How to scale successfully: Your guide to finance essentialsJump to content
Think you’re ready to launch on mass retail shelves? There’s more to it than having an innovative product. For starters, finances – and how prepared your brand is for the leap to mass retail – plays a major role in determining whether you’re equipped to take on a potential launch on a large scale. Below, here’s the scoop – straight from our expert Target team– on what to consider as you rev up to expand into mass retail.
Your Finances and Retail Priorities
First things first, make sure you’re familiar with the key terms below. At first glance, the terminology can be daunting, but taking the time to understand them will boost your financial fluency and help you understand how to grow your brand more successfully – important steps before you ever get a pitch meeting on the books.
- Initial Markup (IMU) and Final (Gross) Margin: Your IMU is the spread between purchase cost and retail pricing; this is also your brand’s profitability to mass retailers. Your Final (Gross) Margin is the profitability after any additional cost of doing business.
- Unit Productivity, reflected as Units Per Store Per Week (UPSPW): This is calculated as the number of items sold per week at a single location. This metric shows the retailer what sales velocities they can expect as they consider your brand for their assortment.
- Retail Price Positioning: The retails set relative to competitive products. A lower price is not always better, but it should make sense in your customer’s eyes.
- Out of Stocks (OOS) and Vendor Fill Rate (FR): Understanding both of these is important as you think about showing up reliably for your customer on-shelf. As you think about success, your OOS should be low and fill rates should be high.
- Weeks of Supply (WOS): Every category department has a goal. Do you know if you’re over inventoried or under inventoried? Being prepared with this number can help paint an accurate picture on your preparedness to scale into a retailer.
Tried-and-True Processes: Foundational Financial Routines
You’ve got the terminology down. What’s next? Consider implementing the following routines in your business review and ongoing routines – a major step in monitoring your growth and creating the foundation to scale.
- Review your sales dollars and units weekly. Watch for changes in trends, and understand what could be driving that trend. As what defines a trend? Generally speaking, it’s a pattern of activity that lasts more than four weeks.
- Proactively communicate your internal marketing plans as you make or update them with your team and buyer or planner. That way, if you notice an uptick in sales, you’ll have a sense of key drivers.
- Closely track projections. This is especially helpful in the event you have to adjust production rates should you need more inventory or less. Monitor your margins. How are your margins vs goal or versus last year? If they are lagging, investigate your data to understand why.
- Revisit your inventory to understand flow and with any purchase order (PO) related questions. Some questions that you should be prepared to ask include:
- How is your inventory doing compared to both you and your retailer’s projections? Are they beating or missing the forecast? Is this a trend?
- Do you have the inventory to support the trends you’ve discovered if they maintain?
Preparing for a Successful Pitch Meeting
Preparing for a successful brand pitch or line review starts long before that all-important meeting. Below are a few key topics to think through and consider as you prepare to scale and take the next step in your retail journey.
- Inventory reliability is important. Make sure you understand your lead times and your projections, so your product is always in stock and ready for customers.
- Be proactive about your productivity. If you see a trend, or if you anticipate a change, let partners know. They are your partners and want to be ready for any sudden surges to demand.
- Actively market your brand on your owned channels. Create a virtual connection with guests so that they can easily recognize your product when you make it on shelf.
- Ask yourself the hard questions. Before heading into a meeting with Target or any major retailer, evaluate your brand using the questions below, which will help you effectively evaluate your current growth and better prepare you for pitch meetings.
- How are your forecasts doing to projections? Are they beating or missing the forecast? Is that a long term or short-term trend? How might you adjust shipping, or marketing levers to attend to that?
- How are your fill rates and on time shipping trends? You should aim for this rate to be 95% or better.
- How are your inventory levels? Are you able to produce enough inventory to support your current sales velocities if you were to be awarded business with this new retailor, and expand your distribution? If not, what is your plan to effectively scale production to support potential expansion?
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