Last week, 21 Hats contributor Liz Reisch Picarazzi wrote about whether she should continue to sell Citibin’s waste enclosures and package lockers direct-to-consumer only or should she try to go through a mass retailer: “As I look to scale my business, I’ve become curious again about selling in Costco. But it does raise some questions: Should I knock off my own product with a lower-priced version? What exactly would I have to do to get into Costco? And how would this help or hurt my brand?”
Liz also wrote: “The low-cost prototype is on hold until I figure out what’s involved with getting into Costco. It could be a ton of work for limited profit, and it could cannibalize our existing sales. Or it could be the way to scale nationwide. I’d love to hear from 21 Hats readers who have successfully broken into Costco or other Big Box stores. How did you pitch your product to them? What did it do to your margins? How are they to work with?”
One thing I'll add is that your product value proposition is only a component of your total relationship value proposition. Step back and think about it, does your product offer value to the same target costco customer? Will they love it as much as they love kirkland trail mix in those comically large containers? Might it bring in a different type a new customer that could be a target for costco? How will you be able to fit in the costco/consumer margin/cost/price battlefield? How easy will you be able to make it for costco to take your product with respect to: logistics, forecasting, palletization, merchandizing, ordering, EDI?
My experience with Costco is always after these questions have been asked, and we are coordinating on the logistics end, what do they need, when orders are going to be sent, how will we ship the pallets etc,.
This might be a thing that rather than targeting Costco, you might need to make your product so desirable that Costco cant not have your product in their stores. Being approached by Costco is a sure sign that its time to start pivoting to support that relationship.
Honestly, it is very expensive to support a big retailer's needs, so probably pile up some cash (or investments) to be ready for that push. Both in terms of direct expenses, and in margin erosion.
If your goal is to make the most margin with consideration of the inputs (labor, risk), then wait. Otherwise, if the goal is to scale then Cosco is a calculated risk that you'll need to do the math on.
One thing I'll add is that your product value proposition is only a component of your total relationship value proposition. Step back and think about it, does your product offer value to the same target costco customer? Will they love it as much as they love kirkland trail mix in those comically large containers? Might it bring in a different type a new customer that could be a target for costco? How will you be able to fit in the costco/consumer margin/cost/price battlefield? How easy will you be able to make it for costco to take your product with respect to: logistics, forecasting, palletization, merchandizing, ordering, EDI?
My experience with Costco is always after these questions have been asked, and we are coordinating on the logistics end, what do they need, when orders are going to be sent, how will we ship the pallets etc,.
This might be a thing that rather than targeting Costco, you might need to make your product so desirable that Costco cant not have your product in their stores. Being approached by Costco is a sure sign that its time to start pivoting to support that relationship.
Honestly, it is very expensive to support a big retailer's needs, so probably pile up some cash (or investments) to be ready for that push. Both in terms of direct expenses, and in margin erosion.
If your goal is to make the most margin with consideration of the inputs (labor, risk), then wait. Otherwise, if the goal is to scale then Cosco is a calculated risk that you'll need to do the math on.