How to sell your products to Costco, Part 2

Last week we left off just as I was about to get into the nuts and bolts of the critical steps required before ever stepping foot into a meeting with a Costco Buyer.

These steps are in order, but feel free to change them around a bit to suit your work schedule and time lines.

1. Product selection: Determine if a single product or multiple products will be offered. At times, in order to create the value needed to meet Costco's standards, you may have to bundle products together. Bundling products can also help with your distribution as you have created a unique item number.
2. Pricing: Research distribution network to determine lowest sell prices in the market on the products you would like to offer Costco. Ensure you have a handle on all prices and products being offered for sale. If you don't you can be sure Costco will. They will do their research which means you need to as well. Create a possible pricing structure taking into account prices currently being offered.
3. Distribution affect: Determine how selling product to Costco at reduced pricing or added value will affect your current distribution network. Distributors and dealers can sometimes become difficult if they believe you are undercutting them by offering the same products to Costco for less.
4. Packaging: Determine what type of packaging you will be offering to Costco. Costco is very specific on their packaging and palletizing requirements. Price out packaging and graphics.
5. Logistics: Take a look at your current logistics capacity to determine if you are able to service a large client like Costco. Knowing your capacity will help you calculate what you potential sell through might be. Analyze Costco's routing guide to ensure you are including all required aspects when looking at logistics. Click here for routing guide.
6. Other Costs: Review these additional costs: 1. Customer service support - Do you have the phone support required to handle the influx of customers or will you have to hire a company to handle this aspect? 2. EDI costs (Electronic Data Interchange) - Price out EDI to include in your financials. 3. Promotional costs - Will you want to participate in any promotions? The various promotions at Costco are where the sales really explode and should be planned for accordingly. 4. Shipping - Costco will require a delivered cost to their depots. You must cost average this out and include in your cost structure. 5. Returns and defects - How will you manage the return and defect portion. This can get expensive and should be carefully evaluated.

Stay tuned for the final post on this subject. As always email me with any and all questions.