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Saturating a market
The best way to build brick-and-mortar distribution is through market saturation. Market saturation means you are available in multiple store locations within a territory before moving on to another territory.
A regional strategy, as opposed to a national strategy where your products go out all over the place, is going to help you achieve market saturation. Going out nationally is a mistake I see all the time by brands starting out in brick-and-mortar retail. I know it’s hard to say no when a retailer wants your products, but if you are too spread out it becomes very hard to control your success. Hard to get that second P.O. because velocities were not as expected, and hard to know why (like did your placement/promos even execute).
There is a better way.
What saturating a market does for you:
1. Concentrates your in-store execution efforts for better results
2. Creates cost efficiencies in logistics
3. Consistently delivers data on where your products are being shelved
4. Builds ACV through consumer cross-shopping
How to saturate a market
The playbook here is to get into an anchor retailer, then sign on as many independent and smaller chain stores that also pull from the same warehouses as the anchor. You’ve saturated that market when you have reached your ACV target consistently over a trended period (scan data is nice, but not necessary to guesstimate ACV – more on this next week).
For example, let’s say you get into Raley’s. That will turn on a distributor like UNFI. Once you are in the UNFI warehouse, you’ll want to get into stores like Mollie Stone’s, Andronico’s, Gus’s and others that pull from that warehouse. When you do that, your merchandizing teams – which charge you a retainer per region no matter how many stores – can get around to all your locations. They will ensure your products are on shelf and properly tagged.
The additional benefit of having someone come around regularly is that store staff will start paying attention to your items, and then eventually your merchandizers can come around less frequently. Case in point: how many times have you popped into a store you rarely or never visit, can’t find your items, and then approach the store assistant who shrugs, “I dunno, never heard of it”. Products easily lose placement when stores aren’t visited consistently.
Once you’ve saturated a market, your marketing activities will drive velocities everywhere you are sold, which is key. You get efficiencies and higher ROI when doing demos, pop-ups, launch events, etc, because your products are available in multiple locations around town. More consumer touch points where your products have physical availability + more impressions per customer = more sales. It’s the quickest way to reach velocity goals.
I cannot emphasize the importance of consumer cross-shopping enough. The myth that there is a natural consumer that only shops natural stores gets debunked when you talk to real people. Real people shop different kinds of stores, including your target consumer. On average, people shop at 5.2 different retailers per month, so if you are in multiple stores in one region, your customers can find it no matter where they are shopping. You want your products available to them in multiple places.
With a market saturation approach, your store locator will go from looking like this →
To this →
Next week I’ll dig into the measurement of market saturation – ACV – what it is and why you should care.
All my best,