Bob was right all along (no – not ‘The Builder’ – I mean Dylan)! Those never ending shifting sands that we do not see each day have moved the desert further on and a new wilderness, just like our markets, has emerged. But it’s not just about the markets, many of which are limping along like a three legged crab! Because world markets have become much more volatile it is time to re-evaluate the typical business route to access foreign markets. It has to be a multi-channel approach to succeed in the long-term. It sounds obvious now but was not so a few years ago.
Traditional, and taken for granted, trade routes are drying up, and new routes must be forged so that the cash can flow and we all remain healthy. The tradition of working with distributors to reach into foreign markets works well so long as both your business interests are truly aligned. So for the first few years this works well as the low risk business model of distributing your products to independent retail stores rolls out. So for example after a couple of years you find yourself in some 400 independent toy stores in Canada. But you have to ask yourself – what next?
If like WOW you are selling consumer goods then independent stores the world over are in decline and at the best of times represent only 5 – 10% of the national sales value of your product category in any foreign market. It is the mid-sized and large chain stores that dominate the sales by category. We need to be making ‘friends’ with them and showing them what we can do for their businesses.
Typically distributors have many brands in their portfolio and each one only gets a proportion of their time and budget each year. All their products are sold mainly to independent stores and some key national retailers. Once the distributors comfortable goal of filling up these sales channels has been reached further growth tails off and it can become frustrating for the principal (that’s us) since you want the growth to continue.
Supplying big national retail chains involves more financial risk for the distributor like the need to hold much higher inventory levels of your products and the greater risk of exposure if the products do not sell well. In addition the big retail chains demand marketing spend to support the sell through of the products. So perhaps naturally a distributor often needs to be persuaded to take that step forward by the principle.
For many reasons the ‘persuasion’ part does not bear fruit some of which are because the distributor is under financed, does not have the skill set to engage with tough large retail chains or is simply happy enough with the existing level of business they are doing. Any such reasons are profoundly boring to a self-respecting entrepreneur who has growth at the forefront of his/her mind!
So it is time to relook at those signed distribution contracts for the many markets we are in and find ways to leap frog over and get connected to the top buyers in the big chain stores. It is time to stop thinking about geographical territories like the USA, Spain or whatever and think about sales channels. When you think about it, who cares where the customer actually is in the world! What is important is that we can supply them with perfectly suitable products that make them happy and sell well for them. Everything else is just process!
Since we already exhibit at five different international trade shows each year we can easily meet all these important buyers. With so many huge retail chains based in Europe all within two hours flying time from our London HQ we are well placed to take this next step in our sales strategy.
With news of all those wretched customs and immigration queues at the UK airports I figure it is time to invest in a WOW Gyrocopter. I have my eye on an Arrow Copter - see left... Awesome!
Nadim is the CEO of WOW Toys - you can see a Case Study with him on expanding across the globe here