Promotional or Retail - The Supplier's Plight
This article was written by Guest Contributor Nigel Harris of PowerStick.com
When we started our company several years ago, our first ever sale of any significance was an order for several thousand pieces going to an international airline.
Originally, we had not intended to sell our products to anyone other than consumers through brick and mortar stores, but the airline experience caused us to rethink our original business plan.
Yes, our first product had won a Best in Show at the CES Electronics Show where the winners are showered with love and affection by the Best Buys and other similar “electronic behemoths.”
Retail brands did indeed approach us with promises of huge returns if we invested in their space and they basically said that purchase orders for our product would pop up like rabbits in a shooting gallery.
However, when we asked for term sheets or conditions that retailers required from their suppliers, the opportunities became murkier.
- We would have to provide “exceptional” pricing.
- We would be required to spend many dollars on cooperative advertising.
- The retailer would require guaranteed sell-throughs, which if not met, would result in the merchandise on hand being returned to us and at our expense.
- Payment terms would be 120 days or later.
The more we explored the retail space, the less appealing it became.
The airline deal had gone exceptionally well. Prior to printing we provided a proof for the branding that would be printed on each unit. We also supplied a pre-production unit for client verification and after acceptance we ran the job. We prepared and submitted a pro-forma invoice which the client paid in full and then we shipped the goods.
After that experience and our review of the “opportunity” the retail channel could offer, we decided there and then to commit 100% of our activities to the promotional market.
Several years after that initial airline sale, we remain committed to promotional distributors and their commercial clients.
To anyone who might be going through the same thought process while trying to decide between retail and promotional, I would offer the following:
- Retail customers buy in singles with the constant threat of returning the item. Promo clients buy in multiples with very few if any wanting to return.
- Retail “Big Box” clients are very slow to pay and payments are subject to deductions. Promo clients pay in full, on time, and just about every time.
- The retail client researches and has high expectations of the item being purchased. The promo client is surprised with a gift and therefore has much lower expectations.
In addition, because of the mass distribution opportunities, our marketing and advertising costs go much further than if we had gone retail.
We are very pleased with the market decision we made back then, and everything about our business today is a testament to the correctness of that decision and to the opportunities available to new suppliers in this space.
Are you a supplier with a retail-quality product that chose to move into the promotional product space? What was your reasoning for doing so, what challenges did you face, and what advice do you have for others who may want to do the same thing?