Lisa Kovner will be blogging all month on beauty brand strategies, from Business Plan Dos and Don'ts to Distribution 101 to What Is Ops and Why Do I Care. You can read Kovner's "So, You Want to Build Your Own Beauty Brand" in our January issue, as well as her previous posts, "Creating Cool" and "Who Needs a Business Plan? You." -Editor
There are two types of distribution for beauty care: traditional and direct.
Traditional distribution includes distributors, sales consultants and independent sales reps. They have long-standing relationships with retailers in your desired market, sales teams to rep your brand and offer marketing support to help their accounts sell your products.
They also warehouse, ship to their accounts and manage re-orders. All of this comes at a cost, making distributor pricing essential to price structure. The best distributor relationships are partnerships. They want to see you succeed, because when you do, they make money, too.
Many emerging brands don’t appreciate the value traditional distribution offers.
Direct distribution doesn’t have intermediaries. You sell direct to accounts. You recruit a sales team. Margin is higher because you’re not paying a distributor. However, your marketing and sales costs are likely to be higher than if you partner with a distributor.
Many emerging brands don’t appreciate the value traditional distribution offers. The bigger margins are sexy, but they fail to account for the high cost of marketing a product. Often, the costs of direct distribution can be higher than what intermediaries in traditional distribution ask for. Don’t rule out traditional distribution unless you know it won’t benefit your brand.
Creating a Distribution Strategy
A distribution strategy outlines how you plan on getting your products into the hands of retailers, distributors and customers. It addresses these types of questions:
What retailers match your brand position, marketing personas and price point? Have a list of retailers you want to work with.
What is the average price point of your preferred retailers? If pricing is too high or low, it will be harder to get a buyer to add your brand to their inventory. Know their customer and create a bulletproof presentation that proves their customer wants your product.
Be sure your price point includes industry-accepted margin for the retailer and any intermediaries.
Who are the people involved in the decision making to add brands to inventory?
Develop marketing personas so you know exactly who you’re selling to. What brands are they using to solve their problem? What are their emotional drivers? How do they respond to technology and marketing? What questions do they ask before deciding to buy?
What seems like an exclusively creative endeavor has an impact on your distribution strategy. What are the packaging requirements for your preferred retailer list? Are there certain types of packaging that sell better than others? The short answer is yes.
Do competitive research. Buy your competitors’ products in-store from retailers on your preferred list and, with a critical eye, identify the packaging trends. Ask sales staff what they look for in packaging. They’ll tell you what works and what doesn’t.
What tools will be made available to the sales team?
Who are the people involved in the decision making to add brands to inventory? There are several people who participate in the decision. Know who they are and what’s most important to them.
If it’s a merchandiser, show how the brand will be merchandised in their store. If it’s the education manager, show how you plan to train store staff about your brand and products.
What tools will be made available to the sales team? Sales kits, full-size or deluxe samples, etc. are absolutely essential to sales team success.
What tools will be available to retailers to market your product in-store or online? This can be more complicated, as it will include marketing tools you provide (e.g., product images, product copy, launch promotions), as well as marketing tools retailers use to drive sales (e.g., end-caps, catalogs, dedicated e-blasts, etc.).
How will you pay for these opportunities? Nothing’s more exciting than finding out that you landed a key account and they want to feature you on an end-cap. Then you find out the end-caps will cost $35,000 or more. Can you afford to participate?
Who are the industry experts you can reach out to for consultation and recommendations?
Who are the industry experts you can reach out to for consultation and recommendations? These individuals know more than the business of beauty, they know wholesale buyers likely to be interested in your brand.
Get to know who they are, enlist their expertise and you’ll be on your way to developing a distribution strategy with a higher level of confidence.
Now that you have your distribution locked down, it’s a good time to resume product development, packaging, pricing, marketing and other pre-launch activity.
Lisa Kovner (firstname.lastname@example.org) is the founder of Kovner & Company, which propels brands forward using influencer-based and non-traditional marketing strategies for consumer, retail and distribution channels.