What are the challenges for a startup in finding distribution? How do these challenges compare to those faced by a large company when it introduces a new product?
Lamar talked about his next steps. “I did not know how to make money in this business. I thought I would have to go out and sell every single store—I would have to negotiate with every store manager. I eventually learned about distributors.” Lamar began by visiting grocery stores and trying to convince the managers to stock his product. The small independently owned stores would buy Hylux, but the large stores would not. “I did not know about ‘buyers’ in the chain stores. The managers would smile and say let us think about it, but you would never hear from them again,” he recalled. Lamar then decided that he would instead approach gyms and fitness centers as his targets to avoid the “shelf” competition that already existed in grocery stores. While still in school he would drive to 10 gyms per day in Boston. The reactions to his pitch provided market validation. Although he began to secure accounts, he discovered that servicing the accounts was a challenge. He could not conduct product tasting events and deliver product in a timely fashion. He began to lose some of his early accounts.
Lamar searched online for distributors but found none existed for fitness centers. The available distribution channels were, in effect, requiring him to rethink his retail outlets. “My first distributors were small independent distributors in NY. They saw my product in some bodegas and in my parents’ restaurants and became interested.” Lamar found that his market became regionally differentiated: in New York City he had two small independent distributors and his outlets were small independent stores. In Boston, he could not find small distributors, so his Boston market remained gyms that he serviced himself.
Because of the resistance he was facing from larger distributors, Lamar decided he had to make some changes to improve his chances of success. He spoke about the differences among the distributors he encountered:
Small distributors did not need to know the numbers because they knew you did not have any. They were betting on you having an interesting product that they could get in on early. The bigger distributors, however, were asking how big was your production, how much money did you have invested, what were your sales projections. They wanted to know that you were legitimate and that you were in it to win it, because they did not want to waste their time on you. Big companies can pour all sorts of money into an unproven product and get distribution. But the little guy cannot.
Lamar decided that one thing he could do to appear more legitimate was to create a custom package that would allow higher quality branding. Using a Kickstarter campaign, Lamar raised USD 14,000, which enabled him to hire a graphic designer who designed professional packaging
The money also allowed him to create another batch. He then started rethinking his target geographically:
I wanted to be in gyms in NY, Chicago, and Los Angeles. But now I am finding that I have to go with small distributors in smaller markets to prove myself. I did not plan on Central Massachusetts but I have the opportunity there. I may have to think about smaller towns in the Midwest too. If I can get some smaller chains in the Midwest, then I can get some distributors. So it is opposite from what I thought—I need to get the retailers to get the distributors.
- What are the challenges for a startup in finding distribution? How do these challenges compare to those faced by a large company when it introduces a new product?
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