How to Get into a Big Retail Chain

Federal retail chains are a huge distribution source. But getting in there isn’t easy, especially for small manufacturer and startups. Arkadiy Pekarevskiy, co-owner of Aztec confectionery factory (Grondard brand), explains how to negotiate with retail chains and what will it take to appear on a supermarket shelf. 

One friend of mine used to say: “When you work with retail chains, you are their slave!” There is some truth in it. I could not get into any retail chain with my product for 2 years and fired a few managers who could not solve the problem. And then I took the problem up myself and realized that there was something wrong in the situation.

How were we taught to do business in the 1990s? If you need distribution, you should spend days and nights near the store head’s office until he agrees to sell your goods in his shop. But this doesn’t work in negotiations with retail chains.

Only the product matters: its quality and interest in it. We had no problem with quality. But I had to work on attracting attention. This is quite understandable. In a store, no matter how large it is, the number of shelves is limited, while the number of offered products is unlimited. And every manufacturer wants to take a bigger shelf, so there is a “battle” for every centimeter of it. And it seems to me that the main “weapon” here is human communications.

Buyers tend to ignore a supplier, respond nothing to his requests, avoid contacts. Manufacturers spend months just to transfer their product to buyers. And the same time is spent to organize the meeting.

Informal relations help dialogue. For example, if you worked with chains earlier, the conversation may develop faster, at least because you have numbers of useful people from there. Our negotiations speeded up when I hired a former top manager from Pyaterochka (a Russian grocery store chain, X5 Retail Group brand, unites more than 15 thousand stores supplied by 31 distribution centers.) But anyway it’s months of work, because there is a certain routine.

There are two ways to work with retail chains. The first is to work directly with them, when you supply the products yourself. But this works only for big manufacturers with a large assortment, turnover, a brand known around the country, ad campaigns on TV. The second way is to work via distributors. Each retail chain has a number of such suppliers. This works for small manufacturers with a turnover incomparable to sales of bread, milk or Coca-Cola, for example. But… there are thousands of products in every distributor’s list. And no one can guarantee that yours will be sold. So, the best decision here is to work in both directions at the same time: to negotiate with retail chains directly and, after the agreement is reached, start working with distributors at the technical stage. That’s what we did.

But getting into a big retail chain costs supplier a lot. You will have to participate in various promotions where the goods are sold with practically no profit. And the last 5 years in our country are the time of such retail promotions.

When my mother says she bought a box of chocolates for 57 rubles on the promotion in a store, I realize that it’s impossible. Its production alone costs 70 rubles and considering the company’s profit and all the extra charges, this box of chocolates should cost at least 150 rubles. But such promotions are obligatory. If your product’s profit is 100-200%, you can afford it. But most manufacturers have small profits. And after the promotion, when they put a normal price on their product, people just don’t buy it. It’s a problem. And it concerns the entire assortment of chains – it is, like in “Wheel of Fortune”, different promotions take place all year long. Of course, it’s good for retail chains as their turnovers grow. And for customers too. But the manufacturers are suffering.

Negotiations with retail chains can succeed only if you are ready to participate in their promotions and sacrifice profits for the sake of turnover. Hard? Yes, it is. Blackmail? Perhaps. But there is no other way.

All the easy ways that existed in our business before 2008 are gone. Now only those who make the best product at the best price and are ready to negotiate, survive.

We agreed on these game rules. It took us a year to enter almost every retail chain. And do you know what the paradox is? Our sales increased by 30%, but despite all the obstacles we finished the year with profit. In this regard, I really like the phrase: “Do what you need and come what may.” That’s how we live and how we survive.

Profile

Arkadiy Pekarevskiy

Born in 1966 in Leningrad. Graduated from the Mining University.

In 1991 – co-founder of Sela Corporation (turnover in 2008 — $200 million). In 2008, he sold his partner a stake in the company (it was estimated at $90 million) and became an investor.

Now he develops Aztec confectionery production company (Grondard brand), invests in real estate, has a stake in the Capital–Polis insurance company and the Pic’n’Mix company, which produces and distributes educational children’s toys in Russia.

Source “Market Media”

https://marketmedia.ru/media-content/kak-popast-v-bolshie-seti/?fbclid=IwAR39UTsUwlvqgM_fGRNCnXM9KDpsn2BJHADqDwexEj3x-OC9FWVDxYWTZI8