Sunday, June 28, 2009

Installment #2: 5 common mistakes companies can make when selling their products to Costco! Installment #2.

#2 - Believing Costco will change their business model for your item

It is no secret at this time of year the wholesale and retail business is crazy. One unique characteristic of Costco is they will accept product all year round as long as it fits into their business model while most business retailers are already finished with their merchandising plan for the rest of this year and are already working on 2010.

Costco has been successful over the years by sticking to what works and not compromising their formula. It would be a mistake to think they are going to alter their long standing and time tested business model for any one item.

When deciding whether your product is right for Costco, it is imperative to put your product into Costco’s model to see if it will work and if you can live with the result. Preparation is the key here! If you do not know how to prepare for a meeting with Costco and how to see if your product will work in their model, then feel free to contact me via my
website.

Outlined below are a couple of main features to their business model that will get you started.
Brand – Costco is generally looking for items with an established brand image although there are some limited exceptions to this rule. If your product is new to the market then you may want to gain some distribution and brand awareness prior to taking it to Costco. TLB Consulting can help you create an overall marketing strategy for your product prior to taking it to Costco.

Value – Costco must be the lowest price or offer the most value in the market, no exceptions. Costco’s members pay a premium to shop at Costco therefore Costco will not bend on offering value. As a rule they generally like to be a minimum 20% below any advertised price. It will be important to look at your current distribution and evaluate how selling to Costco may disrupt your current sales.
Packaging – Costco has made their packaging and pallet displays an integral part of their overall value statement. The faster Costco can take a pallet display from the truck to the sales floor the more value they are able to offer their members by keeping their overhead low. Be prepared to understand and adhere to their packaging requirements. Note: Costco moves product around the sales floor daily and the more mobile your product, then the easier they will be able move it without damaging the display.

If companies are lucky, they get one chance to sell their products to Costco. Doesn’t it make more sense to be prepared and know their business? You will go a lot faster and farther if you are in the same boat rowing with Costco and not against them.

Happy selling.


Stay tuned for installment #3 – Thinking you can figure out the logistics later.