FMCG stands for fast-moving consumer goods, which tend to have lower prices, slimmer margins and higher volumes than durable consumer goods. FMCGs, such as soft drinks, food and beverages, soap, household cleaners and personal care items cosmetics beauty care, are also found in a wider variety of outlets, including convenient stores and corner stores, where they can “fly off the shelves.” Many brands have established distribution networks, sales channels, in both urban and rural areas to transfer products to retailers and eventually end consumers.
However, competition for space on those shelves is fierce. In order for FMCG distributors to ensure that their products can successfully compete for shelf space and sales, they need to develop a well-defined and well-honed distribution strategy. Here we share three tips to help get you started: know your competition, avoid consignment selling, and build strong relationships with decision makers. Let’s take a close look at each:
Know your competition
In many cases, knowing your competition is one of the best ways to avoid getting lost in the mix. For example, suppose you are a distributor for a new brand of root beer, and you’re trying to get into stores. When you find a store that already offers five competing varieties of root beer, then you may want to skip it in favor of another store with no root beers, or perhaps only one. Before going all the way with this strategy it’s important to ensure that there is not a good reason that your competitors aren’t found in a particular store or region (such as a strong regional preference for orange soda over root beer).
Of course, knowing your competition will rarely be as simple as counting the number of competing root beers in each store. You will probably need to do more in-depth research in order to learn, or at least estimate, just how much your competitors are selling; whether they are ramping up or phasing out competing products; what price points and promotions they’re using successfully; and what kind of volumes and margins they’re generating. Once you have a reasonably complete picture of the competitive landscape, you can begin not only to map out the best areas and stores to aim for, but the strongest selling, promotional and pricing strategies to use to outshine your competition.
Avoid consignment selling
Store owners and management are understandably reluctant to buy FMCGs that they’re not certain they can sell. If you find yourself in this situation, which most often happens with new distributors or new products, the decision maker may offer you a compromise: they won’t buy your product up-front, but they’ll put it on their shelves. If it sells, they’ll give you an agreed-upon cut. But if it doesn’t sell, it’s your loss, not theirs. This is called consignment selling, and it puts the distributor at a severe disadvantage. It’s not difficult to see why. Suppose the store owner has two root beers on their shelves: A and B. They’ve already paid for A, but B is there on consignment. Clearly, they will lose money if they don’t sell root beer A, so they’re going to take pains to ensure it sells. However, they have nothing to lose if they don’t sell root beer B, so they may just wait and see if it sells itself. Therefore, unless you have a high degree of confidence that all or most of your product is going to sell at a particular store in a particular time-frame, then consignment selling is a high-risk proposition that overwhelmingly favors the store and could leave you high-and-dry.
The stronger your relationships with store owners and managers, the more they will trust you and want to work with you. This may sound like common sense, but amidst all the excitement of sales it is far too easy to forget this simple truth. Relationship building is even more important in small, family-owned corner stores where there is no corporate management or policy that the store needs to answer to. If they know you, like you, and trust you, they will be that much more likely to take a chance on you, offer you a good contract, and suggest your product to their customers.
Therefore, it’s important to take the time to cultivate genuine relationships with store owners and managers, rather than leaping directly into a number-crunching sales pitch. It may be best to start with a simple conversation. Most store owners are proud of their business, and enjoy sharing the story of how it came to be and how it serves the community. Take the time to listen to each of their stories. And remember that the more you show interest in the store owner as a person, and respect the role their business plays in their community, the more likely they’ll show interest in you and welcome you as a new business partner.
Three ways to increase FMCG sales
FMCGs generally sell at lower prices and slimmer margins than durable consumer goods. However, they also sell at higher volumes, which has given FMCGs a reputation for “flying off the shelves” with consumers making frequent purchases. But before FMCG distributors can leverage those high volumes, they have to get their products onto those shelves, and that’s not always as easy as it sounds. In order to stand out among the dozens of other FMCG distributors vying for limited shelf space, distributors need to develop a well-defined and well-honed strategy. Here we’ve taken a close look at three tips to help you get started.
- First, be sure that you’ve researched your competition: their prices, their volumes, their favored outlets, so that you can compete accordingly.
- Second, avoid consignment selling, unless you are confident that your product will sell quickly and that the retailer will pay you reliably.
- Third, invest time in building relationships with store owners and managers, as this will lead to the trust that good agreements and partnerships are based on.
By following these three tips, you will give yourself a well-earned edge in the race to fill shelves and sell FMCGs in 2018.
Other ways new technology solutions can help include:
- Improve productivity of your distribution network
- Market development
- Provide you with the insight to build and reach a larger market more effectively
Should you want to discuss or find out more about how you can benefit from new technology, please feel free to contact Ivy Mobility.