Getting supermarkets, convenience stores and drugstores as you distributor
We all want our products in full sight at the shelves of any supermarket, convenience store, drugstore or department store. This will boost your sales and give your product the status it deserves. However, in order to get there, you will have to pay for it, and the better the position, the higher the fee.
Definition of a listing
A listing is the introduction of a product/product line in the retail offer of a retail/foodservice company in a specific retail channel (offline or online), territory, store/s decided by a retail representative (Category Manager, Retail Manager, Store Manager, Buyer) after having received all information and deeply assessed the profit and sales potentiality.
What is a slotting fee (or listing fee)?
A slotting fee is the amount of money/fee required by the retailer, once she/he found potentiality for your product, to cover some direct costs (e.g. opening a supplier code, checking quality standards, list in the IT system,etc.) but mainly to cover the costs of space that is the most scarce/valuable resource for a retailer (both online and offline).
Slotting fees or listing fees, slotting allowances, pay-to-stay
These are all names for the fact that the supermarket or other retail outlet wants to optimise its shelf space. The specific metrics may vary, but the principe remains the same: its a way to share the risk/opportunity of a failure/success of a listing between the manufacturer and the retailer.
The point of view of a retail category manager
A category manager of a Retail Chain has:
- A potential opportunity to select products for the categories assigned among about 500.000 SKUs
- She/he needs to select products for a store that can keep only 1.000/3.000 SKUs on the shelves for her/his assigned categories (4.000 small smkt – 10.000 medium – 40.000 large)
- A shopper buys an average of 400 SKUs per year.
- A basket in a single shopping trip is composed by 30 – 60 SKUs.
And a category manager knows that only 1% of new products launched in the market survive more than 1 year…
To list a product means delisting another one
The space in a retail shop is limited. And it is already fully optimised. This means that if you want your product on the shelves, the category manager has to remove another one to make space. So he has to disappoint another manufacturer who has already paid a listing fee, but whose products do not sell enough.
Profitability for a retailer is rotation x margin
Retailers make money by selling your goods at a margin. The quantity of goods sold in a certain period is the rotation, and as a manufacturer you have to make credible that the rotation of your product will be high. The other aspect is margin: but mostly retailers set a fixed margin per product category, which may range from 20 to 50% for fast moving consumer goods.
The same applies for online sales: although there you list as many products as you want, online retailers won’t do that. If the online customer has too much choice, he or she will find the website messy and perhaps even won’t buy.
What is the business case for your product?
Of course you can try to negotiate with purchasing managers of retail chains. There are alternative ways of payment, like advertising in the supermarket’s magazine or doing sampling in the supermarket. This will also help your sales. There are many parameters, and eventually you will have to keep in mind you business case: will you still be making money on your product?
