Crowdfunded into retail: 3 ways brands flop

Knowing how and when to get your product into retail requires a special skill set that not all startups are staffed up to execute following a crowdfunding campaign. Our friends at Retailbound, a modern commerce agency run by Yohan Jacob, excel at launching brands with retailers across all channels. The following article is a piece that initially ran on their blog, which we’re sharing here with the informal community. Read on to learn more, and if you’d like more information about RetailBound, reach out to them here.

Crowdfunding platforms have afforded many entrepreneurs a cost-effective way of funding, gathering early market feedback, and creating buzz around their innovative products. Inevitably this funding and momentum quickly fades post-campaign, and it becomes time to look for ways of continuing momentum, sales, funds, and ultimately growing the business. This often leads brands to leverage customers and marketing levers of channel partners to grow faster without expending as many resources. These channels can be online, offline, catalogers, specialty stores, TV, or even B2B customers such as education or hospitality.

Mistake 1: Underestimating the work and time

Ideally, the hardest part of creating a product would be, well, creating it. Selling is the fun and easy part, right? You’ll list it on Amazon with high-resolution images, assign a distributor or two, find some sales agents, and you’re a millionaire.

If it were that easy, everyone would be successful. Most startups underestimate just how much (continuous) work goes into succeeding at retail. We commonly see startups who’ve signed deals with big-box retailers (online or offline) only to realize that the finances, time, and experience required eclipses what they anticipated.

Earning an initial purchase order (PO) from a retailer is tough work; however, more often than not, it’s what happens after the PO that causes problems for these startups. Common issues we see include:

• Not fulfilling the order correctly, on time, and communicating if delays exist
• Not actively participating in your retailer’s or distributor’s marketing programs in a way that drives meaningful traffic and sales (or underestimating costs)
• The brand’s omni-channel approach quickly leading to difficulty in controlling your minimum advertised price (MAP) and cross-promotional efforts leading to channel conflicts

We hear CEOs and VPs acknowledge these common challenges all the time only to find that 6 months later they’re just another statistic – another startup that confused “knowing” with “doing”. And in retail, the workload and environment can change quickly.

Mistake 2: Not working out issues & fulfilling your backers first 

The reputation and image of your brand is very fragile in the early days. It doesn’t take many negative reviews to mudslide your chances at scaling into the multi-million dollar organization you could be. If your product has bugs or issues that cause customers to get upset, fix them. It’s worth delaying a launch to avoid negative online reviews.

If you haven’t fulfilled your backers yet, don’t start selling elsewhere. It’s not worth the negative reviews that will inevitably make it much harder to convince customers or future retail partners to believe in what you’re selling.

What exactly do I mean? Here are some articles citing examples:

• Thousands of Kickstarter backers still waiting on Coolest Cooler may have to wait another 3 years

• Rite Press Sparks Backlash After Kickstarter Doesn’t Deliver

• How Zano Raised Millions on Kickstarter and Left Most Backers with Nothing

Mistake 3: Thinking you know what you don’t know

Operating a consumer brand in retail (online or offline) means dealing with a lot of moving pieces and people. We try to simplify it as best we can — pricing, promotions, placement, etc. — but the truth is that retail is a very dynamic place to do business.

Vendor paperwork, point-of-sale requirements, margins & fees, returns, competitors, logistics & inventory, marketing expenses and channel KPIs, and the list goes on. Perhaps more important is understanding the various roles that certain partners take care of and which ones they don’t. This way finding the right help to take your brand to retail doesn’t feel such a big leap of faith.

For example, sales agents and distributors can be very useful, and many mention that they “cover marketing.” But what exactly does that mean? Are they providing suggestions and advice? Are they developing marketing campaigns for you specifically? Online or offline? How much time are they actually spending on your brand vs others they carry?

Educating yourself on the process from factory to end-consumer — even just a high-level understanding — will greatly improve your ability to find the right partners. All of our startups are comprised of brilliant entrepreneurs. It’s not a matter of intelligence. It’s a combination of experience, available time to commit, and industry relationships.

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