Selling Your Soul to Big Box Stores - Part 2

When you start out as a small company from your basement/garage, getting your products into big box stores is like a validation that “you’ve arrived”, or that you’ve made it.  You’re no longer some unknown peddler because you’re now shipping products out by the truckloads.  You also think that having your products in all the thousands of chain stores all across the country translates to multiple 0’s added to your bank account.

Getting into big box stores can either make you or break you.  Unless you have a really low cost item that is easy and cheap to mass produce, doesn’t take a genius to figure out what it is, and have investors or a really big trust fund to back you up, you might as well forget it.  One of the biggest chain stores in the country has been known to cause more business bankruptcies in the U.S. than anything.  A friend of ours got an order for 4,000 bags from one of the baby chain stores.  Because she was having her stuff made in China, it took over 4 months for her to receive the products.  By that time, the chain store decided they didn’t want them anymore.  What do you do now with all these bags that had customized packaging just for that store that decided to change their mind?  When you have products made in China, you have to pay for them upfront.  Double ouch!

Cloth diapers, at least the ones we make, are probably not best sold at chain stores.  It’s like having a registered nurse perform brain surgery.  There are a lot of variables in making the system work, and the concept is still too new to be adapted by the masses and their automatic gag-reflex at the thought of cloth diapers.  And I’m not sure it would be possible to require the staff of a chain store to educate themselves in how to use our products so they can answer any question a customer might have.  I think that would be asking too much of them.

After reviewing everything we have to do just to get into the big box stores and a lot of soul searching, none of it felt right.  The stores don’t have to do anything but they have to get tremendously lower pricing just because of who they are and the clout they have.  They don’t have to market your products but they get advertising allowances.  They don’t have to have a clue how to use your products, but they’ll probably get the sale anyway since the customer (that doesn’t know how to use the product either) can just return it and claim it as defective if they can’t figure it out.  And if the store chain decides your product isn’t selling fast enough, if at all, they can just drop you like a hot potato and either clearance your products or send them all back to you.  Nothing personal, it’s just business.  You’re just a commodity item to them.  It doesn’t matter that you just put up your entire life savings to be able to afford that production run to fill their order.  That’s not their problem.

Then I look back at all the retailers we already have and those who’ve supported us right from the start, from Australia all the way to Iceland.  They juggle trying to teach a new customer how to properly use and wash our products with a baby on their hip.  They educate other moms about the benefits of cloth diapering via email while nursing a newborn at their keyboards.  They are constantly thinking of better ways to serve their customers while cooking dinner.  Sometimes, they will forgo buying their kids little luxuries just so they can afford to buy the inventory to fill a customer order.  They either stay up late past midnight or wake up really early to answer emails and pack orders just so they can spend the rest of the day with their kids.  If a customer is having trouble with any of the products they purchased, our retailers will troubleshoot the problem with them until they get it right.  They take full responsibility for any of the inventory they decide to stock in their store and only purchase what they can sell.  They market themselves, their store and the products they carry using innovative practices and by building their own followers and connecting with their own communities.  They can make a much bigger difference in the life of one mom and their own families than any of the big box stores can.  They’ve supported us through all the ups and downs, product revisions, price changes, shipping delays and backorders.

Can it get any better than this?  I don’t know.  But how can we risk taking sales away from them and giving to a faceless corporation that may not really care?  There’s really no reason for us to get into the big box stores.  The grass isn’t always greener on the other side.  We’re still growing by leaps & bounds doing what we’re doing.  We’re able to provide jobs and a means of income to a lot of people who truly believe in what they do.  And we’re creating products that help families without having to compromise anything.  While world domination may sound attractive and what a lot of companies choose to aim for, we prefer to practice concsious capitalism.  Right now, I don’t see the point in reaching for the stars when we already have the whole world underneath & supporting us.

Selling your Soul to Big Box Stores - Part 1

Early last year, we felt as though the natural progression of the business was to start getting into big box stores (Target, Walmart, Babies R Us, etc.).  We felt we were ready for it.  And we hear a lot of people saying that maybe more moms would consider cloth diapers if they were in chain stores.

We hired a consultant whose job was to introduce us to the decision-makers for the big box stores, and to give us advise on how to properly present ourselves to the giants.  To be able to get in the game these big players played, we had to figure out the following:

1. Pricing. First thing on the agenda was to create a price sheet with multiple pricing levels.  The bigger the chain was, the lower prices they got.  We also had to factor in giving advertising allowances, extra markup for reps, etc.  By the time everything was said & done, we pretty much had to sell our products at a much lower price than what we were currently offering our retailers.  If we were to continue having our products made in the U.S., we’d be making a whopping 50 cents on each diaper that would retail at about $25.  We might be able to squeeze $1 if we really tried.  We’d have to “dumb down” our products by using cheaper materials if we wanted to make more money.  But if we were going to do that, we might as well just have them made in China.

2. Packaging. The product has to “pop” when placed on store shelves.  People will have to quickly understand what the product was just by looking at it.  I’m not sure if you can really put everything you need to know about cloth diapers on just the product’s packaging.  It’s not exactly as self-explanatory as toothpicks or socks.  Since we typically just sell to online retailers who mostly work at home, there was no need for any kind of elaborate packaging.  Those that had brick & mortar stores pretty much had their own way of displaying our products.  There was no need to have a ’self-explanatory’ type of packaging because the store owners were the one telling their customers how to best use our products.  But if we wanted to be in the bigger chain stores, we had to have standardized packaging (singles, 3-packs, 12-packs), UPC codes, lot numbers, case packs, pallet packs, and the list goes on.  We will have to invest A LOT of money in packaging.  Not just for the products that go on the shelves, but even for the boxes that the products will be shipped in.

3. Production. We needed to make sure that we had production ramped up to a level where we’d be able to fill a big order in a matter of weeks.  This means that we would have to carry a lot of the materials in stock & ready to be cut & sewn at any given point in time.  Most of our materials are custom-made for us and takes 6-8 weeks to be made and shipped.  We usually only keep about 3-4 month’s worth of materials, but if we were to get a big box store account, we’d have to carry maybe 3 times that amount.  But that is if we kept production in the U.S.

4. Customer Service Issues. We all know that big box stores have very lenient return policies.  While most of our online retailers carry a 30-day return policy on unwashed & unused items, big box stores typically have 90-day return policies with no restrictions.  This means that you can turn a nice-looking shirt into a dish rag, tell the store clerk there’s something wrong with the shirt, return it and get your money back as long as it’s within 90 days.  The store takes it back, dumps it into a box, sends it back to the manufacturer and gets a credit back for all the returned items PLUS the cost of shipping it back to you.  One of the major online stores that approached us had a policy that we needed to respond to any customer email sent through their store within 24 hrs (regardless of weekends or holidays) or we get fined $5.  Product returns/exchanges also needed to be responded to within 24 hrs.  Otherwise, they will respond to the inquiry themselves and charge us for whatever it costs them to resolve the problem, plus $5.  So if we decided to take off for some federal holiday, we’d have fines gallore to come back to work to.  Basically what all this boils down to is that these big merchants are absolved from any kind of responsibility for your product other than to put it in their stores.

5. Payment. We would need to be able to float several tens and even hundreds of thousands of dollars worth of invoices for at least 30 days.  AT LEAST 30 DAYS.  We’ll need to give at least 2 more weeks for late payment.  Remember all those customer service issues I just mentioned?  They don’t bill you for them, they take it out of the check they’re supposed to pay you.  One manufacturer we knew that had her products in a baby chain store said that a lot of times, it felt as if she was paying them to sell her products.

This is by no means everything that we needed to do, and just part of an extensive list of things we have to comply with.  As we were trying to work through all this and evaluating our sanity for even considering it, representatives from the big box stores started approaching us.  Even major online retailers started inquiring about adding our products to their site that gets tens of millions of visitors a month.  Holy crap!  That’s what we wanted, right?  We stalled on the vendor agreements and after several months of talking to other manufacturers, I seriously don’t see why anybody would want to put their products in the hands of the chain stores.  Sure you’d get more product visibility, and the prestige in being able to say your products are in chain stores, but at what cost?  It almost feels like you’d have to sell your soul.

To be continued….

Free Diapers for Chocolate

No idea is too crazy for us.

Starting a business

Over the years, in different versions & languages, this is a question that I often hear aspiring entrepreneurs ask.  “What type of business should I start?”  “What’s a good business to get into?”  “How can I make money on my own business?”   “How did you start your business?”

There is no one cut and dried answer to this as I believe starting a business, running it and growing it must be congruent to each individual’s own unique set of talents, skills and experience.  Not only that, but it must also match what your market needs and wants.  One of the best ways to start a business is to figure out what you can offer.   What are you good at?   What do you like to do that others can find value in?   Is there a product or service that you can fill in the marketplace that is unique and can set you apart from your competition?   What are you passionate about?   What would make you want to wake up each day ready to face the world?   Each of us has something special to offer.  Each of us has our own unique abilities and passions.   Don’t be led just by what everybody else is doing or what somebody else tells you to do.   Just because somebody made millions selling hamburgers doesn’t always mean that it’s a good business for you to get into.   What if you’re a vegetarian?    You’ll be burned out of the burger business in record time.  And don’t be discouraged if there are a bazillion other people doing what you’re wanting to do either.  Sure there may be 5000 other real estate agents in your town, but maybe you’re a marketing genius that can make a fixer-upper sound like a mansion and can use that to set yourself apart.   You need to be really clear on what value you’re trying to provide, because you can’t just open shop and sell stuff and hope to get a piece of the pie.  80-90% of new businesses are already doing that, and 95% of them are closing shop within the first 5 years.

I always hesitate to answer questions of how I got started and the details of how I run my business when it is asked by someone who is also trying to figure out what business to get into.   It is not because of the potential competition, but because I don’t want to give the person the idea that anybody can do what I’m doing.   Don’t get me wrong, what I currently do is not hard for me, and anybody with the right motivation can probably do it.  I consider a lot of it play because I truly enjoy the business, the freedom and the creativity it allows me.   Even if I had 50 million dollars in the bank, I’d probably still be doing what I’m doing.   But for someone that doesn’t have kids, hates kids, does not believe in cloth diapers, can’t even talk about poop without gagging, or has no passion or interest in this business other than just to make money, my business would be a big mis-match for them.   Now if I was talking to a mom who’s had 5 kids and has a lot of enthusiasm and support, my response would probably be completely different.

I’ve seen several people try to do what I’m doing and have failed miserably.  Why?   Because all they were after is the money.  They knew nothing of the products, how they worked, how they are used, or who their customers were.   Something as “niche-y” as manufacturing reusable diapers truly requires one to have a higher purpose or a true passion for the industry than just making money.

You can’t open a business with just the sole purpose of making money.  That is probably one of the worst ways to do it.  You have to be driven by something else other than just money, because owning and running your own business will just about take everything you’ve got–mentally,physically,  emotionally, psychologically & financially  Once your material resources runs out, you’ve got to be able to dig deeper to pull your way through.  Running after the money is almost always never a good way to start & stay in business.  Yes, you do have to mind your numbers, but you also don’t want to be constantly looking at each potential customer as lunch.  If you focus on the real value that you are providing and are able to convince your customers of such, the money will come.

Start with trying to figure out how you can be of service to others.  See what you can create that brings people joy or make their lives easier.

Welcome to MargaritaMcClure.com

Welcome to my new blog!  After going back and forth for almost 2 yrs about doing a blog, I finally decided to go ahead and do it.  What kept me from going forward with it is the fact that I wasn’t sure I’d be able to keep it up.  I mean, what am I going to write about?  Certainly not just cloth diapers.  I can only talk about cloth diapers so much before I bore myself to death.

What I have noticed over the last year is that I have been getting more and more inquiries from other women and moms about starting and/or growing businesses.  As much as I’d love to help everyone, answering each and every inquiry or ‘holding somebody’s hand’ isn’t something I can possibly do at this point.  Besides, I don’t know all the answers either.   I can only write about what I have gone through, what I’m going through, and what my kids are going through.  Yes, you will hear about my kids, the dust in my house, and how I’m never organized for extended periods of time.