Retailers Round ‘Em Up!1 Sep, 2012 By: Patrick Cauley Response
With direct response no longer considered a ‘Wild Wild West’ industry, retailers are now eagerly opening their shelves with hopes of lassoing the next hit product.
Unlike randomly stumbling upon a DRTV spot while watching TV, when a consumer is in a brick-and-mortar store, they’re typically there with a purpose — an intent to shop. Browsing aisles with shopping on the mind makes these consumers much riper for the picking than the channel-surfing coach potato.
“The economy obviously has affected every category and every retailer, but the last thing that you can ever do is start thinking doom and gloom. You have to look for the opportunities in it and find solutions,” says Travis Berger, executive vice president of sales and marketing for Clearwater, Fla.-based Infusion Brands.
And when talking with some of the industry’s thought leaders on the subject, everyone agrees the opportunity for direct response in retail is huge — and still growing. “Right now, I believe retailers understand the potential like they’ve never understood it before. The (DR) industry is legitimized now, and you’re actually seeing some of the big players really starting to come into the industry a lot more. It’s hard to argue with a lot of the successes there have been at retail,” says Berger.
Berger referenced Perfect Pushup, for example, which he worked tirelessly to get onto Wal-Mart’s shelves. “It came out of nowhere, nobody knew anything about it, and then all of the sudden it was everywhere. The numbers we were able to put up with that were staggering. There’s no way you can do something like that with some normal fitness item that didn’t have TV behind it,” says Berger. While it was obviously a viable DRTV item and nowhere near a losing campaign, Perfect Pushup didn’t become a mass item until moving into retail.
“You have some major retailers that have really carved out a position — i.e., the Walgreens and Bed Bath & Beyonds of the world — but nipping at their heels are a lot of other retailers, including Wal-Mart and Target. And even the clubs now are starting to recognize that the As Seen On TV logo has really contributed to the development of items and brands,” says Jeff Buchbinder, vice president of Los Angeles-based bdirect Inc.
But the enduring question remains: How does a marketer identify the next Perfect Pushup?
“A lot of times, it’s dependent on the item or year,” says Amit Khubani, vice president of international business development for Fairfield, N.J.-based Ontel Products Corp. “For instance, the year the PedEgg came out, foot items were doing extremely well. So that was a hot category for that specific year. This year, it’s kind of a hodgepodge, but retailers look to us to tell them which items are doing the best on TV because the at the end of the day, the products that are doing the best on TV will sell the best at retail.”
He continues, “Right now, toys are doing quite well. We sell into more than 70,000 retail doors — that’s how big the market has become. It’s a very strong category in retail; at the beginning of the year, we were up more than 100 percent.”
In particular, Dream Lites has been a huge hit for Ontel with Khubani predicting it may be the biggest grossing As Seen On TV product in 2012 by year’s end. In addition, he noted Slushy Magic, Perfect Tortilla and Magic Mesh as current retail winners. “Categories that involve the household are doing great, and housewares is always a bread-and-butter category for us, but toys are doing just as well,” he says.
Berger says fitness and housewares are the obvious retail gold categories. “If you’re trying to focus on one category to find the next hit, it’s almost impossible. It’s much better to have an open mind and focus on mass-driven core categories that any of the big retailers play in,” says Berger.
However he does warn marketers to steer clear of seasonal or regional products. “It will dramatically affect velocity and the lifespan of the item. You want one with mass appeal. You don’t want to look at the category alone,” Berger adds.
It’s important to note that while every buyer is competing against all the other retailers, a buyer is also looking out for the category they represent as they strive to produce incremental growth for that category. Therefore, DR marketers have to go into the retail game with the mindset of showing the buyer that their product is going to be incremental growth for the buyer’s category. “The buyer has to take something off the shelf to put your product on the shelf … and there isn’t a buyer out there that wants to do that, thinking to themselves, ‘I want to do 10 times the work tomorrow for zero gain.’ So you have to show them that it’s going to get them closer to their goal number and grow the category,” says Berger.
The Price, and Placement, Is Right
The beneficial thing about most As Seen On TV products’ price point is that they’re essentially recession proof. That coupled with the fact that many of the products in the category solve everyday problems, often times saving consumers money in the long run, makes impulse purchases at retail that much easier.
“Below $20, you’ll sell the most units, but no matter what, if it’s a hit it’s a hit. If it’s $100, you have to go to the right retailer. You don’t want to run to Wal-Mart if your item is $399. The retailer and price point have to fit,” says Berger.
Khubani finds that the magic price ranges from about $9.99 to $29.99. However, regardless of price, placement can be just as big a piece of the puzzle. The intricacies and hierarchy surrounding physical store display location are akin to the social politics of a lunchroom in an overly cliquey high school cafeteria. What shelf you’re on and who you’re on it with is everything.
“No matter what I always say, it’s best to go after core category if you can, because that’s where shoppers are going to look for it. A lot of times, the timelines just aren’t right. Maybe you’re so far out in advance of the core category that you just don’t want to wait that long. The As Seen On TV shelf is a more of an immediate thing; most of the time you can get in there a lot faster than core categories,” says Berger.
Khubani always strives for visibility. “No one is necessarily going to walk into a store looking to buy product ‘A.’ We find that our products become more impulse-oriented, because of the low price points,” he says.
With impulse-oriented products, you want people to be able to see your item. “The more places we have products in the store, the better. When we have products that are on the As Seen On TV end cap, it’s great because it becomes a destination location for our products. Eventually, we’ll usually transition a product out of that end cap and take it inline, because it shows it has legs after the TV campaign has gone down,” says Khubani.
Caught in the Web
Interestingly, when it comes to the retail game, it seems that a retailer’s website plays a significant role in being able to maximize the opportunity for a particular product — and can actually be a detraction. “If you don’t find a way to keep it off of the dot-com and just put it in the brick-and-mortar, you won’t be able to keep funding your spot, most likely, because the profit margins will plummet. Velocity might go up, but people won’t buy it from DR. They’ll go to a known retailer’s website rather than someone they’ve never heard of. Nothing is more important than being able to create demand by funding and running that spot, otherwise retailers won’t be able to get any velocity no matter what,” says Berger.
Khubani finds that retailers generally follow a map-pricing program, which is almost like manufacturer’s advertised protected price. “If someone is dipping below your retail level on the Web, it’s going to affect your retail business in a major way — and that includes Amazon sales. If Amazon is breaking price on a product, you almost can’t sell them,” he says.
Berger stressed the negative impact of retailers putting your product on their websites. “It’s very important to get this point across to the buyers, because most buyers want to put it on their site and test it. If you’re new to the game or don’t know these things going into a meeting, you have to be ready with these answers. Even with a hit item, you won’t have an opportunity for it to be massive because the second they put it online, you’ll have to stop running it, unless you want to investment spend on it,” he says.
Consequently, TV remains king when striving for retail success. “When TV is high, the retail numbers on a daily basis stay high,” Berger says. “The second it goes off TV, it falls immediately and you’ll be able to see it in the retail numbers.”
Ontel uses the Internet to derive a good portion of its TV sales, with a big portion of that attributed to the DRTV-specific website. “If we’re actually distributing a product on the Web, it’s hurting our sales because it’s almost like we’re selling it at wholesale to sell on the Web so that another person can sell it at retail,” Khubani says. “Selling it directly with our TV offer generates a lot more money for us per unit, which allows us to put a lot more money into TV, and at the end of the day will sell more units at retail. So, it’s almost like we’re shooting ourselves in the foot if we allow the Internet to be out in a big way while the product is on TV.”
Yet, Khubani contends that once you have mass retail distribution anyway, your TV is inevitably going to fall. “No one’s going to pay $80 for two Dream Lites when they can walk into Walgreens and buy it for $29.99 and they only have to buy one. So, your business is going to be affected anyway. If you’re supplementing your TV to drive your retail, that’s a completely different conversation, but TV eventually falls off once you have massive retail distribution,” he says.
Words of Wisdom
“I don’t think anyone has completely cracked the code, but they’re utilizing the great DRTV media tool to drive retail sales,” Buchbinder says. “At the end of the day, the retailers in today’s environment are looking for ‘incremental-ity.’ They’re looking for the new; they’re looking for innovation and brands supported by smart media. We say look no further than As Seen On TV because if you define your requirements with what I just said, that is As Seen On TV.”
So what should a marketer with a hit item do if it’s not fluent in the retail game? “No matter what, you’re going to have to develop a comprehensive strategic vision to maximize that item. It might be really, really hot for six months to a year, but chances are it’s not going to last forever,” says Berger.
For starters: What retailer are you going to go to first? Can you get a promotion with that retailer? Is it possible they’ll give you more volume for exclusivity than if you had inline placement with eight other retailers?
“Every retailer you go to is going to have a dramatic effect on the ability to maximize the opportunity. The key is to have a strategy before you start calling up retailers and trying to get it in,” Berger adds.
According to Berger, for every unit that you sell at DRTV, you’ll sell nine more units when it hits retail. That is, as long as the media stays up to support. “So if you’re looking at a hit on TV, you’re looking at about 10 times the volume at retail if you do it right to maximize the campaign,” he says.
And making sure inventory is intact is obviously imperative for retail success. “Generally, in terms of demand, we know that we’re going to sell 7 percent of a product on TV, and 93 percent will be sold at retail. Taking that into account, we know that if we sell 50,000 units on TV, we could sell 20 times that at retail. So, we’d have to order up a million pieces based on knowing what this thing could possibly do,” says Khubani.
Moreover, certain consumer times do affect marketers in terms of how much inventory they have to put into a store. “Sales during the fourth quarter jump anywhere between five to 10 times the normal amount, so you actually have to fortify your retailers with that much inventory. If they’re selling 5,000 pieces a week of a product in August, for example, and you know that they can sell 50,000 pieces a week during Christmas, they have to have 50,000 units in their stores, and you have to really manage your inventory to a point. It can cost you money; you have to take a gamble and basically predict what you think the consumer demand is going to be. And that’s more of an art, rather than a science,” says Khubani.