265. How CPG Brands Can Use Off-Price Retail as a Strategic Growth Channel

0:00Matt Goldbloom:Welcome to Startup to Scale, a podcast by FoodBevy. I'm your host, Jordan Buckner. Join me as I talk to aspiring entrepreneurs, seasoned industry experts, and everyone in between as we unlock the keys to growing from startup to scale.

0:18Matt Goldbloom:There's one retail channel that's probably the most misunderstood. Today, I want to demystify the Off Price and Value Retail channel. And to do that, I have invited Matt Goldblum, who's the founder and CEO of Common Shelf. He works directly with brands to understand this channel and to create a strategy that's fitting for the opportunity. So today, I really want to discuss kind of how this off-price channel can actually be a strategic layer, not just a last resort for your brand, what really drives velocity there, and the operational reality kind of behind managing this. I know this kind of works without execution, really work with teams to kind of build lean teams, whether on the brand side or the operator service provider side.

1:00Matt Goldbloom:And so, you know, this episode is sponsored by Plus40, who helps brands extend their team with global talent to handle the day to day work that actually helps to keep business moving. Matt, welcome to the podcast. Yeah, happy to be here, Jordan. Thanks for having me. So first off, let's set the stage. Can you tell me what is the off price and value retail channel and what retailers are included? Yeah. So Off Price is the retail channel that primarily consists of these large retailers, TJX, which is the parent company for household names like TJ Maxx, Marshalls, HomeGoods that are very popular in the US, Ross, Burlington.

1:35And essentially they operate on this what is called a treasure hunt clearance model. Essentially, most of these retailers, you don't know what's in the store. You don't know what you're going to get. The whole idea is you go into that store and it's become really a discovery hub. So you're going in there and you're going and finding exciting brands, either trending ingredients that are trending on social media or your favorite everyday brands that you find at Walmart and Target, but you're getting them at a discount. And now you don't know what you're going to get when you go in there. You go in with$100.

2:03You can now shop Beauty, Pet, Peril, pretty much anything you can think of. And you're going to find exciting deals there that you're not going to find elsewhere. Traditionally, it has been more of what we would consider to be like a clearance or liquidation play. that's how these stores sort of got started where brands had too much inventory they needed to get rid of it and they wanted to find a home for it and so these retailers sort of filled that gap and offered a solution there and there's still a lot of that happening in these in these retailers where we make too much inventory we need to sort of pass it along at a reduced cost to someone else and then that discount gets passed on to the consumer but increasingly it's becoming a really a gen z millennial hub for exciting new products and branches sort of why i entered the space because that shift is really happening and it's coinciding with a lot of macro shifts in the broader economy.

2:46People are looking for more deals, more value. So yeah, that's a bit about the category.

2:51Matt Goldbloom:So is there a difference in either how consumers are shopping or how even the retail buyers are thinking about merchandising the category between like those clearance items and the treasure hunt finds? I guess meaning like, does every product you sell in have to be significantly discounted? Or are they looking to take kind of full wholesale price products in as Yeah, usually you're going to have to go in there with a reduced cost that's then going to be passed along to the shopper, to the customer of those stores. So when you're selling to them, it typically is at a lower wholesale cost than you would to a Walmart or your distributor that's supplying product to Whole Foods, for example.

3:27The sort of caveat is that it's a very clean deal. They're buying new items and new brands every week. So you can get in there relatively quickly, which is very different than I'm sure your viewers and listeners know about other retail channels. And it's just what I would consider to be a net or clean deal. So you go in there. They're going to offer a cost or price on the goods. Once you negotiate that, there's typically no other fees involved. And one of the beauties of working in these channels as well is that they're going to pick up the goods from your warehouse locally in the United States, which is not something that every retailer will do otherwise.

3:57So it kind of nets out relatively similar, which is sort of like the hidden secret of the work that I do. You know, if you are working with one of these, you know, specialty grocery stores or specialty beauty retailers, it's extraordinarily expensive to work with them. And so that net cost that you're providing to them is sometimes in the same ballpark as where you'd provide to a TJX or Ross. So it really depends. They're buying all the inventory at what would be considered a lower cost so that they can take their margin and then, you know, offer typically a minimum of a 20 percent discount from where you could get it elsewhere.

4:25Matt Goldbloom:I think that's exciting. So how should brands really approach thinking about this strategy? Because I know when I was running T-Squares, I had different people reach out and like, here's this opportunity to sell the excess inventory in this channel. But it kind of felt more like a one-off deal. I wasn't quite sure like what happened to the inventory. There's always the like potential perception, I think, from the brand side of, will this make my product feel like it's not selling or ruin kind of our brand equity being sold on these channels? How do you, have you seen that kind of evolve and how do you advise brands?

4:58Yeah, I mean, that's something, that's probably the number one thing I hear from founders or operators is that they don't want to devalue their brand, which is totally understandable. I would say there's a few ways to go about it. First, if you do have inventory that is closer to expiration or that you need to move, you're paying too much in stores, this is a good channel. You might lose a bit of money on it, but it's better than just eating storage costs or excuse me, the product expiring. They have a bit more lenient, for example, from a food product or a beauty product in terms of expiration dates as opposed to like Whole Foods or Walmart.

5:26There is a benefit there. But what I would encourage people to do is go look in your local TJ Maxx or your Ross or Burlington and see what's on the shelves. Increasingly, what you're going to find is that there's brand names in your category that are also competing with you at other stores. And they're not just in there as one-offs. They're consistently selling. Now, why are they doing that? They've sort of realized that while, yes, you always want to protect your brand equity and maybe the channel is not ready for everyone. Recently, the US consumer is hunting for a deal and that deal and the value that they're gonna get for the product is more important to them than potentially seeing your brand at a quote unquote lesser retailer.

6:02So they would rather get their favorite Ulta product at TJX for 30 % off because they love that brand. They're actually going to potentially go back to Ulta and buy it the next time they're walking that store as well. So it can actually be an incremental purchase for you as a brand. And so what I try to tell them is, yeah, it depends on the product and depends on the price points, but it can be a new way for you to acquire customers. Obviously, you want to do that profitably, ideally. And again, if you can get into the margins of it all, that's what I do with a lot of my clients, trying to figure out if it makes sense from a commercial standpoint.

6:33But it actually can be incremental to your overall business. And the loss of brand equity, while I will fully acknowledge it is real in some cases, it is more of a myth these days just because of how incredibly popular these stores have become.

6:44Matt Goldbloom:Do you see any strategy around creating unique product architecture like brand SKUs there? Similar to how I was thinking like when selling on Amazon, I didn't just sell single bags. I would sell a multi-pack or like a three-pack, which actually you could not buy in retail. So it felt distinctly made for that channel. Are there product types or bundles that feel purposeful for that value channel where it feels less like a clearance and more like this was designed for this place? Yeah, there's a lot of that, especially on the holiday time. Like there's a lot of seasonal buys by these buyers. They want stuff for Mother's Day, for Halloween, for Fourth of July, for the Christmas holiday period.

7:21And you'll see a lot of like big brands are making products that are exclusively for this channel. You know, typically, again, it's all about the discounted value offering. So oftentimes brands will achieve a better value by bundling products together. So you'll see a lot of like 12 days of Christmas or you'll see a lot of like, you know, summer, you know, skincare SPF packs for sunscreen brands. You'll see a lot of these offers, these deals that you would typically find otherwise on maybe TikTok shop or online. And they're being offered to their customers. That's a that's a great way for brands to give their customer value, but also potentially not sell their products for a very low cost.

7:56They're also, you know, making larger pack sizes in general. You know, for example, in liquid beauty and hair care, for example, like one liter bottles tend to do a bit better in a lot of these stores. Brands that are maybe making a 500 milliliter bottle will say, you know what, if the buyer's interested, we've already proven that maybe we can sell our existing SKUs in those stores. So let's make a one liter bottle. And the buyers are really interested in that, especially if you are a recognizable brand. So there are a lot of ways to do that. Also, you can potentially, you know, avoid, you know, potential conflicts of interest with other retailers meeting the customer, you know, really at the price point they need to be at or where they typically buy products at in these stores.

8:33Matt Goldbloom:How do customers shop food and beverage specifically within these stores? Because I, you know, just my own experience, I've seen like by the checkout or sometimes it's around, as you mentioned, like those seasonal occasions of like maybe summertime is like some food items for summer, like barbecues or picnics or things like that. Are there certain ways that like food is merchandised differently or that founders should think about like when to potentially bring their products in? Yeah. Food and beverage is actually one of the fastest growing spaces. It's small, you know, starting from a smaller size.

9:05It's growing a lot in these stores. Traditionally, a lot of more impulse purchases, candy, wheat, sips doing exceptionally well. That aisle and the likes of TJ Maxx and Ross and Burlington is slowly but surely growing. You know, there's a few different options. One, again, we can go back to the whole expiration risk. The requirements for a lot of these retailers are not as strict as other ones, not just with expiration risk, but also with labeling. If there's a discoloration in the label, for example, or there's a run that you did in your manufacturing facility that is not 100 % up to standard, oftentimes you could still sell that through these channels, which is a great fit.

9:40But I would think about how do I grow my brand awareness if I'm trying to launch into Whole Foods, trying to launch into Walmart, Target? Where can I also meet that customer that is increasingly shopping at those retailers? Again, as these retailers have become a lot more popular with that younger consumer that's hunting for a deal, there's increasingly a lot more overlap. So what I would say is if you are launching with one of these big retailers, it's worthwhile exploring if you can supplement that launch with, you know, some sort of TJ Maxx program or a Burlington program. Yeah, it depends on the customer, depends on, you know, your price points and everything like that.

10:11But ultimately, it can be very complementary to your broader retail launch.

10:15Matt Goldbloom:So Matt, I'm kind of curious, like how, tell me more about like how you work with brands throughout this journey and where your role is in the work that you do. Yeah, so within the industry, typically we'll operate like a standard broker, but we're basically facilitating the transactions, managing the relationship, helping you strategize how to win in this channel. That's fundamentally what we do. We're an extension of your sales and operating team, and we're sort of your in-house experts for this specific channel. Our goal is not just to sell your products once to these retailers. It's to find ways to, as we talked about earlier, build new products, make it into a six, seven-figure revenue stream for brands, which is increasing available and possible.

10:51So that's typically how we work. Again, depending on the category, we have a lot of buyer relationships, some more than others. What we also sometimes will do is we'll have what we call like an audit sprint, which is basically like a one month exercise where if you're not sure, we can kind of sort of handhold you through the process of understanding the channel a bit more, walking you through why it could potentially work, what your price points need to be, how you want to change your packaging. That's a newer service that we're super excited about because we're sort of mutually qualifying each other, but also making sure that you're 100 % ready to enter the channel, right?

11:21So if, for example, you have a plantain ship brand and you want to move in there, maybe you don't know exactly what's in the stores or if the pricing is right. We can have that conversation. We can basically provide that information for you. So if there are changes required before we really push it, you can go back and make those changes and ultimately be ready to move forward. So it's some sort of combination of those two things. But, yeah, really just making sure that we are leading and guiding brands through the off-price journey.

11:47Matt Goldbloom:Yeah, I think that's really exciting, especially for anyone who's listening who wants to learn more about how to do that, if it's the right opportunity for your brand to definitely reach out to Matt and see what the opportunity could be. Matt, one thing that I've been very interested in recently is just like how people are forming, building and running businesses. I'm curious because like everything you're describing has a lot of moving pieces. I'm curious how you've actually managed all that day to day and how you have built out that team and for your business. Yeah, definitely. I mean, it's definitely been a journey, right?

12:18I try to start a business as a small feat. And so what I've really done is really rely on two things. One is like, it seems like everyone else in the world is artificial intelligence and trying to use it to be more efficient. But it's also been finding the right partner to help me find good talent. And there are a dime a dozen out there, these agencies that will try to help you bring in talent. But I spent a lot of time trying to narrow down, you know, where these people are going to be located, potentially, if they are overseas, what is their experience? How does that vetting process go? And, you know, you'd be surprised to know that it's not really the same across a lot of these agencies, right?

12:50Some have a much stricter standards and some dull. But I have found through working with Plus40, it's been an unbelievable experience. And they've been able to really like outsize my rate of return in terms of what I'm actually getting with my employees. I came to them, basically said, hey, guys, I'm starting this business. I need a couple operational administrative people to sort of, again, do a lot of the tedious work in the business, make sure things are flowing. you know, and I put together a JD with their help and then they went right to work and were able to find two great people that are still with me now, uh, about a year later.

13:21So I think it's really finding the right agency partner that can actually understand what you're trying to create, um, so that it can source the right people. Um, and then also making sure that the vetting process is important, you know, as well, you're finding people that are actually tailor-made for your specific business. So yeah, it's been a good experience. And I think I've been able to achieve a lot with a very small team because of, you know, the work that I put in with them as my partner.

13:45Matt Goldbloom:Yeah. You know, it's always really exciting because, you know, you've been able to build these relationships and the strategy of like how the value channel and like retail works. It takes you and your experience to be able to like manage those relationships, talking with brands, understanding how it fits and developing the strategy. Then, you know, I know a lot of brokers as well. There's just like the executional work of like filling out the paperwork and tracking schedules and just making sure the communication and meetings happen. And so it sounds like you've been able to find a good source using like global talent who are just around the world to be able to fill out that executional capacity.

14:22Matt Goldbloom:Is that right? Yeah, definitely. It's been more executional, operationally focused. You know, obviously my experience is on the front end sale side, the buyer relationship, which is difficult to replace. But in any business, especially in the brokerage business, there needs to be that back end sort of support mechanism or even for a CPG brand, right? I haven't personally started one myself, but I can't even imagine how much stuff is going on behind the scenes. And the ability to have high quality labor that can work on, you know, your hours in the United States that it, you know, they can speak English that can obviously deliver those things that you need.

14:52It helps me sleep at night from, you know, because ultimately everything falls on me as the founder, but the ability to have people that truly understand the business that are motivated to come in and work, um, you know, despite being thousands of miles away is really reassuring. So for anyone listening, I would highly recommend you, you know, take the time to, you know, to really work through that process and what you really need and finding the right partner. And I can personally say that, you know, plus 40 has been a great one for me.

15:14Matt Goldbloom:Yeah, I think that's exciting. And even just thinking about and sharing how I've built FoodBevy and my business, I think there's definitely a strong role for finding employees, finding other partners who may be here in the US, right, to like run the strategy and really have a unique point of view in your industry and like build a close team there. I think there's also than roles that are more just like executional of filling out paperwork, maybe like running parts of the operation where it's just making sure things get done. And, you know, I think previously there are a lot of conversation around like hiring a VA or virtual assistant.

15:50Matt Goldbloom:And I'm excited because that's conversations evolved over the last few years where the idea is like, maybe it's someone who can handle like your schedule or help you with emails, but it's actually evolved to a lot more than that. Like, you know, two of my team members who live in different parts around the world actually helped to fully have ownership over parts of the business to run as well as if they, you know, because they're just full-time team members. They're not doing this as like tacked onto the side that's assisting. They're actually like running parts of the business with me, which is really exciting.

16:22Matt Goldbloom:And then I think the other part, which we're seeing a lot of interest in, I think, you know, mutually with our businesses and elsewhere are using AI as well. And I'm kind of curious on your take of, you know, the role that AI is might play within your business or within business in terms of like what it can do, at least right now, and maybe the things that they can't do. Yeah, it's an interesting one. And one of the things that I struggle with is trying to figure out if what I'm building with AI is actually going to help me or it's more of a distraction, right? Because there's so many tools at your disposal.

16:52And it's so, it's so interesting, new and intriguing. I would say the thing that I try to focus on with building both with team members abroad, but also with AI is like just making sure it's still core to the mission and core to revenue generation. There are so many distractions and so many ways you can use AI that are probably beneficial for you and potentially for the business, but maybe aren't like directly, you know, driving the business forward. So I'm trying to prioritize things or automations within the business that are going to make not only my life more efficient, but it would make it easier for me to sell the products, sell my clients products to these retailers.

17:27So that's really what I'm focused on. It's mostly automations that are actually going to be supporting what the two offshore talent members do. And one of the exciting things as well is they're really engaged and are interested in learning more about it as well. So I want it to be complimentary to what they do. And I want them to know how to use the technology. So I've actually spent a little bit of time with them, like taking them to Claude and like working through the automation with them so that they make sure that they fully understand it. Because ultimately what it's doing is it's helping, you know, make the business more efficient.

17:55They happen to be touching a lot of those, you know, those, those points that AI is now going to be automating. So it's important. I would say that again, revenue generation focused on like actually achieving the most, you know, the highest, the most important goals in the business, but also making sure your team is like fluent and understands the technology and what you're actually building. That would be another one as well. What you don't want is you're building all the AI, your team doesn't really know how to use it. And you're spending a ton of time handholding with them. And, and, You know, that's just kind of defeats the purpose.

18:21So trying to find ways to, you know, get everyone involved.

18:23Matt Goldbloom:Yeah, I love that you're sitting down and talking with them about tools like Claw because then it becomes a way for them to extend their output and their own efficiency. And it's less about replacing them, right? Because I think like the biggest thing about debate around AI is like replacing people necessarily. But it's more from what I've found benefit around as well as like, how can you extend the output that someone makes so that they can do more with the less that they have? And so your business can go farther. And I think that's been really exciting. And, you know, I'm curious to see just like how the different like AI tools continue to evolve.

18:59Matt Goldbloom:I don't know. Like, I kind of feel like AI right now for a lot of entrepreneurs with current businesses, as you mentioned, can be a distraction because there's almost this idea of like, oh, you can build anything. And entrepreneurs love having their ideas expressed. So you're like, what else can I build in? I've gone on a number of rabbit holes of like cooler, interesting things that I've made. But I'm like, I like your point of coming back. Like, is this actually driving the business forward? Or is it something for fun? And I can put it in the fun bucket, but not try to like trick myself like, oh, I'm using like this is for the business when it's really not.