What’s the biggest problem in merchandising today? Everybody is offering the same products to the extent that catalogs, Websites — even stores — look the same. Nothing seems fresh, new or unique.
What’s a good way to remedy the situation? Develop your own product.
Not that product development will solve all your merchandising problems, however. Once a promising new item is introduced and eventually has a modicum of exposure, it’s going to be knocked off and exploited. Buyers have to be vigilant about staying ahead of this market reality.
But if you are at the forefront of a product trend and have developed your own merchandise to capitalize on its moment in time, you’re ahead of the game.
Start by sourcing
First, you need to find a product that’s worth developing. Where to look for inspiration? Trade shows remain the best place to source product.
Of course, your competition is there, too, so you have to go beyond the obvious markets and displays. The biggest shows tend to be in places like New York, Atlanta and Chicago. But going to small shows in areas less known for their wholesaling, and usually without permanent marts, can also reap rewards.
For instance, Phoenix, Orlando, Boston and Seattle boast terrific regional shows. These markets are often focused on products or themes that represent their areas, such as Native American Southwest, New England or Pacific Northwest.
Foreign markets can be even better for ideas and merchandise. And you don’t necessarily have to travel too far. Montreal and Mexico City, for instance, show Western vendors as well as international factories’ representatives. And if you are able to attend the major European markets, such as Ambiente, Birmingham and Maison & Objet, you should.
One of the bonuses of traveling to trade shows is the excitement of discovering unfamiliar and disparate cities, with their new selections of retail and specialty stores. Allow at least one day around a trade show to explore some of these establishments. Not only are stores in other cities or countries great resources for product, vendor and price point information, they can also inspire ideas for categories and presentations.
You should also check out permanent showrooms — either rep groups with many lines or those with individual product lines. During off-markets they provide an opportunity to formulate ideas and fill in holes. Sometimes product that was overlooked at a major market is seen in a whole new light when displayed in an uncluttered space.
Trade publications such as Gift and Decorative Accessories, Home Accents Today and HFD, to name just a few, have ads and features focusing on individual products, vendors and categories. There are also several trend reports on the market that, depending on the targeted audience, can provide necessary research to enable buyers to formulate future merchandising campaigns.
Don’t overlook consumer magazines — especially those with “favorite things” sections that highlight new items. These don’t always strictly adhere to the theme of the publication — a food and travel magazine may present a fashionable sweater with embroidered fruit on it, an automotive publication might feature a throw with images of old cars. Featured articles sometimes display collections of product as well as individual items — these can inspire creative merchants to expand their own mixes.
Television can be a source of inspiration too, particularly specialty programs and channels. The gourmet shows often use new gadgets, cookware or dinnerware that may not yet be on the market, while the home shows may renovate and restore with articles and images from historic periods, foreign cultures or nature.
Digging into development
It should go without saying that merchants and vendors must clearly understand the brand before attempting to develop proprietary products. Usually the manufacturer must do some research involving and learning about the cataloger’s mission statement and objectives, visualizing the target customer, trends in the current market, potential materials to be considered and their availability, costs, lead times, minimum order quantities and more.
Prior to starting a dialog with the vendor, determine a budget for the proprietary items. Because there are minimums to meet, the startup costs as well as the inventory costs can be staggering when payment is required before the campaign is even launched.
All vendors will ask for the merchant’s ballpark cost expectations. This is necessary to determine if the venture is even a reality. It’s not fair or economical to have manufacturers initiate designs if the individual cost is prohibitive. Some vendors will start the process on good faith, but normally there are upfront fees.
You should also have your legal department or lawyer finalize a copyrighted logo with pantone colors. You’ll also need to have any wallpaper or overall/background design if it’s necessary in some categories, as well as all other brand requirements such as relief or embossing, cutouts, colors, metals and materials.
Once you’ve identified the item and procured the vendor, this supplier will produce an image that must be approved and authorized by the merchant. Then, using the logo, colors and so on, the vendor will create a one-dimensional image that’s identical to the finished product.
Every aspect of completion or approval must be signed off in writing or by e-mail so that nothing falls through the cracks. There should be much communication between merchant and supplier to expedite the process and ensure a faultless final product.
Surveying the samples
After the image is approved, the supplier will create a model and produce a sample for you to review. Sometimes this takes several tries — you must communicate to the manufacturer everything that’s incorrect or needed to improve on the item.
A manufacturer will often produce several samples to ensure that the article is what is envisioned. Every aspect of the design has to be created and modified along the way.
A piece of jewelry, for example, can have many clasps to choose from; or there may be copious chain links to evaluate in several lengths and widths and weights. Maybe stones have to be selected and their brilliance or color clarity identified. Then there are the metals: silver, gold, vermeils and so on.
You must consider every aspect when finalizing the piece — and the list can be endless. And these must all be addressed before the exclusivity and logo are applied.
Once you have approved a design and worked out the details, it’s time to place a purchase order, and in most cases a letter of credit or check must be issued for the manufacturing to begin.
There are several payment options, depending on the length of the vendor/retailer relationship. The most common is one-third of the total inventory cost at the time of the p.o. (this can also include the sample and model costs already incurred), another third when the order is ready to leave the dock, and the final third when the item arrives in the U.S.
Minimum quantities for an individual item can range from 3,000 pieces to 10,000, depending on the category, the materials required, and the extent of customization. Some manufacturers will lower the minimums, but this naturally requires negotiations and good communication with the vendor.
Keep in mind that product development always takes longer than standard sourcing. Because much merchandise comes from overseas, the lead time from vendor purchase order receipt to delivery at the cataloger’s warehouse can range from 90 days to more than 120.
Many suppliers can and will work with shorter leads — but only after a merchant/vendor relationship has been established. Remember, the lead time doesn’t begin until the purchase order is placed, and that shouldn’t be done until the final production sample is approved.
In addition to the lead times and the excessive revenue outlay, don’t forget that you have to warehouse the inventory until it sells. And if it doesn’t sell well, you can rarely return such product to the vendor for credit.
While there are more than a few risks with product development, the rewards can mean much larger margins, which ultimately improve the bottom line. Developing your own product also helps create a company identity of uniqueness and exclusivity — which can be good for business in any economy.
Leila T. Griffith is a catalog merchandising consultant based in Jacksonville, FL.
WHERE TO GO FOR INSPIRATION:
TRADE SHOWS (GO BEYOND THE OBVIOUS MARKETS AND DISPLAYS)
FOREIGN MARKETS (SUCH AS TRADE SHOWS AND LOCAL RETAILERS)
TRADE PUBLICATIONS (AND TREND REPORTS)