Confessions of a Former Retail Buyer

0:00When someone comes to my door, I know, because I'm using SimpliSafe. I get an alert straight to my phone and I can see, is this someone I should unlock the door for because I know them? Or is it someone I need to tell to get lost? But here's the thing I love most about SimpliSafe. It works when I am not looking at my phone too, because when I'm not keeping an eye out, SimpliSafe is. SimpliSafe is proactive with a double layer of defense that stops crimes before they start. First, AI-powered cameras spot potential threats outside, and then live agents step in, talking to the person through the camera and letting them know they're on video and police will be dispatched if they don't leave.

0:44They can even trigger a loud siren or spotlight. That's how you help stop a crime before it starts. And SimpliSafe makes it easy to use. There are no long-term contracts, no hidden fees. You can cancel at any time. It was named Best Home Security Systems by U.S. News and World Report for five years running. It offers a 60-day money-back guarantee, so you can try it and see the difference for yourself. This month only, take 50 % off any new system. This is one of the best prices you will ever see for SimpliSafe, so don't miss it. Just go to simplisafe.com slash problem solvers. Again, that is SimpliSafe, S-I-M-P-L-I, S-A-F-E, simplisafe.com slash Problem Solvers and lock in your discount.

1:33There's no safe like SimpliSafe. From Entrepreneur Media, this is Problem Solvers, a show in which entrepreneurs do what entrepreneurs do best, solve unexpected problems in their business. We were completely wrong. And I'm just like, it's not selling. It was like, we have to start from scratch. I'm Jason Pfeiffer, the editor-in-chief of Entrepreneur Magazine.

1:58If you're a founder who makes a product, then this is probably your dream. Your dream is to be able to say, I am on retail shelves nationwide. And maybe you throw in a number there. Maybe you say, I am on 13 ,000 store shelves nationwide or something like that. And you know the problem with that. The problem is that, well, getting on those store shelves, getting on those store shelves is the easy part. You know, people often think that the success, the accomplishment is getting on the store shelves, but no, no, no, no. The success, the accomplishment is selling off of those store shelves. And that's a very, very different thing.

2:48Take it from a guy who has,

2:53accidentally bankrupted companies by putting them on store shelves. Yeah, I had a brand that wanted to go to Target and they wanted to go big right away. This is Matt. He used to be a buyer at Target, meaning he was the guy that decided which products made it onto shelves. And well, I'll tell you more about Matt in a minute, but let's just stick with the story he's telling. We vetted them. We thought that they were going to be great. And, you know, the reality was that they weren't, their finances were not in line. And the minute that a big PO came and they had to go procure all the ingredients for it, they couldn't float.

3:26And unfortunately, two months later, the company was gone. It just, they couldn't operate anymore. They couldn't get more debt. They couldn't raise more capital. And that was it. And that was it. And here's the thing. Matt has seen that story play out many, many times. So anyway, here's who Matt is. Hey, I'm Matt Adelman. I'm the VP of food and beverage at the Genesis Company. We are a Target brokerage that focuses in growing brands and scaling at Target. And you used to be a Target buyer. Yes, I spent four years at Target as the senior buyer within the deli department, managing all sorts of wonderful random products.

4:06All of which is to say that Matt has seen the good and the bad and the ugly of retail. He knows better than almost anybody, what it means to really succeed on retail shelves. And to be clear, you can succeed. You can succeed. And getting onto retail shelves can be an amazing thing, but you got to do it right. And that is the thing that Matt wants to teach founders. In fact, it's also the thing that he needs to keep remembering for himself, because Matt isn't just a guy who helps people get on retail shelves. He also sees this from the perspective of a guy who has a small brand that wants to be on retail shelves.

4:52So I mean, in my not very much spare time, I'm the co-founder of Switchback Foods. About two years ago, I was introduced to Oli, my co-founder, and he needed someone that understood retail sales and marketing. And that was the connection there. So I lead all the sales, all the retail sales and the marketing aspect. for switchbacks. So I see both ends. I see big, big, big CPG brands and what they're doing and how they're winning at retail, but also startups and the challenges they have and the things that they're trying to do to just make it to the first million and figure out how do I just get that one next win.

5:26And that's basically the question we're going to answer here on this episode of Problem Solvers. We are going to talk about how to get that first win and how to get many more because Matt has seen how it works. And he has identified three major mistakes that early stage founders make as they pursue retail. And if you understand what these mistakes make, then you can avoid disaster. And you can also plan for success. Matt writes about this in Entrepreneur Magazine. Actually, I had him write a piece that's called Confessions of a Former Retail Buyer. You can find it in the March issue of Entrepreneur Magazine.

6:08But here I wanted to talk through this piece with Matt. I wanted him to unpack these three major mistakes so we can really dig in and you can hear directly from him about what he has seen go very, very wrong and also very, very right in retail. Coming up after the break. All right, we're back. I am talking with Matt Adelman, the VP of food and beverage at the Genesis Company and a former Target buyer, about the do's and don'ts of getting onto retail shelves. And before we begin, just a quick note here about how I know Matt. So you may not know this, but I co-founded a private network for early stage consumer packaged goods founders called CPG Fast Track.

6:55I partnered up with some incredible friends of mine who have built just massive, very successful CPG brands. And we help early stage founders just accelerate their business, improve their sales, improve their marketing, improve their brand positioning. It is so rewarding. And Matt is a part of that. That's where we started talking about retail. And I said, man, you know so much about this. This has got to go in Entrepreneur Magazine and we got to talk about this on the podcast. So anyway, if you're interested in CPG Fast Track, you can go to cpgfasttrack.com and learn more there. Okay, let's dig into the conversation with Matt.

7:35And to start, I asked him to just set up why it's so important to really understand retail and how wrong things can go if you do not. I think there's a big misconception out in retail, especially with newer brands, where they think that If you swing for the fences right away, you can hit a grand slam and it's nothing but positive upside. And the reality is when you swing for big, big POs, someone like Target, if you're not ready to handle it, if your cash flows are not in line, if you're not financially sound, there's so much that goes into being able to make the products, being able to go buy the packaging, the ingredients, the line time, the transportation, everything that just goes into making the product and getting it to the store.

8:23I think too many brands just focus there. They forget that once you're on shelf, you got to have marketing funds. You got to have trade funding. You got to deal with deductions and chargebacks and all the other fees and all the other things that come on top of it. And if you don't have that baked into your financials in the first place, it's going to be a major surprise. I mean, I had a vendor last year, $160 ,000 in chargebacks in two months. Wow. Right? Like if I'm a new brand, and granted they're shipping full chain across the country at Target, But if I'm a new brand and I don't realize that I might be on the hook for even$10 ,000 or$15 ,000 or$20 ,000 in deductions, that's a big uh-oh.

9:01You know what I mean? Yeah. So, Matt, you had identified in this piece that we ran in Entrepreneur three problems that founders run into that they may not realize is ahead of them when they pursue retail. and in this conversation, I'd love to walk through each of them, what the problem is and then how to prepare for it, how to resolve it. And the first one is really coming out of what you just talked about a second ago. The first one is cash flow reality. Because as you write, retail costs money, a lot of money, like much more money than people think. You had just detailed some of that, but let's just step back a second and really appreciate that.

9:45You said you're going to get the largest PO you've ever seen. It costs a lot of money to purchase all of that and to get it onto the shelves. And you said that people don't really understand how much they need to budget for this entire process. 100%. I mean, do you want me to go into all the other miscellaneous things that will pop up and people don't account for? Yeah, like what are people not... Because you write that, look, even if you calculate out what the cost of the product and the packaging is, and then you budget for that, that's still likely not going to be enough money for the actual full experience.

10:27So what are the other costs? What are people running into? So let's take a fresh category as an example. So I do a lot of business in dairy and in deli. In those categories, you have something called shelf life. And, you know, the product only lasts, it only lasts so long. What ends up happening, let's say that you got 30 day shelf life, you're shipping to a DC, it's then has to get unpacked and shipped out to individual stores. It sits in the back room, it gets stocked. You're going to lose, I don't know, five, six, seven days. A lot of manufacturers are on the hook for what we call shrink or spoils.

11:00so at target uh they could shrink out 10 of all the products in dairy as an example right so if i ship a po in and i only sell 90 of it and i'm the vendor and i'm on the hook i have to pay target for the shrink and the spoils on that 10 that shrinks out that adds up i go into target and i want to run promotions i want to get a circular in the the the weekly ad i want to get shelf space I want to get an end cap. That all costs money, right? So that's extra fees on top of what you're already not accounting for and just cost of production. Right. Just to be clear there. So, you know, you're walking through, let's just be a consumer for a second.

11:39You're a consumer, you're walking through a target or again, wherever. And you're seeing product on the shelf. If you're seeing an end cap, an end cap we can define as just that kind of nice display at the kind of front of an aisle, right? Yep. That's not coming out of the goodness of somebody's heart over a target. That is something that you're paying for. The brand is paying for. You're paying for the space. You're paying for whatever promotions are happening. So most of the time you're on an end cap and it's going to be a sale. Whatever your sale difference is from your regular retail price, typically brands are paying that difference.

12:20You're paying at the end of the end cap set. If you don't sell through everything and you have extra inventory, you need to pay for the clearance or the markdowns there. There's a lot of extra cost that goes into it. Now you sell a lot, right? End caps are the biggest, best spot because there's so much product that moves. But if you're new to this and you don't quite understand how to run promotions and marketing and get people excited about your brand, there's a risk that it sits there. And there's a whole lot of bad things at the end of a big event like that if you don't get the product to turn and move.

12:51That all adds in. That's all costs that most brands don't really think through before they go after it. So what's your advice for how to think about the amount of money you need to do retail right? I, you know, admittedly, I'm not a CFO. I'm not the good money guy here. So I would say number one, like, go find someone that truly understands retail CFO, retail accounting. And if you don't know, go find a network or group somewhere with people that have through this. I think secondly, that's why brokers and reps exist. That is part of the benefit that we bring to a lot of clients is that we help walk through that stuff.

13:29So I have a customer right now, right? They're$800 million brand and we're bidding on an end cap. And I have to go through and explain to them like, guys, there's a lot of costs, even for you guys. You can absorb all this. Do you understand X, Y, and Z? Oh no, crap. We didn't realize that. I have to get it back to finance to bake it in. So I would just say, don't neglect really digging in on this because you don't know. Make sure you find someone that you can actually talk to and get advice from and help you walk through these numbers so you really understand what's going to happen. Great. Let's move on to problem number two.

14:04So problem number two, you set up as more and more stores, as in what the founder wants is to be in more and more stores. And I understand that. And Matt, I will shoulder some of the responsibility for creating the impression that more and more stores is the goal. And the reason for that is because I've been in media long enough that I've written or edited many stories in which part of the way in which we're talking about the validity of a brand, right? This brand is killing it because they're in 4 ,000 stores because they're, you know, like whatever, like we're using that number to show strength of a brand.

14:46But in reality, you say like when you really understand retail, store count is not the thing that a founder should be chasing, right? Take me into that. It's the kiss of death, Jason. It's you see some story of some overnight success and you forget the fact that they're in year five or six or 10 or 15. You think as a founder that in year one, you need to go everywhere because you just want to win, right? The biggest mistake you can make is try to go across the entire country right out the gates thinking that you're so special and your product is so different and you're so innovative that everyone's just going to want you and it's going to be easy.

15:22Because the reality is getting into retail is hard enough. And I mentioned this a few minutes ago, you have to grow the brand. You have to be able to market and you have to be able to advertise and get people excited about it. So what we always coach people on is get into a hundred doors, get into a local retailer, get into a space that you can legitimately handle and go drive as much success as you can there. Go drive. We call it units per store per week or sales velocity. Go drive as high of units per store per week as you possibly can. I don't care what retail you do it with. Do it with somebody.

15:54So you have a story. So you can walk into the next retailer that you want to go to and show, look at what I've done here. And that could take you two years. It could take you four years. Time should be irrelevant here if you're doing it for the right reasons. Build those stories, focus on distribution, focus on local distribution, high velocities, get a great sales story, and then go expand. And so I'm just going to make some assumptions here, and then you tell me if I'm right. The reason why you want to do that is because number one, if you drive high velocity at a small number of stores. Well, you said it.

16:32Then you have a great story to tell other retailers. You have some excellent numbers. You have some real proof that you can build off of. But conversely, if you spread yourself out to a thousand stores out of the gate, you can't support all that. Where's the money to pay for the marketing to drive velocity in a thousand stores at the exact same time, what you'll probably end up with is very little velocity. You're moving next to nothing every week. And if you do that, well, Matt, you tell me what happens. You're gone. Unfortunately, the buyers, the people who are making the decisions on what products to bring into their stores, their job is to grow sales.

17:16They have to. If they don't, they don't have a job. And as cool as your brand could be and as cool of a brand story as you have and as much as they might want you to succeed, if you're not turning, if your velocity is not there, they're looking at their category assortment every three to six months to 12 months, depending on the retailer. They all, every single one, they've got a list. Here's my top items. Here's my bottom items. If you're in the bottom, you're gone. You're out, no questions asked. And it is really, I mean, one of the things we ask brands when they come to us at Genesis if they want representation at Target is, have you been in Target before?

17:51And did it work or not? Because if it didn't work, and Target has history of a brand not working before, it's really hard to get back in. Yeah, right. So let's put your former Target buyer hat back on and just tell me from this perspective. So you work with a brand, you put them in some sizable number of stores, they do not perform you say these guys got to go you pull them from the shelves and then they come back a year or two later and they say okay we fixed the problem we're ready to come back what do you say uh i mean no like i mean really prove it to me and i this happens all the time one of the things in in retail especially again with the bigger retail and that's sorry if i keep talking target but that's that's most of what i know that's that's where you're coming from these guys I mean, they're rotating every 18 to 24 months typically, right?

18:48So if a new person comes in and they're not quite sure in the category and they don't quite have the confidence yet and they're not willing to kind of put their neck out for a brand, they're going to get something. Let's just pick a product that was there. Someone that comes back and pitches again. They're going to go back and look, did they sell or not? And if they see it didn't work, why do they want to stick their neck out in a brand new category when they have to prove that they know what they're doing? No, that brand didn't do it. there's so many new brands all the time coming right everybody's pitching all the time right if it didn't work before like why is it why is it magically going to be different so it's like yeah it's like you know you only get one shot so you gotta you gotta take that shot when you're really ready what about um kind of saw like a small version of this but just curious what you um what about the tests like you know let's say let's say that a brand um talks to a target or to a whole foods or to something and uh and and they get offered to do a hundred store test in one region um same rules apply here for the most part same rules apply take the test do it like tests are great i love i would love testing in regions it happens all the time um you you better go in that region though and make sure that it's flying.

20:06You better be running meta ads or Google or whatever it is that you can to drive people to those stores because you need that test to be successful. Like same rule. Velocity trumps everything. Yeah. All right, let's move on to problem number three that you see as founders enter retail, which is pitching the wrong way. So people come on this podcast and they tell the story of their brand and they talk about where it came from and where they came from and about the community that they've built off of their brand. And that's in part because they love talking about that. But it's also because a lot of them have been trained that that's what consumers want to hear.

20:46That's what you do in media. But as you wrote, that is not what buyers want to hear. Why? Yeah, I think the reality is, is a lot of people come on the show and pitch the way you're talking and all these founder stores, they're wonderful for DTC. They're wonderful when you are driving to your website and you control the demographics that are coming, right? You pick who you want to target, go after it, right? The problem with it is that your brand and you have your people that you sell to, right? You have to convince those people to come to Target and buy it, but you have to convince this buyer in the first place that your product fits their store and their people.

21:28and too many brands don't truly understand the retailer's people, right? Target calls them guests. They don't really understand the target guests. So they'll come in with their founder story. The target, you mean? The target customer, yep. They come in with their brand story. They come in with all the bells and whistles and their product and why it's so great, but they leave out the most important part. Why does the average target shopper actually care? Are they gonna buy it, right? How is this gonna help the buyer's category? If I'm a buyer, maybe, you know, buyers are graded on, do you drive sales?

21:58or drive margin for the most part, right? Maybe I am totally fine on sales. My sales numbers are totally fine, but I really need a brand and drive margin, right? Like, do you understand what the buyer needs and where your product truly is going to fit into their strategy? This is really valuable that you're saying this because I think a lot of people think of the buyer as just the gatekeeper. And so the whole game here with any gatekeeper is just like, just, just like, somehow figure out how to get the gatekeeper to just open the gate. And, um, and the thing that you're saying, you know, bringing your experience as a, as a former buyer is the gatekeeper needs things too.

22:41Like the gatekeeper is not an all powerful being. The gatekeeper is an employee who's being judged on numbers. And so the gatekeeper is actually looking at you and saying, are you helpful to me? Like very specifically me. Yes. And that makes it pretty personal, but it also shows you where the real opportunity is if you can have the right targeted, excuse the pun, conversation. A hundred percent. I love the brands that I work with who get this. Because before we go into any meeting with a vendor, it's always tell me about the buyer. What's their name? What do they like? What are they like? You really need to know them.

23:20You need to make friends with these people. And the first question should be, like this is the number one tip I can give people today. The first question any buyer should be is, what is your strategy and how can I help? Before you tell them about your product, before you go and say why you're so great, find out what they need. Find out what they're looking for. Find out what the buyer needs. Find out what the buyer needs. And then craft your story on how your brand is going to help the buyer get what they want and grow your sales. Don't just talk about you. Don't just talk about why your story is so great and your product's great.

23:50because trust me, we talk to hundreds and hundreds of brands every single year. We being the buyers when I was at Target. We hear it all. I need to drive sales. I need to drive margin, guys. Help me out. Right. And so things that are really convincing for the buyer are, number one, you had just said a minute ago, a lot of people don't spend time thinking about the customer that's walking into a Target. But if you understand who the customer is that's walking into the Target, then you understand their average household income and you understand the kinds of products that they're mostly responsive to.

24:27And then if you can walk in with data from your own sales experience showing that this specific target customer is going to be interested in your brand because you have specific e-commerce sales data to back that up, because you have some geographic or demographic data that's like whatever it is that, shows I understand, number one, what you need, buyer. I understand, number two, who your customer is and what they want. And then here is real-world data that I have that can convince you, that can prove that your customer wants my product because they've already displayed that in many other ways.

25:10And if you put me on the shelves, I do well for you. That's the pitch, right? That's it. You did an interview with Kaizen Foods, Jason. I think it was last November. Yeah. They talked about taking Amazon seller data and success on Amazon and parlaying that into future retail conversations. That is right. That's exactly what we're talking about. I call it make the buyer's job easy. Give them everything that they need to go, well, this is a no-brainer. Yeah. Product's great. I love it. It's priced right. Oh, it already hits my shoppers. Which, by the way, one more thing here. it drove me absolutely nuts when a brand would come in and they'd pitch me some high-end affluent thing and go, oh, well, the target guest is that they have more money, they spend more money.

25:57No, that is a very small percentage of the target shopper. The average target shopper, a mom with two kids who makes$70 ,000 a year. So what do you have for her? You know, like make sure you understand the demographics that you're talking to before you go into these meetings. Or again, ask the question. Yeah. Yeah. Right. The thing that you're referencing there, by the way, just for those who don't remember, it is a couple months on this podcast, I talked to the founders of Kaizen, which is a pasta company. I can't remember the details now, but they cut a pasta that's healthier and doesn't include some other ingredients or whatever anyway.