I always thought “growing pains” was an oxymoron. Growing is awesome. Pains are painful. Last year, with the growth that my brand Alchimie Forever experienced, I finally understood what growing pains really mean. They are amazing. And they are problematic. I hope your brand has a growth spurt that makes you discover the meaning of the term. And when you get there, or almost get there, remember the following.
Growth is Great
Growth is exciting. It is something to celebrate. To cherish. Even when it’s painful. So, before you think about anything else, pat yourself on the back. Your brand is growing and that means you are doing a great job!
Keep an Eye on Cash Flow
After that celebratory moment, look at your cash situation. Growth requires resources:
- More people to help manage the growth—whether in the office or in the field.
- More products for you to sell.
- More marketing materials such as samples and brochures to continue driving growth.
- More of your time in the field, meaning more travel expenses.
If you are an independently owned, self-funded brand, the likelihood of money in the bank for a sunny growing pains day is not high. Explore other sources of funding proactively (see sidebar).
Inventory Drives Loyalty
The thing about out-of-stocks is that they create an issue bigger than mere lost revenue. Yes, your wholesale accounts want product you cannot ship or invoice. That is bad. But think about your customers’ customers. She comes to your wholesaler’s boutique to replenish her favorite eye cream. You are out of stock, so the boutique doesn’t have it either.
Best case scenario, the sales person is able to give her some samples of said product to tide her over. The sales person takes her name and number and promises to call her as soon as the product is back in stock. If the product is back in stock in two weeks, things are fine. If not, that same customer will come back and probably ask for a similar eye cream from a different brand. And then you start losing customers for the long term, customers your wholesaler has taken so long to convert to your brand.
Money Isn’t Everything
When you experience a growth spurt, you sell more products than you anticipated. Which means you will need to manufacture products faster than you predicted. In my brand’s case that meant that I had to both shorten production times and ramp up cash. More money helps, but more money is not the answer to everything. Here are a few things to keep in mind, strategies to help you both manage and mitigate the negative impacts of out of stocks.
Inventory Management Checklist
1. Prioritize your best sellers.
This sounds obvious and easy, but if you are about to be out of stock of a laggard product and four weeks away from being out of stock on a top seller, most instincts will be to fix the first out of stock problem first. Which is not the right thing to do. First fix the problem of the product that generates most of your revenue.
2. Manage inventory to protect your key accounts.
Strategically allocate your inventory when things get tight. Are you running low on product Y? Is product Y a top seller at your number one account? If so, stop selling product Y to your smaller accounts and save inventory for your key account(s).
3. Offer alternatives.
If at all possible, once you are out of stock of a certain product, suggest to your customers the closest replacement product. Can moisturizer A help tide your customers over until moisturizer B is back in stock? Then recommend plan B.
4. Reclaim your products.
If any of your inventory is tied up in consignment accounts, marketing campaigns and showrooms, bring that inventory back for sale. Promise you will replace it when the inventory is full again.
Supply Chain Checklist
1. Work with more than one manufacturer.
You may already be doing this, in which case I applaud you. I found this out the hard way. Different manufacturers have different strengths. When growing pains are your current reality, what your prize most in a manufacturer are flexibility and speed, and also smaller minimums for production runs. And those may not be the qualities for which you originally selected your primary manufacturer.
2. Look at your packaging supply chain.
The bottles we use for one of our top selling products are my favorite packaging. They come from Italy (Lumson). They take 12-14 weeks to make. And an additional six weeks to ship by boat (or two weeks and lots of extra money to ship by air to the United States). When you are facing an out-of-stock situation, packaging delivery timelines of 18-ish weeks is not very convenient. Can you find packaging suppliers with shorter time frames? Can you use labels, as opposed to printing on bottles?
3. Work with your vendors on payment terms.
Most of your vendors will love to hear about your growth, so let them in on it before you are 30 days late on an invoice. Your transparency will be much appreciated. And, if necessary, ask them to implement a payment plan for you so that you are making small payments regularly.
4. Alert retailers.
If you are going to be out of stock, be transparent with your key customers. Let them know as soon as you know and have a timeline and solution in place. That way you explain the issue and immediately explain your plan to mitigate the problem. Just like your vendors, your key accounts will love to hear about your growth.
You Get a One-time Pass: Use It Well
If you have built your brand and growth on true relationships, and if you manage these relationships with honesty, care and respect, your partners will encourage you and take pride and ownership in your growth—including in your growing pains. Your vendors will work with you because they know your bigger brand will benefit them. Your wholesalers will also embrace your growth, because it means they are performing above expectations. They will understand your out of stocks and will give you a pass. Once. Not twice.
Celebrate your growing pains and learn from them so they remain a one-time thing. The next time you grow more quickly than expected, you must be ready—celebratory bottle of champagne and all!
Ada Polla ([email protected]) is the co-creator of the Swiss antioxidant skin care line, Alchimie Forever, which launched in the United States in 2004. Her strategic focus and implementation have yielded double-digit annual revenue growth for the company. Polla holds an MBA from Georgetown University, majored in art history and political science at Harvard University, and graduated magna cum laude with a Bachelor of Arts degree in 1999. She is also a Global Cosmetic Industry editorial advisor.