Retail Outlet: Smoke and Mirrors: Do You Have a Product or Just an Idea?1 Jul, 2011 By: Anthony Raissen Response
By Anthony Raissen
As we enter summer, I realize that while our bodies may be kept artificially warm during our winter hibernation, there seems to be a chemical imbalance that occurs in our brains. No, not literally — but figuratively. It seems as though many people become delusional during the cold winter months and fantasize about bringing the next great product to market. In fairness, we do see some great ideas that are hatched in winter, but the delusion that I am referring to is the process that these inventors envision when it comes to getting their product on retailers’ shelves.
In previous articles, I have covered many of the trials and tribulations of taking a product to retail: a process of presentations, trade shows, advertising schedules, promotions, PR events, merchandising, etc. Here, I want to focus on an element that is arguably the most challenging of all: developing the final product.
The most important piece of the puzzle when it comes to retail distribution is the product itself — by this I mean the physical product, after testing, in its final packaging, and ready to be put up on display on the retail store shelf. For initial presentations, it is common practice to use mock-ups and prototypes. But once a retailer makes a commitment and allocates shelf space to a product, it expects the product to ship on time. The retailer will impose huge penalties for late shipment of a product once it has been committed to a planogram. When a product is not on the shelf, the retailer loses money.
Far too often, we find that lead times are getting longer, and manufacturers are increasingly reluctant to commit dollars to building inventory in the hope of getting orders. This results in the proverbial “chicken-and-egg” scenario. The sales team goes out and pounds the pavement making sales calls and writing orders, only to find that the operations side of the business is not keeping up with its end of the bargain. On the flip side, the finance and operations teams keep asking for sales projections and forecasts in order to ensure cash flow and a timely delivery of product. Sound familiar?
To further complicate matters, more often than not, the time between a retailer issuing a purchase order and the delivery date for the product is shorter than the time needed to produce the product. It’s not that retailers are unrealistic; it’s just that with all the decisions and planning retailers go through, they sometimes do not have the ability to wait for manufacturers to gear up after they have the purchase order in hand.
A typical lead time from a major retailer is usually three-to-four months (depending on the category). For most manufacturers, this is not very much time; in some cases, it’s an eternity. What this all boils down to is that somewhere in the timeline, a decision needs to be made by the manufacturer as to how much of a gamble the management team is willing to take.
I am not suggesting that manufacturers produce product in the hope of one day getting an order. Rather, I want to bring this critical issue to the table so that intelligent decisions and planning are integrated into the entire process. There is often a middle path in order to accommodate this dilemma, usually a stop-gap measure, whereby raw materials and basic components are ordered in anticipation of a purchase order being placed by a retailer, so that once the order is in hand, production can begin and deadlines can be met.
Anthony Raissen is president of InterQuantum™, the founder of BreathAsure® and has successfully launched numerous products for himself as well as clients. He can be reached at (818) 995-6812 or via E-mail at [email protected]