimmere, who started out as a single mom in her kitchen and basement and is now in 1,500 stores, mostly in Ulta Beauty and Sally Beauty. but also a handful of whole foods.
Though the grocery chain remains its smallest partnership, “Whole Foods gave me the first try when no one knew who we were,” says Jimerre.
With a larger staff, operations manager, and fulfillment partner, Naturalicious can process a retail order in days that would have taken weeks before. “If I knew then what I know now, I would make sure the supply chain was running like a well-oiled machine before I hit retail,” says Jimerre. “You don’t want to be too fast to do it.”
According to Jimmere, the retail payout to the entrepreneur can be 30 to 90 days, even 120 days after the sale, and that means entrepreneurs need to be prepared to face that financial burden, especially if a new business brings a small business in a new order of magnitude. The first big retail orders come with a significant cost, and business owners need to know that they may wait a while for that repayment check.
“You really need to know your numbers,” says The Lip Bar founder and CEO, Butler. “Sure, you want to see the products on the shelves, but as a business owner it doesn’t make any sense if it isn’t making any money. When I started going into retail, I didn’t know how much it cost.”
“I think the biggest mistake people make is believing that they have no leverage,” says Melissa Butler, CEO of The Lip Bar, of doing business with retail partners. “It’s not just about you doing whatever they want you to do. … They attended the meeting because you might be able to do something that will change their shape.”
According to Butler, those long waits before receiving a payout for sales through an affiliate is one reason the emphasis is placed on knowing how much it will cost to work with a larger retailer rather than thinking about how much you will make. By their very nature, retail opportunities mean you lose margins and lose direct access to customers. Hence, it is important to know the opportunity cost.
“The most important thing is to be aware of the numbers. Your business may not get paid for six months. Can you pay the bill?” Butler warns.
Entrepreneurs can bite off more than they can chew when trying to scale for a large retail partner, but what many don’t realize is that these national chains often charge entrepreneurs in several costly ways that can make or break a business.
For example, in-store displays can cost anywhere from $ 30,000 for the “cardboard” facilities to up to $ 300,000 for the permanent, prominent branded shelves, and it’s the brands that the retail partners pay for not.
“It’s not cheap and you pay per store,” says Jimmere. Every time there is a promotion, you pay for those discounts too. You want the premium placement in stores because these are the main areas people spend the money in, but you will pay for them, she says.
Trading partners can also charge a late delivery fee if the product does not arrive within the agreed schedule.
Butler and Jimmere said business owners need to remember that the national retailer makes between 40% and 60% of sales on average, and there may be such reporting fees and late fees that if not effectively negotiated or managed in advance by Efficient manufacturing can reduce your cut in sales before you ever get the check.
In an early attempt by Jimmere to win a deal with a large retail partner, she was told that negotiations were not allowed. “It’s not true,” she says, cautioning small brands not to be so excited about the size of a potential partner that they accept terms that could weigh on their business.
“I think the biggest mistake people make is believing that they have no leverage,” says Butler. You need to be responsive to the needs of a retail partner and their customers, and show how your brand will stand out in a saturated market, but “It’s not just about doing everything they ask you to … you have that Attended the meeting because you can potentially do something that will change the shape, “she says.
“Depending on the terms, you may not even be able to make money on every sale, and I didn’t even know it in the beginning,” says Jimmere. “Don’t let anyone tell you that nothing is negotiable, or get so excited about having your brand in a business that you are foregoing profit instead of having boastful rights. Ultimately, it is important that you can uphold that Business, “she says.
There are many consumers who would never have heard of Naturalicious if partners like Ulta hadn’t been good at promoting brands in stores, and this can ultimately lead to consumers returning to your direct sales channel in the future. However, Jimmere, whose company now has sales of $ 2.4 million, says joining a large retail network won’t necessarily double or triple sales instantly. Sometimes a huge benefit is the discovery your brand can add from the in-store customer experience. However, this also comes at a cost: you do not receive the customer data via your direct channel.
For all the persistence on the phone and the luck with unexpected connections at industry events, several entrepreneurs said they had to work with a broker partner to break through with large retailers. Jimerre and Butler both worked with brokers who knew the big companies like Ulta and Target well and knew how and why their products could be sold through those channels.
According to Jimmere, perseverance and networking can pay off. She called Whole Foods in her area herself and met an important contact person for the up-and-coming Ulta brand division at an industry conference. However, getting started with Sally Beauty didn’t work by just submitting to the company online. “Imagine how many spaces they get. That stuff goes in a black hole most of the time.”
When Butler first made the decision to pursue retail partners, she reached out to many shoppers directly, but says it wasn’t necessarily the best way to go. “Things are getting lost and they are getting a lot of parking spaces,” she says. Butler found that working with an outside sales group was the most effective way to break through with a retailer like Target, given the trust that an agent would bring brands to the business. Although there is a cost to this relationship between men, “They will get you to the top faster and they should be paid for their work,” she says.
These brokerage deals can be based on a percentage of sales or a loyalty agreement, but both Jimmere and Butler said working with brokers who understand these retail partners and are passionate about how their products fit into this company’s plans is essential growing partnerships.
Harris says it took Keeping You Sweet about three months to break through with Whole Foods on its own, and she started a business in Newark, New Jersey. She said that before an initial pitch it is crucial to walk through the aisles and learn the website of a whole food or dream retailer that you want to be when you are on your own.
Their products are designed for gluten intolerance, which is a huge market linked to many medical conditions, as well as people who need to avoid refined sugars, such as diabetics and those who are allergic to eggs or dairy products, or choose vegans as a lifestyle case their vegan cakes. But none of these consumer and health benefits would have been beneficial to Whole Foods if it had already had a competitor selling the exact same products.
“Go to the store before you open it. The first thing you have to do is make sure it’s something you need, or haven’t got in the store or even think about,” says Harris.
Businesses need to match the playing field with the nuances and goals of the retail partner. Whole Foods and Ulta Beauty, both sold by Jimerre, have completely different consumer goals. Ulta is on the lookout for “prestige, if not luxury,” she says, leading to details like Naturalicious packaging with shiny gold caps. Whole Foods is very concerned about helping local businesses and the best ways into its supply chain is to think small first before ever thinking about doing regional or national deals with it or its parent company Amazon.
Jimerre saved money on her dream business at Ford and in the advertising industry, but in retrospect she wishes she had saved even more.
“I always tell people to pile money up when they work in a 9-5 job at a company. That’s your first investor,” she says. She believes this would have helped her rely less on family, friends, and business credit cards in the early days of her business.
Harris has the opportunity to expand with more grocery chains and also with Amazon. However, she is holding back for the time being because of the challenges of scaling and the need to allocate additional funding to buy more equipment and hire more staff. Without this funding, she remains concerned about establishing new relationships, although she remains determined to secure funding at some point and expand her partnerships.
Harris says that after her initial sales success as a local business, she has filed many funding requests but received up to two dozen rejections. “I didn’t expect to be turned down,” she says. Her credit was good and her orders were “through the roof” when she sought additional funding in 2019 to buy more equipment, but she had to make the most of her credit cards and borrow money from family and friends. “Total bootstrapping,” she says.