Working with the Big Boys
Landing a large account can be an exhilarating experience for a young company and you can’t help but daydream about the possibility of “overnight success”. Just around the corner… redemption for all those long hours spent fine-tuning your product, reciting your elevator pitch in the mirror, and packing orders until 2am. While getting an initial order is the first major hurdle, there are many more to come. The “big boys”, like Target, Wal-Mart, Nordstrom’s, Macy’s, etc., are a different breed and dealing with them requires new procedures, policies, and a really big highlighter when reading through their 1,000+ page compliance manuals.
I’ve been fortunate enough to receive an order from Target.com recently. (click here to see the line) As I’ve been muddling through all their compliance and routing guides, I couldn’t help but think my fellow Startup Nation readers might get a kick out of hearing how it all comes together. This will be my first post in a series, so please let me know if you have questions as we move along and I’ll be happy to answer them the best I can!
First things First…
It has been my experience that the majority of these “big boy” retailers shop the tradeshows in New York and Los Angeles. If you’re exhibiting at a tradeshow in either of these locations, be on the lookout! Also, don’t be surprised if their name tag isn’t strategically placed so that the store name can’t be easily read. They’ve learned to keep a low profile to avoid being bombarded with sales sheets and elevator pitches. If you’re able to get their attention they will ask (at least) three questions:
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Are you EDI compliant?
- What is your liability insurance coverage amount?
- What’s your turnaround time?
(Other popular questions are, “How much will you discount us?”, “Do you drop-ship?”, and “Who are you currently selling to?”. These usually come a little later though.)
Are you EDI compliant?
If you are not currently EDI compliant, don’t panic. Before I was set-up on EDI I usually just said something like, “yes, we are in the process of setting that up right now.” You just don’t have to mention that that “process” started 2 seconds ago. They aren’t going to ask you for a membership card, ID number, or anything like that -don’t worry. In case you’re not familiar with EDI, let me explain.
EDI: Short for “electronic data interchange”. By using a product’s UPC number (Universal Product Code) manufacturers, wholesalers, and retailers can communicate between themselves information such as submission of production orders, purchase orders, ship notices, and inventory statuses to name a few. EDI is a standardized database which ensures that everyone is using the same system protocols.
Becoming “EDI” compliant can happen several ways and I will explain all of your options in the next post including how to come up with your UPC’s numbers in the first place. They can be a little tricky.
What is your liability insurance coverage amount?
At this point you should have general liability insurance coverage already. If you don’t, call your Insurance provider ASAP. What you might not have is an insurance policy with general liability coverage for $3-5 million. Most small business owners just start out with $1 million in coverage, so be sure to check your policy. If you need to increase it, give your insurance agent a call and they should be able to raise the liability limit without it increasing your costs terribly. If the costs do seem dramatically higher, it might be a good time to shop around for a new business policy. There are several insurance companies out there that offer “umbrella” business policies that can cover everything from slip and falls, lost tradeshow samples, and a shipwrecked freightliner all in one easy to read policy. Just ask your agent. If you don’t have the correct coverage amount, let the buyer know and explain that you will call right away to increase your coverage. They are usually fine with this as long as you follow through. You will be asked to send proof of your coverage amount during the vendor set-up process.
What’s your turnaround time?
Buyers attend tradeshows with a mission. For example, they may have shelves that need to be filled ASAP, need products for next season, or they want products that can tie in with the latest trend. They need to know turnaround time to see if you will be able to fill their needs. They might like your product, but if they have empty shelves and you need 6 months to produce- it’s not going to work. Be honest about your capabilities. While it would be unfortunate to miss out on a big order because of a tight deadline, it would be far worse to lie about your production timeline and miss your delivery window. They will probably cancel the order and you will be left with the excess inventory. The trust is gone and don’t expect a re-order. Keep the goodwill and just be honest. If it doesn’t work out this time, stay on their radar by sending new product updates and inviting them to see you at future tradeshows. You just might get a second chance.
This is Part one…the next post will cover becoming EDI compliant including how to find a provider, assigning UPC numbers to your products, and an overview of how the system works start to finish. Stay Tuned!
September 16th, 2008 at 2:22 pm
Thank you for your post. I am very excited to see how to become EDI Certified. We have assigned SKU # so I can’t wait to see if we have followed the right steps.
September 16th, 2008 at 2:28 pm
Heather!
I can’t tell you how helpful this is!
I had an order from Borders and it was not necessary to be EDI compliant, but I was lucky.
I can’t wait until your next post!
Thank you.
Jennifer
September 16th, 2008 at 3:53 pm
Great Post Heather. Thanks so much for all this valuable information, and CONGRATULATIONS! your line is simply adorable.
Have an “uplifting” day,
Camie
http://www.liftmeupcards.com
September 16th, 2008 at 8:32 pm
EDI Compliant? Seriously…why? EDI is an old technology that is disappearing. All the major financial institutions are moving away from it.
I used to work for Sterling Commerce that has been doing EDI for 25 years. You can order service through them today if you want in their VAN, but why they know it is a legacy product offering.
Sounds like some large customer got you to support a dying technology because large IT vendors will not support this tech.
I will be interested in seeing why I would support EDI when the vendors that offer today are moving away from it.
September 17th, 2008 at 12:57 am
CONGRATS! I love hearing stories like this. Good luck.
http://www.TruthWhale.com
September 17th, 2008 at 11:55 am
How do you know what your turnaround time is if you don’t have inventory waiting already set aside to be sold. How do I get a big order if I have never produced a large order ?
September 17th, 2008 at 4:55 pm
Thanks so much for the great comments everyone!!!
Let me take a second to explain to everyone what I think Terrence was trying to comment on when he mentioned the use of “VAN”…
VAN stands for “Value Added Network” and is commonly referred to as an EDI VAN. “VAN’s” are private networks and used like mailboxes to transfer EDI data between trading partners (such as vendors and retailers). EDI VAN’s are not a new technology and have actually been around for nearly 30 years. Internet based EDI is a little more recent and allows users to transmit their encrypted data via the internet. Both EDI VAN and Internet EDI have their pro’s and con’s, but it really comes down to which system your trading partner is using. You need to both be using the same method of sending/receiving data to be able to communicate effectively. And finally, regardless of whether you are using Internet EDI or an EDI VAN to transmit your data, EDI in general is considered the standard for most industries including aerospace, automotive, retail and finance.
I hope that clears up any confusion as to what a “VAN” is…
Heather
September 19th, 2008 at 8:28 am
Hi Heather, I am at the very beginning phases of putting together my invention/idea. I have done some research and do not see it on the market. I have also made a prototype but do not know how to protect the idea or what to do next. Are there any web-sites or books that you would recommend to get more info? I have read some info but find it difficult to get going to the next step. I would appreciate any info that you could help me with. Thank You so much and congrats on your success! Nancy
September 29th, 2008 at 9:25 am
Thanks for the great info Heather. Congrats on your Target order!!
Kristin