How listing your CPG brand too early with a big retailer can cost you – and what to do instead.
Picture this: you receive a $100,000 purchase order from the major retailer you just signed with. You celebrate with your team because you’ve all worked hard to get here.
Your team fulfills the order, and you’re all excited to see your brand in the hands of families across Canada. Then, you start to wonder where the payment for the PO is. Well, it’s a big company, so it probably takes time to process their accounts payable. Then, another month goes by, and you need to pay for the suppliers you used to fulfill this PO, your hardworking team, and the day-to-day operations of your business.
In time, you realize you’re not getting paid and go to the rep at the big-chain retailer to ask about your payment. The answer surprises you. You owe them $150,000.
You knew there would be some costs of doing business, but you didn’t expect this. Yes, there was a contract the size of the St. James Bible, and you meant to read every line, but you were fairly busy fulfilling the biggest PO you’ve ever had.
Now what? That retailer has deducted your payment from your expenses, and you won’t see a payment until you’ve completed a couple of years of sales with them.
This is a VERY common story. And one of the top reasons brands struggle to grow.
In this blog, we will break down some of the costs of doing business and explain how to avoid the costly mistake of jumping in too soon.
Unexpected costs of listing with large Canadian retailers
The buyers at large retailers are busy. They don’t mean not to explain every detail of your agreement – they just don’t have time. They manage thousands of SKUS and don’t know what you don’t know.
In turn, you likely don’t know what to ask to fill in the gaps of your knowledge of managing a large retailer relationship. The thrill of signing the “big deal” starts to wane as the expenses and fees pile up, and you’ve committed to a deduction-based payment model.
Here are some of the fees that can arise.
- Listing fees
- Program & promo charges
- Freight fees
- Damage & return allowances
- Supply chain costs
- New location fees
- & more.
The retailer is not trying to mislead you; they just aren’t there to be your business coach. Often, many of their departments aren’t even aware of the fees and costs from other departments within their organization.
Learning the intricacies of working with a retailer of this size can take years. For brands that go at it alone, these are often very expensive years, which result in unexpected debts, and, in the worst-case scenario, the brand can’t stay afloat.
Managing a large retailer relationship on your own is like buying a house without a realtor. It can be done, but it will cost you more in the long run.
What’s the answer then?
How brokers help companies save money while growing.
While it may be tempting to forgo working with a CPG broker to save on fees, this is often a costly mistake. At BNQ Management, our account managers have been working with specific retailers for years. They will map all your annual costs with that business– so you don’t get a surprise bill.
These costs, plus all the deliverables that your company will owe the retailer, will be laid out in a Business Case. When you work with BNQ, you get to review this business case before even approaching the retailer, giving you and your brand the opportunity to make an informed decision about whether listing with this retailer is the right investment at this time.
Instead of approaching a large retail location unprepared, having to say “no” before you get started, and potentially damaging your brand reputation with that retailer, a CPG Broker can help you determine which Canadian retailers (and their costs of doing business) are aligned with your company’s current situation.
When we determine the best retail relationships for your brand based on historical data, your brand goals, and the retailer’s expectations —our people are on a first-name basis with their people. We know how to speak the retail language and ensure that your brand is not lost in the mix of thousands of SKUs.
Our account managers will continuously manage the retailer relationship to ensure your SKUs are performing as they should, identify growth opportunities, and manage promotions and sales as they arise.
What do you do if you’ve already signed the listing agreement?
If this topic rings too familiar, there is still a way to salvage your retailer relationship and get your business growth back on track. Our account managers help brands navigate these complicated retailer agreements and lay them out in a way that is easy to understand. This allows brands to move forward with confidence, knowing how and what to budget for the rest of the year and how to start planning for the next growth step.
If your company is in a retailer agreement that you need help navigating, book a free consultation. We’ll provide transparent and constructive feedback about how to help your brand move forward.
How to tell if you’re ready to get listed with a large Canadian retailer
When it’s time to take the exciting step of listing with one of Canada’s top retailers, you’ll want to prepare by knowing precisely what your deliverables are. It comes down to your company being at the right stage of growth. Here are the parameters we suggest that brands can meet when taking this next step.
Your brand is ready when you have:
- Strong cash flow, and are okay with not turning a profit for a few years
- Established demand — customers are already looking for your brand
- A full product line or at least a brand block, not just one SKU
- A clear value to the retailer — solve a shopper problem or take a risk off the table
- Willingness to invest in the long-term, not just get listed, but grow
If you’ve read this list and determined that your company aligns with these parameters, it’s time to start talking to Canada’s leading retailers about listing your brand. Our team has established relationships with companies like Loblaws, Walmart, Sobeys, and many more. Book a Free Consultation to determine which retailers best suit your brand and your customers.
However, if you’ve read this list and now is not the right time to list with a larger retailer, we should still talk. BNQ Management has retailer relationships with many small and mid-sized retailers across Canada. We help brands get listed with retailers that can help grow their brand and align with where the company is today.
When deciding which retailers to list your brand with, it comes down to understanding the market, which products will perform best where, and creating an affordable and manageable growth plan. The team at BNQ Management is ready to help you make this plan. Get started with a Free Consultation.
