How to Get Your Product into Costco
Costco is a unique, but profitable retailer that many suppliers are anxious to sell to, but few succeed. If you want to start seeing your products on Costco store shelves, follow these tips:
Change your pitch.
For other retailers, you may focus your pitch on how profitable and strong your margins are, but don’t do this for Costco. This retailer makes the majority of their money on customer memberships, not margins. In a pitch meeting, Costco buyers want to hear about what kind of value you are offering their customers and why you are different from the other products in the store. They are much less concerned with how much they will make off of every unit than other retailers are. If you get the opportunity to pitch to Costco, make sure you adjust your presentation to meet what Costco buyers are looking for.
Consider bundling products together.
Often, brands create special bundle packages of products for Costco that are not offered at any other retailer. This is done in order to offer more value to the Costco customer, who is used to buying large amounts of products at once for low prices. If you want to impress Costco buyers, make sure you have already brainstormed ideas of how you can bundle products together and include this in your presentation. But, before you present to Costco, make sure your internal team can handle the process of creating new packaging and shipping out new products.
Make sure you can adjust your price.
Costco is known for the incredible value they offer their customers. If you cannot adjust your price to fit what Costco is looking for, then there’s no point in pursuing this retailer. Make sure you look over your financials carefully to determine how low you can go to remain profitable. Once you know how low you can afford to go, visit Costco stores to see if your price fits in with similar products. If your price is still much higher than other products in your industry, Costco may not be the right retailer for you right now.
Contact a distributor.
Both new and established brands often rely on distributors to handle the process of getting into retailers such as Costco. That’s because distributors such as Mr. Checkout Distributors, already have strong relationships with these retailers and therefore do not have to struggle to get their foot in the door. If your product has strong margins and is ready for retail, Mr. Checkout Distributors can send it to their network of wagon jobbers and direct store distributors to get on Costco shelves immediately. Allowing a professional to handle this part of the business will let you focus on your strengths instead of spending all your time trying to get in touch with a retailer.
Want to launch your new product in Costco? Contact Mr. Checkout Distributors to talk to a team of experienced and knowledgeable distributors that service over 35,000 stores across the country.
How to get your product into Costco
- Understand you client: Before you spend a lot of time and money creating a product, you should know if anyone will want to buy it. Learn more about Market Research
- Learn if it’s protectable: Know if you can defend your product against cheap copies if it gets knocked off. Learn more about Copyright and Patent your product
- Test your product: Make sure that there’s a demand for your product and the customer understands what you are selling when it’s on the shelf and nobody is there to explain it. Learn more about Product Testing
- Perfect your pitch: Before you speak to decision makers, know your numbers, know your retailer and know your logistics in and out. Learn more about Pitching Your Product
- Don’t do it alone: If you haven’t been successful in retail before, a secret of success is that you can’t do it alone. Having great sales staff, customer support and marketing partners can take you from zero to success faster than if you tried on your own. Learn more about Retail Partnerships
Contact Costco Buyer
Do not trust any “list” of buyers.
Typically retail buyers change either companies or positions every few years. This strategy helps retailers know that their buyers are not taking “kick-backs” and are selecting the very best product for the very best position each time.
Buyers are typically held to a very rigorous standard of sell-through volume that they must hit and because of this they are risk averse. Your job as a supplier or vendor is to convince them that the buyers going into the stores not only know about what you’re selling but are actively seeking the product in the store currently.
Sometimes easier said than done, however you must get on Costco’s radar.
Call the Costco’s corporate phone number and ask for the names of the buyer and assistant buyers in your category.
Always leave voicemail with whomever the dispatch will connect you.
Use that information to connect with them on LinkedIn, RangeMe and any other professional social platform.
Ask your representative at your trade bureau to connect you to the Costco buyers as they will potentially have a better history.
Use advertising, public relations and marketing to make your brand known to Costco’s buyer through 3rd party websites & industry media sources.
Be everywhere that they look, the key is to position your brand as the obvious choice when Costco is looking to either refill a slot or create a new category.
Latch on to the news of the day and any trend that will make your product fill that niche whether that be Non-GMO or Vegan Leather for example.
Investing in your brand can only benefit your opportunities in the future. As being “top of mind” will have a ripple effect when you physically present your product at a Costco buyers meeting or trade show in the future.
Costco buyers typically got to their position by picking “winners” and know how to see through the fluff.
Focus on the numbers, know your bottom dollar during a negotiation and how fees and chargebacks may cut into your position.
Know that long term success may outweigh short term sales, however financing large purchase orders from Costco when the net result is negative is not sustainable.
Understand the playing field and the other brands that are in your space, what they are offering as promotion and pricing and how you can stand out against them.
By knowing that each buyer at Costco probably knows more than you do, take an active listening approach to sales and understand that no is a perfectly acceptable answer that may have saved you millions of dollars on the backend.
How to Submit a Product to Costco
Here are the 6 steps you need to take to have your product placed in Costco.
1. Start with the right questions.) Before you try distributing your product to Costco, you need to ask yourself a few basic questions. Do you need to build demand for your product, or is there already a demand for it? Do you know that Costco would be interested in selling your product? If you can strike a deal with Costco, can you handle the production volume? Do you want to sell directly to Costco, or do you want to license your product to a manufacturer that will handle distribution?
2. Be prepared to profit.) Does your product offer enough of a profit margin for Costco? Can you sell your product at a reasonable enough profit to cover the packaging, shipping, commissions, marketing and wholesale distribution? Check Costco’s guidelines for other fees that you will have to build into the cost of your product in order for you to be able to turn enough of a profit to make the effort worth your while. If you work with a discount retailer, they will try to strip your profits down to zero in order to keep their prices as low as possible.
The typical breakdown of margins are: If a products costs $1 to produce, that product will retail for $4. That product that retails for $4 will wholesale for $2 to distributors and stores that purchase direct. Big box retailers like Costco may offer to pay $1.25 to the manufacturer if the product costs $1 to produce. That is the typical profit margin.
3. Determine if Costco is the right store for your product.) The relationship between you and Costco starts with you browsing their store for competing products. If Costco already has a similar product, it is going to be very difficult to get your product picked up. Spend some time at your local Costco to see what kind of products they are selling, speak to the manager and see if he thinks your product will sell well in their store. Picture in which zone your product would best fit on the shelf and keep in mind that the most precious asset that these big box stores value are their shelf space. Keep this information in mind when you are preparing your presentation to Costco.
If your company is minority or women owned, check Costco’s website and see if they offer specific opportunities for those designations.
4. Pitch your product to Costco.) Decide whether it will be you or a representative to present your product to Costco. Your presentation depends heavily on your strengths as a businessperson as they will most likely ask financial questions and logistics questions.
It’s common for companies to hire a broker to pitch their product to Costco, as it will be more likely that your product will make it to the next stage if the individual pitching your product has industry knowledge or a personal relationship with Costco. The percentage of commission verses, however generally a broker will take around 5% to represent your product to Costco.
We at Mr. Checkout have experience dealing with brokers and know that there are several retail brokers that have poor business practices that can potentially damage your brand. If you are seeking a legitimate Costco broker, please give us a call for a recommendation. It could save you a huge headache and a lot of money.
5. Complete the required Costco paperwork.) Often Costco will have you go through an application process. However, before submitting the paperwork required by Costco, you should contact a buyer at Costco and let them know your intentions. Having a contact inside of the company will potentially move your application more smoothly through the process.
6. Anticipate the need for increased volume.) Having Costco agree to stock your product will most likely mean a significant increase in volume. You should be prepared to ramp up your production and informing your manufacturer of this opportunity.
Having production, logistics and distribution to sync is not only difficult, it requires a significant amount of time invested in customer relations. Also, Costco may have stipulations in the contract that may penalize you for delays in shipping and production. Have an attorney explain all contracts to you if you don’t understand the terms.
If you’re looking to sell your product to Costco, be sure to thoroughly assess the marketplace, carefully prepare for production growth, and take full advantage of resources available to help you grow your business.
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