Selling to retail stores AND catalogs

drvagdrvag Posts: 5subscriber
edited July 2007 in Sales
Hello all.  We are working on a new consumer product set for introduction in the 4th quarter.  We have targeted two primary sales channels, retail stores and catalogs mailed directly to consumers.  I have sold retail before, but this is a first for catalog sales.  So I have a few questions that I am hoping to get input.
1) Is it typical for a manufacturer to sell to both channels?
1a) If so, is it best to sell a slightly different product design OR package OR under a different brand name to one channel?  OR can I sell the same product in the same package under the same brand name to both?
2) Do catalogers typically sell their goods at a higher price point?
2a) If so, can I sell them at a higher wholesale price?  OR do they expect to make a greater margin?
Thanks in advance for the help.
Doug
 

Comments

  • ethnicommethnicomm Posts: 1subscriber
    1. Depends on the brand, product line and stage in the product life cycle. If your brand is hot enough and/or the product is unique you might get away with it. Usually big brands with multiple sku`s are able to sell to multiple channels. What you have to consider is the benefits (exposure, sales process etc) against the risks of ticking off your retailers.1a. You do NOT want to sell the same product to both channels - this is asking for trouble! If you go this route, give the two channels distinct products or bundle them in such a way that both channels see value. Packaging is not relevant because catalog shoppers don`t really look at the packaging. If you have a high-end product, you might want to invest in packaging that is consistent with your brand positioning but otherwise, brown kraft box is the way to go. You don`t want to invest in building up a brand name - it is tough enough to sell without having to worry about recognition.2. It depends on the type of cataloge. Hammacher Schlemmer sells products at a premium price point. JC Whitney sells auto parts and accessories at a discount. Catalogs claim that they have high expenses in terms of print production, photography, layout and design but retail stores have inventory investments and costs associated with having a physical presence. 2a. If the cataloger is selling products at a higher price, than you can sell them at a higher price but keep in mind the law on pricing - I  think it`s called the Consumer Goods Pricing Act? In Canada it is "like products for like prices for like volumes". The way around that is with volume discounts, advertising allowances and similar O&A programs. Catalogers do expect to make a greater margin  - especially when you compare them to a Costco or  Wal-Mart.
  • ethnicommethnicomm Posts: 1subscriber
    Jeff,You`re right - without knowing the industry and the product category, it is tough to provide good actionable advice. Even if retailers don`t ask what you`re doing in other channels, you don`t want the buyer flipping through catalogs as s/he is doing competitive analysis and finding the product s/he buys listed in the catalog. Often customers come to the retail store manager with catalog in hand asking "what is the difference between this one and the one I bought from you last week? Why are you 10% higher?"I always say that our job is to make the buyer look good (without going broke of course). Buyers have a multitude of products to review and support and if you make it difficult for them, the support and loyalty could decrease. Better to continually make them know and feel that they`ve made a good purchase decision in going with your products. I would not risk a relationship over potentially poor channel management.In some of the industries that I have been involved in (for example car care, cleaning, hardware, and pet) we even had to be careful managing sku`s between the mass merch, discount, club, grocery and DIY channels!As far as packaging goes, I would not recommend CHANGING packaging to suit catalogers but it is cheaper if you go brown box as you say. If the product is packaged overseas, then you`re stuck with what you`re importing until your volume is high enough to warrant channel specific packaging.I did find that when shipping via courier, the retail packaging never seemed to protect the product adequately. We ended up putting it into another "shipping" carton. This added packaging and labor cost but cut down on freight costs (returns).
  • drvagdrvag Posts: 5subscriber
    Thanks both for the reply.  Ethnicomm, you are absolutely correct about the importance of avoiding channel conflict.  That`s the challenge here.
    Ideally, I would like to sell both channels at the same time so that I can ramp up sales quickly.  And to build the brand name across channels and create awareness.
    Assuming that I sell both channels at the same wholesale price and also assume that the cataloger "I think" typically sells at a higher price point, would the retailer see this as a conflict if the consumer can purchase the product at their store for less?  May drive some sales at the retail level.
    But, that`s my big assumption.  That most catalogs sell the same goods at a higher price point.
    Yes, the product is in the early stage of its life cycle, so not much leverage there.
    Since this is an injection molded product, the product name will be engraved into the tooling.  So, adding a slightly different model would be too costly at this early stage. 
    I could however offer the same wholesale unit price to both with different units per package at different price points.  Example, price point at 2 for 19.99 in retail and 3 for 29.99 in the catalog.  Do you think this would be enough to avoid channel conflict?
    Other ideas?
    Thank you in advance for your advice
  • ethnicommethnicomm Posts: 1subscriber
    Assuming that I sell both channels at the same wholesale price and also
    assume that the cataloger "I think" typically sells at a higher price
    point, would the retailer see this as a conflict if the consumer can
    purchase the product at their store for less?  May drive some sales at
    the retail level.I don`t think there will an issue if the product is cheaper at retail. There is a cost for the customer to physically go to a store vs ordering online or over the phone. However, I`m sure the catalog is charging for shipping/handling - this is usually recognized and understood by the retailer. I think the overall brand exposure will drive sales period - driving sales to the retail level will depend in your points of distribution and the price differential between the two channels.Since this is an injection molded product, the product name will be
    engraved into the tooling.  So, adding a slightly different model would
    be too costly at this early stage. I have used a label in the past to differentiate products. The product name can be the same but you can add "limited edition", "bonus", or whatever to your catalog products.I could however offer the same wholesale unit price to both
    with different units per package at different price points. 
    Example, price point at 2 for 19.99 in retail and 3 for 29.99 in the
    catalog.  Do you think this would be enough to avoid channel conflict?To avoid channel conflict you ideally should offer different sku`s. The catalog unit can include something extra. Without knowing what the product is, it is difficult to come up with some ideas. I will use a handheld vacuum cleaner as an example. You could add a specialized cleaning kit (small brushes, crevice tool that can get into the vents of your car); a couple of wipes/microfiber cloths; air freshener....The best "gut" test that I use is to put myself in the position of the people who are purchasing your product: the retail buyer, the catalog buyer and the end-customer.  What do each of them value?
  • drvagdrvag Posts: 5subscriber
    Appreciate all the comments and the good suggestions too.
    I don`t think there will an issue if the product is cheaper at retail. There is a cost for the customer to physically go to a store vs ordering online or over the phone. However, I`m sure the catalog is charging for shipping/handling - this is usually recognized and understood by the retailer. 
    This is what I was thinking also.  Is there anybody here selling these two channels on a national level that can confirm?
    Thanks again for the help.
  • drvagdrvag Posts: 5subscriber
    Great comments.  Thank you very much.
  • drvagdrvag Posts: 5subscriber
    If you don`t mind, I have a different channel question.  In addition to catalog this product is a great fit for the home shopping networks.
    Is it best to sell shopping networks like QVC or HSN first and then move into the physical retail stores and catalog OR can you sell all three channels at the same time?  A national roll-out in all three channels, you might say.  I know that these shows create tremendous exposure.  Those  "as seen on tv" products we see everywhere.
    Is there a greater potential for channel conflict?
    Is there a common "Channel" step by step process that one should follow?
    Has anyone here sold product to QVC, catalog and retail stores before?
    Thanks again
    Doug
     
  • ethnicommethnicomm Posts: 1subscriber
    My experience with TSC (Canada) and QVC is consistent with tgroup. If the product is available elsewhere, they want to offer the best value to the customer - whether that is through bonus packs or additional accessories. Read the posts on QVC here to get a sense of what you can expect. I would not recommend trying to supply all three channels with the same product. As I`ve stated earlier, if you have a range of sku`s, you should be okay with "channel managing" as long as you understand the unique requirements of each channel.
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