How do you pick the right product for your retail store? First, let’s talk about the product cycle.
When a new product is developed, frequently by a small entrepreneurial manufacturer, this product is searching for a market. The manufacturer, typically, looks for small specialty retailers to develop this product because he has close customer contact and a sales staff that will sell its new, unusual, and exciting characteristics to his customers. Very often, the specialty retailer is offered an exclusive on this product which limits competition and allows high margins.
Once the specialty retailer has done a good job of selling this product and a national name has been established, it becomes a prime candidate for the mass merchandiser and discounter. By this time the manufacturer has developed the ability to mass produce this product and the entrepreneur has been replaced by professional management responsive to stockholders and the bottom line. The discounter sees big profits in undercutting the specialty store price and the manufacturer sees big profits in the huge quantity of product that can be purchased by the discounter.
The discounter, however, doesn’t have a sales staff to sell this product. The specialty store drops it because it’s no longer profitable and moves on to the next new emerging product. At this point the decline of this product begins.
The cycle can take years to occur but it’s very consistent. Every retailer who understands the cycle will see which types of products are best for their store. A specialty store must look for new, innovative, exciting products that can be sold to their customers and should drop the product as soon as it’s introduced at the mass merchandiser level. A big discounter can’t possibly compete with a specialty store on a product which must be sold by a competent sales staff.
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Manufacturers are no longer in the driver’s seat. There is too much capacity chasing, too little demand. Specialty retailers are being ever more successful at bringing in private label products to ensure that the sales effort they make today won’t benefit the discounter tomorrow.
This use of private label products is a very powerful weapon that the specialty store can use to, eventually, beat the mass merchant.
You must shop for the right products for your store. If you don’t, you’ll end up helping the national chains make a lot of money.
You should shop for products by going to the national and regional trade shows for your industry and spending time looking into the obscure booths in the small corners of the exhibit halls. Talk to other retailers, manufacturer representatives, and your customers, and read the trade magazines and journals looking for the right product at the right point in the product cycle and at the right price.
There are many great deals available that your competitors don’t know about or can’t take advantage of because of their size. You’d be surprised at how often you can obtain a great price on merchandise that a discounter would never touch because the quantity available isn’t large enough to inventory all of the discounter’s stores.
If you shop enough and see enough new products, eventually the light goes on and you know you’ve got the one that will allow you to beat your competition.
To summarize the competitive weapons you can use on the buying side:
1. Look for ways to improve your control of inventory.
2. Look for products at the right point in the product cycle.
3. Shop extensively for the right product at the right price.
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