I look at the three tier system as one that is ripe with opportunity for emerging brands, brokers, and all those that make and produce the goods we like to sell. The issue with the 3 tier is that it is so incredibly fragmented that it is often hard to gain traction if you are a new brand, a brand looking for distribution, or a broker looking for brands to represent. But like any true optimist, I look at the challenges of the 3 tier system as an opportunity to sell more, sell more often, and continue to be successful.
Why you should focus on the influencer
Focusing on the small independents and small chains, the influencers, can potentially yield greater output in the long run with a higher gross margin to both you and your customer.
The reason that big box, chains, and super stores continue to proliferate in America is that for a distributor, they are an easy sell, and for a consumer they are an easy trip. A little known secret is that, from a retailer point of view, while the average cart is over $30.00, the gross margin is under 20%. Compare that to a smaller store, an independent, or a wine/spirits specialty store. At those establishments the average cart is over $42, and the gross margin is north of 28%. The reason that big box etc. is growing and mom and pop type stores are stagnant, is that brokers, distributors et al continue to gravitate to that channel because the sales call is easy. If you can move 100 cases with one trip and one sales call, it is much easier than making 100 calls to move 100 cases.
Finding the right retailers
Finding the right regional or mini chain is the key to selling small and being successful. Selling small can yield bigger and more sustainable results. The key, however, is to identify retailers that have consistent foot traffic and high transaction counts that are not 100% predicated in seasonality.
Rosen Retail maintains that the harder sales call is the more profitable sales call in the long run. IRI data shows that there are over 115,000 total off premise liquor licenses in the USA and roughly 2,000 are chains, mega, and big box stores. That means that, allowing for statistical error, there are 100,000 independents to sell into. Now obviously you cannot get into and call on 100,000 accounts, but you can use data segmentation and business process to identify and basket the accounts that, in the short term, can be an asset to you and your products.
It is better to have the right 5,000 leads nationally that will buy your goods than 100,000 leads that might or might not buy your goods. We use the Rosen Joint Business Process (RJBP) segmentation and 25 questions; layered together this can change your sales game entirely. The questions are designed to engage the potential account, weed out non-buyers, and create an easy sales call and an easier opportunity for the brand.
Sustainable sales and relationships
We maintain that when you identify the right small retailer and right regional chain; that sales call can be productive and mutually beneficial. The small guy wants to feel the love as well, and showing them the attention, pricing, and support will create a loyal customer. It can be argued that loyalty beats short-term sales anytime.
While acquiring a placement in a chain or Wal-Mart is wonderful for case sales, it is also the potential kiss of death to a brand. It can create downward pressure on price and gross margin. From a consultant’s point of view, I would rather attack the influencer in a market than a leader. More brand stability, less price fluctuation and a better long-term sustainable sales trend.
When running a marathon it is best to break it into 4 6.5 mile runs, this is no different! Focusing on the pieces of the retail channel and you will eventually get to the overall goal.