Case study

Case study: Another commerce company that chose to sell in brick & mortar store

Lesson Details:
March 03, 2020

Video Transcription: To help you understand why we chose to only pursue the online strategies at first with the grout product I'll give you a case study of a real client that was in commerce which went the other route and this client went directly to brick-and-mortar stores the product was a decorative cooking salt it's a very unique sort of thing it that client was a chemist originally and she came up with this really cool looking salt that if you do something to the salt it starts to take on color and starts to look really beautiful so you can put it on top of actual dishes and it will make it look beautiful so it actually was salt but it actually served this really amazing effect and I actually tried to search for it now so I can show you an example because this is so unusual and rare but I actually didn't find it online this was a client for from around five or six years ago so there's nothing like this on the market essentially and this was an invention in the food industry in the food industry it's actually really hard to make inventions so this particular client I don't know if it's an error but it was a challenge that she first got a patent for a new food and new patent especially on foods they're not they're not easy to get so she spent like 20,000 plus dollars which really should have gone to marketing and growth maybe website online stuff like that but that's where a lot of money was spent before the launch even but that wasn't the issue what I want to bring to your attention is she got into Whole Foods in a few regional stores of Whole Foods which was a fantastic like the number one place she wanted to get into for big retail stores she got into it's a major chain if you don't live in United States Whole Foods is a major chain of premium priced products for food so it's like good food mostly organic blah blah blah stuff like that she got in there great but there was a lot of challenges first of all to produce the product itself her cost was minimal which was good.

It was like under $1 that's perfect but to place a product in Whole Foods or any major market it has to have special jars that are beautiful special labels because the labels are typically 24 hours a day under bright store lights in the bright store lights over time they'll ruin simple paper so the labeling has to be produced in a special way and so the packaging was worth over $2 even though the actual food itself cost under $1 the packaging in this is salt by the way it's cheap product but the packaging was like 2 plus dollars which killed almost all the profit and that was the requirement that you couldn't get around that and another requirement Whole Foods put on this client is that she had to do her own marketing and promotions and giveaways like you know for example if you ever visit a supermarket and they give away little samples of foods that's not the supermarket giving you a gift that's the supermarket requiring the manufacturer of that food to give away free stuff maybe that food is not performing well or maybe that food this there's some other issue or maybe they just bully that producer of the food and say hey we're gonna take you out of our offerings if you don't give away free stuff and of course it's such a major sales source that that producer of the food has to go with it but it's a major loss to the producer of that food so that's a loss that Whole Foods kind of imposed on that particular client the name put imposed this on many new sellers so that was a loss by itself and there was other problems the major issue that was really difficult to get around is whole foods made an offer for sold item that was very low my client was only gonna make like 20 or 25 cents per sale you can't really make a lot of money like that and that's not counting the free giveaways and all the other hoops my client had to jump through contacting her lawyer so many things that's not even counting that that's just counting how much it takes to make the food and how much takes to package the food and even so the profit was tiny and if you count everything else that Whole Foods asked for it was actually a loss now you will ask what about other food chains well she also got into Trader Joe's but Trader Joe's offered an even lower rate then Whole Foods offered and that rate was going to be a hundred percent at a loss so it wasn't even possible unless she miraculously got cheaper packaging cheaper labels on her products cheaper manufacturing of the foods so it was just an impossible deal that Trader Joe's offered her because all the problems arose because she had no negotiating power consumers wouldn't know that that salt was there or that salt is missing nobody's asking for it and that's why we didn't want to be in such a bad negotiating position with the brick-and-mortar stores not to mention the whole procedure takes a long time they impose a ton of other requirements you have to buy up a lot of inventory upfront at times so there's a lot of problems and we didn't want those problems and precisely because of all these issues that arise with big brick-and-mortar stores that they impose on small retailers we did not choose at first to go after the big brick-and-mortar stores  

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