Investors are asking that brands be omnichannel before they’ll invest. For most of you that are D2C, that means entering retail. How to enter retail on a small budget and with the least amount of risk is what I’ll be diving into today.
Investors are looking to invest in food brands that have established success in omnichannel because it allows for wider audience reach, higher revenue growth, and a more stable revenue stream.
Last week I talked about proving out product/market fit on a small scale and through retention metrics. I want to stress how important small is and keeping your reach geographically contained when you are first starting in retail.
If you go big and wide in retail what could go wrong? Let me count the ways:
1. Once in, you’re locked for 6 – 12 months and if you didn’t get something right (or the retailer screwed up) with the pricing, promo, merchandized location… any number of things, you are stuck.
2. The buyer is suddenly MIA because you’re small and not their priority.
3. You have to hire merchandizers to ensure your products are stocked and to tell you WTF is going on at store level because you don’t have data or the data is unreliable. You didn’t budget for this.
4. Your broker said they’d do the above but aren’t.
5. You change something about your formula to make it better and you can’t get the product switched out.
6. Product is getting close to date code and you want to do a fire-sale, but you can’t get the promo scheduled in time so you’re forced to buy it back with all the associated costs.
When you keep things small you can do a lot yourself, and pivot quickly when things aren’t working. Especially when you’ve established a relationship with your buyers and store staff.
Once you have good same-store sales data to show investors, you’ll be in a better position to close the deal. With more funds you’ll be ready to:
1. Bring in seasoned sales help to execute your go-to-market strategy (that is in writing and vetted by an industry mentor)
2. Deploy your budgeted spend plan (get advice to know how much)
3. Direct your growing audience to new stores to ensure product moves off shelf Day 1
Word on the street is VCs have pulled back on deploying new funds to startups. Relative to the past few years this is true. But there are different kinds of investors and different kinds of deals – topics for another post. What to know is, deals are being made all the time. Your chances of closing a deal get better the closer you are to nailing your market potential, product/market fit, and omnichannel performance.
All my best,
Walmart wants your startup’s products. Why? - CNBC.com
Wealthier shoppers are increasingly turning to Walmart for groceries, CFO Rainey told CNBC. He said about 75% of its market share gains in food came from households that make more than $100,000 a year in both the second fiscal quarter and third fiscal quarter.
About half of the market share gains came from high-income consumers in the quarter that ended in late January, he said at a conference in March.