Why Start-ups Shouldn’t Sell Their Products in Retail Stores

Just about every entrepreneur’s dream is to see their product on their favorite retailer’s shelves. Frankly, I can’t blame them because I’ve dreamt of that as well. As a matter of fact, my first book, Reality Check: A College Student’s Survival Guide, is on the shelves of several bookstores across the country and unfortunately, it’s not everything it’s cracked up to be. Here are some valuable things I’ve learned so far:

  • Product Placement: When retailers decide to sell your product, they decide where they place your product, or product placement. It’s very difficult to get good product placement unless you have amazing media (TV, social media, blogs, etc.) exposure and/or deep pockets for marketing. I’d recommend placing your product(s) on an end cap but they’re not cheap. Therefore, develop a detailed plan before going into the retail market.
  • Marketing: On Shark Tank, Kevin O’Leary and Mark Cuban claim that marketing is the black hole of every business. Honestly, I have to agree with them. If you don’t have a large marketing budget, it can be very difficult to create a buzz, or inform and educate consumers, about your product. Thankfully, there’s social media now and best of all, it’s free. Learn how each social media network works and use it to your advantage.
  • Refunds/Returns: Retailers are more than likely to return any unsold inventory to you within a certain timeframe. Most retailers won’t sell your product if you don’t allow them to make returns, from the get-go. If your profit margins are small, this could really hurt your business because in some cases, you’ll be making little to no profit, as processing returns aren’t free.
  • Distribution: In order to sell through some, if not most, retailers, you have to work with one of their distributors. These distributors sell to, or distribute, to these retailers. Here’s the thing: If the distributor doesn’t like your product or sales terms, it’s going to be very difficult to sell through those retailers, unless they’re willing to make an exception because they love your product so much and are confident that it will sell very quickly in their stores.

As you can see, many aspects involved with selling your product in retail stores is out of your control, including product placement and refunds. If you don’t feel comfortable with selling your product through retailers or don’t have a fully developed strategy, I’d recommend selling your product online only. Many successful businesses sell their products online and are very content with the results.

When you’re a start-up, you’re learning not only about your market and your consumers but about your product as well. As a result, I’d recommend starting somewhere but “starting small.” That way, you can make mistakes and learn from there without “burning bridges” with your retailers. Once things go sour with them, it’s very difficult to convince them to re-consider your product for their stores.