Should DTC Brands Sell to Mass Merchandisers?

Bandholz: Today I hope to discuss another issue: how to get into mass retailers. What year did Beardbrand launch in Target? Was that 2018?
Bandholz: Small retailers can go to Wholesale.beardbrand.com and place an order, pay with their credit card, and then we ship it. It’s like a retail transaction. But with Target, it’s much more complicated.
Bandholz: What’s the future of physical retail? Covid shook everything up.
Bandholz: The bigger question for many listeners is how does a brand even get into Target? What’s the process? Reinders: It was. February 2018. It took an entire year of work to get there.
As an indie bootstrapped brand, we can’t afford to make up their margin if they can’t sell the product. So, we tried to collaborate on promotions, data, and making sure folks know that our brand is in Target. We offered exclusivity for some of ours products. We also negotiated the contract to avoid potentially bankrupting ourselves on chargebacks.
Reinders: It’s a valid point. The mass retailer is going to protect its margin. And if your brand is not performing, you have the potential to be the company that is making up that margin. We were cautious during our negotiation to shift as much responsibility for that margin to the retailer as possible.
Our entire audio conversation is embedded below. The transcript that follows is edited for length and clarity.
Reinders: We dipped our toes into a mass retail store before Target. But we weren’t ready. We had a lot of chargebacks. Our paperwork was a mess. We didn’t know when they were returning stuff or whether they should have returned it. It ended up drowning us. Plus our products never took off there.
Reinders: We’ve researched that. We focused on Target based on what type of brands it carries and its reputation. Target is comfortable bringing young brands to the masses. Walmart does a great job of ensuring its customers get the best value. That takes a more mature brand. Beardbrand has never been the cheapest product on the market. So if a brand is ready to offer a deal, Walmart might be a good place.
Bandholz: Felipe, who was on this podcast a few weeks ago, set up our EDI. In other words, we had to hire someone to set it up.
We asked ourselves, “What can we bring to complete what’s missing? And what kind of data-based information can we offer as an ecommerce company — who’s buying and why?”
Bandholz: You’re my business partner. No one had better poach you away. We’re going to ride this to the end.
So waiting until year five for a big opportunity such as Target was a good move for us. The earlier failure was a smaller scale but a similar type of mass retail chain. It provided us with familiarity as to the paperwork and shipment expectations.
We could hire a person to manage the smaller accounts and another to manage a single major account, responsible for all of the interaction with the warehouse and all of the inventory. That would be the man-to-man approach.
Bandholz: Beardbrand has other wholesale accounts, such as independent pharmacies, salons, and barbershops. How did they take the news of us going into Target?
Eric Bandholz: You were on this podcast back in 2018. We talked about finding business partners.
Bandholz: When we got into Target in 2018, that was our fifth year of business. Should we have tried to get there earlier?
Bandholz: Many of our listeners are direct-to-consumer ecommerce brands. They’ve developed their own products. How do they know if mass retail’s going to work for them?
When we improve the packaging, for example, it eventually goes to the shelf, but several items on that shelf are not improved. So that’s been tough from a brand standpoint, as we try to be very consistent and evolutionary with our products and brand. I don’t know how to solve that other than selling faster.
A chargeback is when you’re penalized for not carrying your end of the bargain. If you’re shipping late, shipping faulty products, or shipping incomplete purchase orders, you would get a chargeback. It forces us as a vendor to be on top of our game operationally, which can be a good thing. But you need to go in with eyes wide open, knowing the potential of losing a lot of money if you cannot execute operationally to keep the product on their shelf.
Lindsey Reinders: Yes, what to look for in a person to grow a business with. How to vet them and find the right one.
Reinders: I see more of the hybrid approach — order online and drive yourself to the store to get it, rather than ordering online and a truck delivers it a few days later.
Reinders: All the way.
We’ve had a bit of experience with regional groceries. We found that grooming products are an afterthought for grocery stores. Shoppers are primarily there to get food. Plus, they are programmed to look at the circulars and the coupons. So they’re looking for a deal.
Reinders: Felipe was a big part of getting us up and running with Target because he had that familiarity with EDI, shipping requirements, supply chain logistics, and everything related. It was crucial to our success.
Bandholz: Do you have insights into Target versus other mass retailers, such as Walmart, CVS, Walgreens?
Selling products to mass merchandisers is a goal of many direct-to-consumer ecommerce brands. Certainly it was for Beardbrand when we launched the company in 2013. Eventually we succeeded when Target began selling our products five years later.
For us, it came down to our mission of reaching as many men as possible. We did our best to protect those independent retailers by offering an exclusive product to Target that wouldn’t directly compete with what their customers were already buying. And we reminded them that a rising tide lifts all boats.
Bandholz: Looking back, would you have done anything differently in the beginning stages with Target?
Bandholz: What are the staffing requirements to manage a Target account?
CVS and Walgreens are good options depending on the product. They focus on convenience rather than offering a variety or cutting-edge items.
Reinders: I’m on Twitter and LinkedIn. And Beardbrand.com, of course.
Is mass merchandising a worthwhile channel for ecommerce brands? Would Beardbrand do it all again with Target or a similar company? What’s the process? I recently asked Lindsey those questions and more.
Bandholz: Where can people reach out to you, contact you?
Reinders: Our marketing broker facilitated the conversation. Brands can hire a broker or an agency that has experience with Target or another mass retailer. Ours happens to be staffed with mostly ex-Target employees. They know the internal functions, the language, and what the buyers look for. And they were able to guide us through those conversations, such as the value our brand brings and what Target needs. I wouldn’t do it any other way. They’ve been crucial.
Reinders: Right, we had to create an EDI — electronic document interface. Target submits orders from their system automatically into our EDI platform. We then pull from the EDI into our accounting and other software. But, yes, selling to Target is a whole different beast in that regard.
Reinders: I’m happy with the getting-to-the-shelf portion. Felipe guided us well there. There was some initial ambiguity as to how boxes should be labeled. But overall we executed pretty well. What we’ve learned since then is we can’t be as responsive and iterative in mass retail as ecommerce. Beardbrand is built over the years on listening to our customers and making tweaks to improve. We can’t do that as quickly with Target because they’ve got our products in 2,000 stores.
Lindsey Reinders, my business partner, drove that project. She approached Target, negotiated the agreement, synced our internal systems to Target’s, and ultimately oversaw fulfillment and shipping.
I don’t think we lost any of those accounts.
Data has always been a weak spot for mass retailers. Customers pick products off the shelf and go through the checkout line. The retailer doesn’t conduct a post-purchase survey, see the emails customers click on, or analyze their path on a website.
Reinders: We had a couple of reactions. Some people were stoked about Target’s reputation and legitimizing the brand. Others were worried they were going to lose their Beardbrand customers to Target. A few thought we were becoming too mainstream.
Reinders: It depends on whether you go for a zone defense or man-to-man. We have a zone defense here at Beardbrand where our inventory and logistics manager shoulders the process for fulfilling all purchase orders, not just Target’s. And then our account manager does a lot of the experience portion of all wholesale customers with negotiating, promotions, answering questions on new products, that kind of thing.
Bandholz: I’ve heard horror stories of companies selling into Walmart or similar, and then they go out of business because Walmart drove the costs down.
Reinders: One of the things that helped us was looking at the products already available at Target. Did a Beardbrand prospect have his needs met at Target?
If I had a magic wand and unlimited resources, I would hire a merchandising team to go into Target stores and improve sales. Those employees would help craft the experience for other major retailers as part of the negotiation and bringing them on board.
It seems that physical stores are moving towards being experiential, more attractive, and more of a destination or showroom. Target’s remodeling of stores appears to focus on lighting, experience, and aesthetics, giving people a place out of the house and a more involved shopping experience versus clicking and scrolling.