Target’s flagship store at Target headquarters on January 07, 2021 in Minneapolis, Minnesota.
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April Harris of dessert company Keeping You Sweet, Melissa Butler of The Lip Bar, and Gwen Jimmere of Naturalicious share several things in common: they are Black female entrepreneurs who have succeeded building businesses on their own, and they have succeeded in winning deals with national retail partners including Target, Ulta Beauty, Sally Beauty and Whole Foods.
In recent decades, Black women have created new businesses at an unprecedented rate. There has also been more focus in recent years from the national retailers to diversify their supply chains and partner with more female and minority founders. They have as much experience, if not more, navigating the changing retail industry and dominance of the big chains as any successful entrepreneurs. Even with unique product ideas and passionate consumer bases, getting into the big retail stores wasn’t easy, and they have all learned valuable lessons, from pre-pitch research to post-pitch operations, on how to build a retail partnership that makes sense for a growing small business. They recently shared some of their early wins and misses, mistakes and hard-earned business wisdom, with CNBC.
Here are 9 lessons they want to share with entrepreneurs hoping to win a pitch with their dream retail partner.
1. If you aren’t a celebrity, bring proof of social media
Gwen Jimmere, founder and CEO of hair care brand Naturalicious, has been on the other side of the table: she worked at Ford in global communications and in the advertising industry before starting her own company. Ford was among the first companies to build its brand on Facebook and Jimmere says it is critical for entrepreneurs to build an online “tribe” that rallies behind their brand and can be used as part of a pitch. It demonstrates the community of consumers you can bring in for a retail partner.
This is especially important for brands competing with the increasing entrance of celebrities into the consumer market, who are more likely to be immediate sales successes in stores. Retail partners will look at sales and social media presence, and Jimmere says national retailers like to see proof of the popularity of a brand on social media, at least 10,000 followers on Instagram, as an example.
April Harris, founder of New Jersey-based Keeping You Sweet, which makes gluten-free and vegan cheesecakes, says you need to do the research on your existing online presence if you have not already because for these partners it can be the major point of attraction. She started in local delivery and local Whole Foods and through the latter relationship was introduced to Amazon (Whole Foods’ parent company) representatives. Amazon mentors that were brought in to work with Whole Foods supply partners showed her search results related to her that she did not even know existed, thousands of searches for her name that piqued Amazon’s interest in a potential partnership.
2. Track social media by geography
From a retail partner’s perspective, it’s the best payout for the least work if you can bring in a community they know already follow you and buy everything you say to buy. “You have to keep those screenshots to prove it,” Jimmere says.
But it is not just about the total number of follows or searches. The geography of your social footprint is key for in-store deals. Jimmere says that when she started to pitch Sally Beauty the company was impressed with her sales growth but less sure that buyers across multiple markets would come into stores to buy.
“That got us into Sally Beauty because we could prove — even though they had never heard of us and were only in a few Whole Foods at that point — the geography of my tribe and how it overlapped with their stores,” she recalls. “Start saving all that social media stuff geographically,” Jimerre adds, and not only for an initial pitch, but if you want to expand your retail footprint with a partner after an initial deal.
Social media approval isn’t enough to win a pitch, she says, because you need to be able to make the connection between the social media presence and how it will drive people to specific stores and move product off shelves.
3. Don’t go for it all, all at once
“If a small brand doesn’t have lots of money to spend on retail marketing, which is a lot of money, it may be more advantageous to get into a handful of local stores, at most, that you can easily get around to or have family or friends help you get around to, to prove you can go regional and then national,” says Jimmere, who started in her kitchen and basement as a single mom entrepreneur and is now in 1,500 stores, primarily Ulta Beauty and Sally Beauty, but also a handful of Whole Foods.
Even though the grocery chain remains her smallest partnership, “Whole Foods gave me the first shot when no one knew who we were,”Jimerre says.
Now with a larger staff, an operations manager and a fulfillment partner, Naturalicious can turn around a retail order in a few days when it would have taken weeks before. “If I knew then what I know now I would make sure the supply chain is running like a well-oiled machine before getting into retail,” Jimerre says. “You don’t want to be too fast to do it.”
4. Be prepared to foot the bill for a while
Jimmere says that in retail payout to the entrepreneur can be on a schedule of anywhere from 30 to 90 days, even 120 days, after the sale, and that means entrepreneurs need to be prepared to carry that financial burden, especially with a new deal that is taking a small business to a new scale. The first few large retail orders will be a major expense and entrepreneurs need to know they may be waiting a while for that payback check.
“You really need to know your numbers,” The Lip Bar founder and CEO Butler says. “Sure you want to see the products on shelves, but as a business owner, it doesn’t make sense if it doesn’t make money. When I started pitching to go into retail I didn’t realize how much it cost.”
“I think the biggest mistake people make is thinking they don’t have leverage,” says The Lip Bar CEO Melissa Butler of deals with retail partners. “It’s not just about you doing everything they want you to do. … They took the meeting because you can potentially do something shape-shifting for them.”
Butler says those long wait times before getting a payout for sales through a partner are a reason to stress knowing how much it costs to be in business with a larger retail entity rather than thinking about how much you will make. Retail opportunities by their nature mean you are losing margin, and losing direct access to the customer, so it is important to know the opportunity costs.
“The single most-important thing is to be aware of the numbers.Your business might not get paid for six months, are you capable of footing the bill?” Butler cautions.
5. Understand that a coveted deal can be a costly one
Entrepreneurs may bite off more than they can chew in attempting to scale for a big retail partner, but many don’t realize those national chains often charge entrepreneurs in several costly ways that can make or break a business.
In-store displays, for example, can cost from $30,000 for the “cardboard” fixtures to as much as $300,000 for the permanent, prominent branded shelfs, and it is the brands not the retail partners who pay.
“It’s not cheap and you pay per store,” Jimmere says. Any time there is a promotion, you are paying for those discounts as well. You do want to have the premium placement in stores because those are the prime areas where people are spending the money, but you will be paying for it, she says.
Retail partners can also charge a late delivery fee if the product doesn’t arrive on the agreed upon schedule.
Butler and Jimmere said entrepreneurs need to remember that the national retailer is taking, on average, anywhere from 40% to 60% of the sales, and there can be those display charges and late charges which, if not effectively negotiated ahead of time or managed through efficient production, can reduce your cut of sales before you ever get the check.
6. Don’t be intimidated, negotiate everything
In one of Jimmere’s early attempts to win a deal with a large retail partner she was told that negotiating was not allowed. “It’s not true,” she says, and she warns small brands to not get so overly excited about the scale of a potential partner that they accept terms which may weigh on their business.
“I think the biggest mistake people make is thinking they don’t have leverage,” Butler says. You have to pitch to a retail partner’s needs and their customer needs, and show how your brand will stand out in a saturated market, but “it’s not just about you doing everything they want you to do. … They took the meeting because you can potentially do something shape-shifting for them,” she says.
“Depending on the terms, you may not even make money on every sale, and I didn’t even know that in the beginning,” Jimmere says. “Do not let anyone tell you nothing is negotiable or get so excited about having your brand in a store that you forego profit in lieu of being able to have bragging rights. At the end of the day, what matters is that you can sustain the business,” she says.
There are many consumers who would never have heard of Naturalicious if partners like Ulta weren’t good about promoting brands in stores, and that can ultimately lead consumers to come back to your direct sales channel in the future. But Jimmere, whose company is now doing $2.4 million in sales, says getting into a big retail network is not necessarily going to result in a doubling or tripling of revenue immediately. Sometimes, a big advantage is the discovery your brand is able to add from the in-store customer experience, though that comes at a cost too: you don’t get the customer data that do through your direct channel.
7. Accept that the hardest part may be getting a meeting
For all the persistence in making calls and getting lucky with unexpected connections at industry events, several entrepreneurs said they have needed to work with a brokerage partner to break through with big retailers. Jimerre and Butler both worked with brokers who knew the big firms like Ulta and Target well and knew how and why their products could be sold into these channels.
Jimmere says persistence and networking can pay off. She made the calls herself to Whole Foods in her area and she met a key Ulta emerging brands division contact at an industry conference, but getting into Sally Beauty wasn’t working by just submitting to the company online. “Imagine how many pitches they get. The stuff goes into a black hole most of the time.”
When Butler first made the decision to pursue retail partners she directly reached out to a lot of buyers, but says now it was not necessarily the best way to go. “Things do get lost and they get lots of pitches,” she says. Butler found that working with an external sales group was the most effective way of breaking through with a retailer like Target because of the trust already established as an agent placing brands with the company. Even though there is a cost to that middle-man relationship, “They will get you in front faster, and they should get paid for their work,” she says.
Those brokerage deals can be based on a percentage of sales or a retainer, but both Jimmere and Butler said working with brokers who understand these retail partners and are passionate about how their products fit into these companies plans, has been a key part of growing partnerships.
8. Walk the aisles, know the partner before pitching
Harris says it took Keeping You Sweet about three months to break through on her own with Whole Foods, and she started with one store in Newark, New Jersey. She said walking the aisles and learning the web site of a Whole Foods, or whatever dream retailer you want to be in, is critical before a first pitch if you are going it alone.
Her products are designed for gluten intolerance, which is a huge market linked to many medical conditions, as well as for people that need to avoid refined sugar, like diabetics, and those allergic to egg or dairy or choosing vegan as a lifestyle, in the case of her vegan cakes. But none of those consumer and health advantages would have been an advantage at Whole Foods if they already had a competitor offering the exact same products.
“Go into the store before you pitch them. The first thing is to make sure it is something they need or don’t already have in store, or are not even thinking about,” Harris says.
Businesses need to tailor the pitch to the nuances and goals of the retail partner. Whole Foods and Ulta Beauty, both of which Jimerre sells through, have completely different consumer goals in mind. Ulta is looking for “prestige, if not luxury,” she says, which ends up in details like Naturalicious packaging having shiny gold caps. Whole Foods is very big on supporting local businesses, and the best ways into its supply chain are at first to think small, before ever contemplating regional or national deals with it or its parent company Amazon.
9. Save even more than you think you will need
Jimerre was able to save money for her business dream while working for Ford and in the advertising industry, but looking back she says that she wished she had saved even more.
“I always tell people to stack money up when working in corporate, in a 9-5 job. That is your initial investor,” she says. She thinks that would have helped her lean less on family and friends and business credit cards in the early days of her business, which is a common route of funding, according the the Kansas City Fed, for Black female entrepreneurs who struggle to be approved for traditional capital from banks and investors.
Harris has opportunities to expand with more grocery chains and with Amazon as well, but she is holding off for now due to challenges in scaling, and the need to secure additional financing to purchase more equipment and hire more staff. Without that funding in place, she remains concerned about taking on any new relationships, though she remains determined to secure the financing at some point and expand her partnerships.
Harris says that after her initial sales success as a local business she submitted many applications for financing but has received as many as two dozen rejections. “I wasn’t expecting to be rejected,” she says. Her credit was good and her orders were “through the roof” by the time she was seeking additional funding in 2019 to buy more equipment, but she has had to max out credit cards and borrow from family and friends. “Totally bootstrapping,” she says.