A series of Business Tips from the book:
How to Sell to Retail Chain Stores: Finding a Manufacturer’s Representative
By Michael Ford
A manufacturer’s representative is someone who sells your product to major chain stores. In the simplest terms, he is a freelance salesman who represents many products.
— Michael Ford
I was especially interested in this particular book as Michael shares tips on hiring a sales rep. Since this is one of my expertise, I was interested in his perspective.
So, to qualify his statement above, a sales rep sells your products to ANY store that is his/her customer(s). Whereas, you may sell to end consumers, sales reps sells to store buyers which is THEIR customers!
Honestly, I did not agree with some of the information that he shared in this book, but he did make lots of good points.
Over the next few days, I will share some of his best tips along with a few I did not agree with and why I did not agree with them.
So, say tuned …
Before a rep can sell your product or service to a major buyer, you must first sell the idea of your product to the rep.
— Michael Ford
I know … that may sound like a no-brainer, but, at the same time, it is the truth! If you can’t pitch your sales rep on your product or line of products, how do you think they are going to feel about selling it?
If you have done your homework BEFORE you approach a rep, you should have some solid answers to the following questions a rep will probably ask you:
• What is the typical inventory turn-over for your product?
• What is your typical reorder rate?
• How quick can you ship after receiving an order?
• What are some of the stores or types of stores where your product is successful?
• How often do you release new products for your line?
When you do decide to hire sales reps, it is also important to know that “no real rep is going to sell everything to everyone everywhere.” Won’t happen, so don’t expect it!
If you are a small company, then you have no reason to pay a rep to do hourly work…. Always find out your rep’s desired commission rate FIRST, then send your pricing. NEVER send your pricing and then ask the reps rates..
— Michael Ford
If you are unfamiliar on how reps work, you can hire an independent rep or a rep group based on commission rather than an hourly wage. Most reps take on several different lines and visit/contact retail outlets to show their various lines of products and receive a percentage of the wholesale price of items sold as their commission.
Reps are one of the best option to expose your product to the retail/wholesale market as you, the producer, does not worry about travel expenses and most other fees incurred by the rep — as this is included in the commission fee.
But here is where Michael and I disagree: Never send your pricing and then ask the reps rate! Most industries have a standard rep commission rate. In the gift industry, it is typically 15% — although, I’ve been paid as much as 20% and as low as 10%. If you have done your homework, you will know the rate for your industry and will offer that rate to your potential rep.
Per Michael’s suggestion, you will be creating a wholesale price based on your reps commission rate! This is not a good practice for two reasons.
First, I recommend that you include the standard commission rate into your pricing right from the start (if you don’t end up hiring a sales rep, you will still need to pay yourself for the selling/marketing aspect). And second, it may be a violation of the Robinson-Patman Act to have various wholesale pricing based on your reps commission.
Ask for references! You want to know that they can do what they promise. What other products have they represented and where are those products selling.
— Michael Ford
Don’t hire the first sales rep that sounds interested in your products without checking him/her out first!
Contact their references and inquire about the performance of this sales rep with their company. Some good questions to ask are:
• What type of stores does XX rep sell your products to?
• How long have you been working with XX rep?
• Is the rep firm diligent in getting new accounts for your line?
• Does XX rep follow up in a timely basis to your and buyer’s inquiries?
• Does XX rep met your expectations based on what they promised you when you first contracted their services?
No matter what a potential rep tells you, “Any real rep has a specific market or a few specific markets, but no one can sell to “anyone”.
Ask what their niche market is and the type of stores they sell to. If you can see your products in that niche and those type of stores, the rep may be a good fit for you …. if you got a good referral from one or more of their current accounts.
You are much better off with smaller chains and even individual stores…. They are also a better place to start because the entry bar is lower, they have fewer manufacturers or reps knocking on their door and they need good products not sold at the big chains.
— Michael Ford
I love it! After all is said and done, Michael believes you are better off starting your wholesale selling to smaller chains and stores! EXACTLY my thoughts!
If you are not familiar with large chains, they can have loads of hidden costs that can kill any profit you make with the sale.
I like the way Michael describes it:
They will nickel and dime you for every cent they can trim off the price. They will dangle a 1000 unit order in your face and then make you come down so low you make a penny per unit while they make you feel guilty for that much profit. You may make what you think is a good deal and then realize you are paying for shipping costs, storage fees at THEIR warehouse, advertising fees for THEIR newspaper ads, and other fees you never heard of.
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