Getting products into a major retailer is a significant achievement for high-potential brands. In the aftermath of the pandemic, as consumers revert to pre-crisis shopping habits resulting in a 20% Q1 2023 foot traffic surge, retail distribution offers a unique opportunity for growth. Retail sales are predicted to grow by 4%-6% ($5.23T) in 2023, eclipsing pre-pandemic averages.
This guide unveils a winning strategy for penetrating the retail market, equipped with insights and tactics to secure prime shelf space in major retail outlets. We’ll explore the current retail climate, discuss collaboration approaches, and examine effective distribution expansion strategies.
At Teamshares, our vision is to help a network of 10,000 small businesses become employee-owned while supporting a generation of business owners through confident retirement. Retail distribution is an important driver of growth for small businesses, and we hope this guide will help employee-owners build thriving businesses.
What is retail distribution?
Retail distribution is a business strategy that sources products from a manufacturer and distributes them to the end consumer.
Through the process of retail distribution, goods change hands, often passing through many different intermediaries including vendors, wholesalers, and retailers. Retail distribution channels can have long or short end-to-end cycles, depending on the type of channel and the number of intermediaries.
Retail distribution channels include:
- Direct-to-consumer: Also referred to as DTC, this retail distribution path has the shortest cycle because it cuts out the middleman. With DTC, brands can sell their product directly to a consumer through either an e-commerce or brick-and-mortar store.
- Resellers: Resellers are intermediaries that buy a brand’s product and resell it to either another business or the end customer. There are three types of resellers: retailers, wholesalers, and independent distributors.
- Retailers: Retail stores can either sell directly to consumers or act as a reseller by reselling products to other retail stores. This type of distribution expands a brand’s footprint beyond a single retail store and can be viewed as an extension of the team.
- Wholesalers: Wholesalers are middlemen who buy products from retailers at a low price and then sell them to other retailers at a higher price. Wholesalers can be especially beneficial for the end customer. Take Costco as an example. Because they purchase products from businesses at a lower-than-wholesale price per unit, they can still mark prices up while passing along savings to Costco members.
- Independent distributors: These are third parties that are authorized to sell a brand’s product to wholesalers or retailers. Independent distributors are typically viewed as an added layer to the supply chain that can help brands manage the sales and distribution process.
Understanding the types of retail distribution channels, and deciding which would work best for their products, can help small businesses decide which common strategies to try.
Common retail distribution strategies
When it comes to retail distribution strategies, there are two common approaches to pursuing expansion:
- Pitching a buyer who is employed by the retailer.
- Entering into an agreement with a broker to pitch retail buyers on behalf of the brand(s).
Below are some of the pros and cons of each retail distribution strategy.
Working with a retail buyer
Working directly with a retail buyer allows a small business to establish a direct relationship with the individual who is ultimately responsible for selecting the products sold in their retail stores.
Retail buyers can be especially beneficial for brands or small businesses because they help with the production process by making sure products are ready for an increase in demand.
This means making sure products meet all quality and safety standards, and that packaging, labeling, and pricing are well-defined, competitive, and appealing to consumers.
Working with a broker
Hiring a retail distribution broker can be advantageous because it allows businesses to leverage their industry expertise and connections. Brokers typically have extensive experience incorporating new products into retailers, with processes that require minimal effort from their clients. The benefits of working with a broker include:
- Industry knowledge: Brokers are familiar with the retail landscape, buyer preferences, and market trends.
- Established relationships: Brokers already have existing relationships with buyers, which can expedite the process.
- Negotiation skills: Brokers often have strong negotiation skills and can help secure favorable terms for your brand.
- Time savings: Brokers can handle much of the legwork, allowing small business employees time to focus on other aspects of the business.
- Geographic expertise: Brokers are geographic experts enabling them to intimately understand the retail landscape and buyer profile in specific areas.
Ultimately, the decision between working with a buyer directly or using a broker depends on factors like industry experience, resources, and the retailer’s requirements. Given the constraints and urgency to drive demand, we recommend you consider a broker initially to expand your distribution efforts.
Before engaging a broker, a brand needs to have tested the market enough to inform a direction and evaluation metrics.
In addition to finding a broker within the target geographic area, find a broker that has strong relationships with the category your buyers are in. For example, a broker can specialize in the natural products industry but only within the food category versus lifestyle category buyers.
Many brokers are paid based on commission or percentage of sales, so they’ll prioritize the brands that will benefit their book of business most. This means brokers are motivated to sell because you’re typically only paying for the results they provide.
Small business owners should vet their brokers to make sure they are a good fit. Consider how much category or industry experience a broker has and if they’re an independent broker or part of a larger firm. Some larger brokerage firms have accelerator programs for new and emerging brands.
Ensure the broker and their sales team have prior experience in your specific industry, and ask for references who can share specific metrics about how the broker has helped drive new business.
Additionally, consider the retention rate of their team. At the beginning of any relationship, there is a learning curve where a broker and their teams learn about your products and growth plans, so it’s important to keep the same team around to set you up for success. When interviewing brokerages, ask how long the core team has been working at the company to gauge their employee retention rate.
Before hiring a broker, consider how you’re going to manage their services. Depending on your team size, it may make sense to have a single point of contact or multiple teammates divided by retailer type.
Once you’ve hired a broker and an account manager/account executive joins the business, they can start to manage distribution outreach through cold calls or alternative approaches.
Are you a broker or business owner that needs an exit plan to keep your company and employees in place?
Navigating entry: Steps for retail distribution
Of course, retail distribution starts with an entry process. Learning how to navigate entry is one of the most crucial parts of the whole retail distribution cycle. Note that large retailers may require brands to work through a specific distributor.
Below are steps for retail distribution entry for small businesses to get their products on the market:
- Ensure product readiness
- Develop brand narrative
- Select retailers
- Prepare sales materials
- Perform outreach
As a small business, it’s important to execute these steps to get your products ready for retail distribution entry.
Step 1: Product readiness
Retail readiness is making sure a product listing contains all of the necessary information for a customer to understand exactly what they’re purchasing. For all products, this covers basic elements like:
- Conforming to quality
- Conforming to safety standards
- Conforming to packaging standards and differentiating based on retail landscape
- Conforming to distribution standards that may apply in your specific state
For e-commerce products, this process includes adding further details because customers can’t see and handle a product the way they can in a brick-and-mortar store. E-commerce products also need to be optimized for online search, including elements like:
- Optimizing a product title length
- Generating product images
- Establishing ratings and reviews
- Collecting accurate product specs
Step 2: Brand narrative development
A brand narrative is the story of a small business’s history, identity, and mission. A brand narrative is important because it helps explain a company’s products and services, generates leads, and increases sales. It also helps a small business connect with their audience on an emotional level.
This step is all about constructing a compelling brand narrative that resonates with retailers and consumers and addresses the solution your products provide. A good brand narrative will include the following elements: brand identity, vision, operations, and brand voice or tone.
Teamshares helps many small businesses become employee-owned, which is an important and compelling part of the narrative these businesses include in their branding and storytelling materials.
Step 3: Retailer selection
When it comes to selecting a retailer, small businesses should choose strategically, and vice versa. A strong supplier-retailer relationship can pave the way for long-term success and brand growth.
When selecting a retailer, small businesses should go through the following checklist:
- Define brand guidelines and align them with the brand values of a desired retail partner. This can help small businesses pinpoint a major retailer with a similar brand ethos.
- Choose a retailer where your products will get the most attention from your desired or target audience. Consider what kind of customers and how much attention each retailer attracts.
- Do research on how a retailer has performed in the past with a similar target audience. Ask for references from brands within your industry that have worked with the potential retailer, and be sure the retailer can validate their performance metrics with reports from their work with similar brands.
- Consider location within the retail outlet, such as shelf space, and existing offerings for strategic alignment.
This checklist of considerations can then help small business owners move onto the next phase of retail distribution: preparing sales materials.
Step 4: Prepare sales materials
In this step, small business owners should develop a presentation exhibiting their product features, benefits, market potential, and projected sales. Set your brand apart from competitors by demonstrating the products’ traffic-driving potential.
Make sure you define the value proposition in all your sales materials. This is the core message that should be conveyed to a potential retailer, and it should tell them why they should choose your product over other alternatives. For example: your product is more sustainable than competitor brands or solves a problem that competing brands can’t. Use photos and design to amplify the presentation of these materials.
Craft a value proposition for your product that is clear, concise, and compelling, and highlights the unique benefits and differentiators.
Step 5: Align your pitch and perform outreach
Once the value proposition is refined, small businesses should develop a concise, compelling pitch that demonstrates how their products will add value to a retailer’s shelves.
When reaching out to potential retailers, consider a sample pitch such as the following:
Hi [name],
I’m the president of [company name]. We make the first-ever farm-to-direct protein bar with crickets, a protein-packed snack for customers looking for sustainable alternatives to meat-based protein.
I know you have a dedicated shelf space for alternative proteins on aisle 12, which makes sense considering these products are trending up 23% from last year in specialty grocery stores like yours with a predominately female, ages 25-35, customer base.
I’d love to swing by next week with a sample and discuss our brand.
What date and time would work best for you?
You can also schedule a meeting with me directly through my {Calendly link}.
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Approaches to retail distribution expansion
In addition to outreach, there are several effective approaches small businesses can take to expand their retail distribution strategy and get their products noticed in the marketplace.
- Trade shows: Showcase products at trade events for broad exposure.
- Distributor relations: Cultivate distributor networks for access to retailers.
- Local specialty stores: Target local shops for direct collaboration.
- Direct-to-consumer marketing: Just like consumers, retailers are driven by a brand’s presence and ability to drive sales to their storefront. Leverage your online presence through PR and social media to drive brand loyalty.
- Temporary retail spaces: Employ pop-up shops for physical showcasing.
- Collaborations: Partner with established brands for extended reach.
- Customer requests: Encourage customer demand for specific retailers.
Below, we cover each of these approaches in more detail to give small business leaders ideas of how to best leverage them for their business.
Trade shows
At trade shows, suppliers come together to showcase their available products for retailers to sell in their brick-and-mortar or e-commerce stores.
Trade shows are a great way for retailers to see products in person and learn about the companies selling them. Oftentimes, these shows have separate days or sections specifically for new and emerging brands.
Trade shows can also be a good way for business owners to network with other business owners and retailers in their industry.
Some of the top retailer trade shows in the country include:
- Coterie NY: Best for luxury fashion
- NY Now: Best for eclectic apparel, homewares, and gifts
- New York Toy Fair: Best for toys and children’s goods
- Atlanta Market: Best for home, gifts, and apparel
- COBB: Best for small apparel brands
- Surf Expo: Best for surf and beach goods/apparel
- Grand Strand Show: Best for coastal resort and souvenir goods
- CABDA: Best for bikes and cycling gear
- The Inspired Home Show: Best for homewares, decor, and small appliances
- MAGIC: Best for contemporary, trendy apparel
- COSMOPROF: Best for beauty
- Outdoor Retailer Shows: Best for outdoor and travel apparel and gear
- Connect: Best for independent outdoor retailers
- Las Vegas Market: Best for home wares, furniture, jewelry, gifts, handmade
- JCK: Best for fine jewelry and gems
- ASD Market Week: Best for high-margin, high-volume goods
- WWSRA: Best for outdoor goods, apparel, and gear
- LA Market Weeks: Best for men’s, women’s, and children’s apparel
- LA Mart’s Gift + Home Markets: Best for gifts and homewares
- Los Angeles Cash and Carry: Best for cash-and-carry purchases
- Natural Products Expo West: Best for natural and health foods
In addition to trade shows, small businesses might want to consider other approaches like building distributor relations.
Distributor relations
Distribution networks support the movement of products until they reach the customer. They often consist of storage facilities, warehouses, and transportation systems for retailers and wholesalers.
Building relationships with local distribution networks can help small business owners rub shoulders with the people who can help put products on the shelves or know someone who can.
Local specialty stores
For businesses that offer niche products, partnering or collaborating with local specialty stores is a great way to expand retail distribution.
Some industries that might benefit from partnering with local specialty stores include health and nutrition suppliers, specialty grocery brands, hair and beauty brands, toy companies, jewelry companies, and pet store brands.
Direct-to-consumer marketing
Direct-to-consumer (DTC) marketing is another important strategy for small businesses to expand their retail distribution because it uses multiple techniques to interact with and reach a target audience directly.
Social media advertising, content marketing, search engine optimization (SEO), and email marketing are all proven DTC methods for creating a strong online retail presence.
Temporary retail spaces
Temporary retail spaces (e.g. pop-up shops) are an important promotional strategy, especially for online businesses. A study that surveyed retail organizations worldwide revealed that among the businesses that implemented at least one pop-up shop, more than 80% considered it a success.
Pop-up shops are designed to create connections with current and potential customers, increase brand awareness, and introduce new products to the retail marketplace.
Collaborations
Collaborations offer some obvious benefits for both businesses and retailers, including access to new insights and advice and an expanded customer base. Generally, brand collaborations work best when two companies have complementary, but not identical, customer segments.
Customer requests
Learning how to generate customer demand is an especially important skill for small businesses to master in the age of social media. There are a couple of ways businesses can go about this.
- Leveraging scarcity. The scarcity principle creates urgency in the minds of customers to purchase a product quickly. When product scarcity exists, mark it clearly to ensure consumers know that they have a limited window to make a decision.
- Leveraging video marketing. In the age of YouTube, TikTok, and Instagram reels, video shorts are one of the most effective ways to generate customer requests and get more eyes on a product. Most small businesses can get this done with minimal equipment, often just a cell phone camera and an affordable video editing app like CapCut.
With a sharp strategy attuned to market trends and efficient communication, conquering the retail arena is attainable for any small business. Whether via buyers, brokers, or innovative pathways, the linchpins of triumph remain sustained professionalism, persistence, and a potent value proposition.
These insights and tactics can help small businesses leverage retail distribution to drive growth. At Teamshares, we understand how important small businesses are to the economy, which is why our goal is to keep them thriving through employee ownership.
If you’re a retiring business owner or a broker, find out if Teamshares is the right buyer for your small business.
