03/2015

MONEY
START IT UP
DOING BUSINESS
TECH

M ON EY

SHELF LIFE
ILLUSTRATIONS BY KARLA B. SAJONA

How to get your product on store shelves

WRITTEN BY CHARLENE PE

www.entrepreneur.com.ph/themagazine MARCH 2015 23

MONEY

E
very manufacturer dreams of having
his product stocked on supermarket
shelves. But it’s easier said than done.
It’s a challenge, particularly for small
manufacturers that are just starting out and
may not have the financial means to pay the
fees retailers charge for carrying products
on their shelves.
So-called listing fees in supermarkets
range from P800 to around P2,500 per
stock-keeping unit (SKU) per store, says
Steve Cua, president of the Philippine
Amalgamated Supermarkets Association.
He says both new and existing suppliers
need to pay the fees in exchange for the
shelf space at supermarkets. Given the
finite space in their stores, he says retailers
charge the fees, which are paid outright
in check or cash prior to product delivery,
to discourage suppliers or sales reps from
pushing “bad ideas or products.” “The [fee]
is directly proportional to the perception
of how attractive it is for the supplier to
get himself into the shelves of a particular
outlet and the retailer’s perception of his
opportunity cost had he allowed some
other willing supplier to put his products
on his store’s shelves,” he says.
The listing process is fairly simple
and straightforward. “You provide
[retailers] a trade letter that contains all
the information they need…a sample of
the actual product, and what your plan is
to grow sales for that product in-store,”
says Joanna Gilladoga, marketing head of
Human Nature, a maker of personal care,
makeup, home care, and pet care products.
When meeting with retailers, you should
be ready to provide them with figures and
information on trade discounts, production
cost, and even research reflecting consumer
insights about the product. “To be successful
in negotiations, go into the meeting knowing
full well what you want the outcome to be,
so that you can direct and influence the
course of the conversations toward that
end,” says Gilladoga.
Cua says suppliers can avail of group
listing fees when they have several variants HIT THE RIGHT SPOT
of their products, in terms of sizes, scents
or flavors. Some retailers also allow Some suppliers may want to position their products strategically by placing
suppliers to offer an introductory price them alongside complementary items, says Steve Cua, president of the
for the first month of placement in lieu of Philippine Amalgamated Supermarkets Association. This means putting
peanut butter and cheese beside the bread display, placing products beside
listing fees, says Gilladoga. “Can you afford
a market leader or a competing brand to better highlight their competitive
this total cost of doing business? If not, advantage over the prices of their competitors’ products, or displaying
then identify which elements in your total products in more than one shelf or aisle to ensure brand or product recall.
cost of doing business are dispensable and In this case, suppliers will have to pay for the privilege to place their
do without it if you really can’t get away products in their preferred slots, in exchange for the effort and discomfort
with not paying the listing fee,” she says. retailers have to face when complying with these special arrangements.

24 MARCH 2015 Entrepreneur Philippines

Since suppliers and retailers bear a “shared
risk” in brand or product marketing, suppliers
need to convince retailers that their relationship
will be mutually beneficial in the long run.
Note that retailers will have the final say
on how they want to present your products
on their shelves. However, you can suggest,
convince, persuade, or offer to pay for prime
shelf space, such as eye-level shelves, whole
blocks for related products, or a spot beside
a targeted competitor, says Cua. Suppliers
may also want extra exposure with a gondola
(a freestanding shelf ), or the much-coveted
space at the end of aisles, says Gilladoga.
Retailers usually give suppliers a trial
period before agreeing to a long-term
relationship. “Normally, a supermarket
gives a supplier three months to review
and see if new items or variants are
worth carrying on a continuous basis.
Some supermarkets are very strict and
delete non-performing products from
their shelves without the benefit of an
extension, while others give extensions
based on their past relationship with
suppliers,” says Cua. Gilladoga says some
retailers measure how well a product is
performing in the first four weeks, and the
performance will already be indicative of
the kind of shelf space and purchase order
quantities they will be getting.
Clearly, there’s a cost involved in
getting into supermarkets. The bottom
line is, since suppliers and retailers
bear a “shared risk” in brand or product
marketing, suppliers need to convince
retailers that their relationship will be
mutually beneficial in the long run. Here
are some pointers to make sure your
investment will pay off.
>FIND YOUR UNIQUE SELLING PROPOSITION
There’s only a finite amount of space
available at supermarkets. As a small
manufacturer or supplier, you’ll have to
compete with larger and more established
competitors. One way to get an edge is
by showing retailers that you’re offering
unique products consumers will love. Cua
says as supplier, you should highlight the
competitive edge of the product you’re
offering and why customers would prefer it
over others. “This should make the retailer
feel that your product has a chance to sell on
his shelves, thereby decreasing his chance
for opportunity loss since he most probably
RETAIL UNDERDOG
Small manufacturers might find
it difficult to convince major
retail chains to carry their
products on their shelves when
more established suppliers
has to take away some other product or have deeper pockets, giving
decrease the display size of competing them the means to spend for
products to make way for yours,” he says. prime retail space. “One reason
Human Nature, for instance, lowered why some supermarkets do
its price points and told retailers it could not entertain MSMEs [micro,
help increase the shopper’s average basket small and medium enterprises]
size, drive new shoppers to the store, and is because these enterprises
improve the store’s profitability. “If your new are not capable of complying
with the requirements of bigger
product does not contribute to any of that,
supermarkets like the volume of
you are just wasting [the retailer’s] shelf
deliveries needed to cover a chain
space, confusing the shopper, and adding of stores. They are ill-equipped
unnecessary complexity to the system. You’d for proper labeling and bar-
then have to rethink your new product’s coding, which is a requirement
proposition not just to the end-consumer, for stores using POS [point-
but also to the retailer,” says Gilladoga. of-sale systems],” says Steve
Cua, president of the Philippine
>HAVE A MARKETING PLAN Amalgamated Supermarkets
Jerry Ferreros, national sales manager Association. He says some
supermarkets waive listing
of Philippine confectionery maker
fees for small, cottage-type, or
Markenburg International Foods Corp.,
backyard-type manufacturers
says suppliers should give retailers as their way of practicing
details about their marketing campaign, corporate social responsibility
including plans for setting up sampling and entrepreneurship. However,
booths and hiring promo girls to push the smaller suppliers will have
products in-store. a better chance at targeting
smaller neighborhood retail
>PICK THE RIGHT RETAILER stores rather than the big chains.
Since you’re paying for shelf space, make “The problem in perception is
that small manufacturers think
sure you pick the right retailer. In the case
they’ve had it made when they
of Human Nature, it went with leading
occupy space in the shelves of the
retailers because they draw in shoppers big chains,” he notes.
that buy the kind of consumer goods it
produces. “If you have a high-value product
that’s expected to sell only in low volumes,
then look for retail partners whose shopper
profile fits exactly [who you’re targeting].
High foot traffic won’t be as important as
average shopper basket size,” says Gilladoga.
Also, she says leading retailers might
require higher listing fees, but the product
will also be carried in several branches as
opposed to second-tier stores, which only have
a few branches. She concedes the fees may be
out of reach for startups. “But working with
second-tier retailers is also a good option if
your production capacity is not yet ready and
you cannot scale up to the volume demands of
leading retailers,” says Gilladoga.
Suppliers should also consider the
market they are serving. Products
that come in small sizes sell well in
convenience stores, says Ferreros. E
www.entrepreneur.com.ph/themagazine MARCH 2015 25