A cheaper, faster way to that first sell

By Jack Lander

llbeanCatalogIn its early days, a product is often relatively expensive to produce and it lacks the history of growing sales that is essential  to get to first base with chain store buyers.

So, how do we get sales started?  And how do we get our product’s direct cost down to the point that it can sustain the huge discounts demanded by brick-and-glass retail distribution, and still turn a profit?

The answer is to sell through catalogs, which offer inventors and small entrepreneurs several advantages:

  • They are inventor-friendly. Not only do they welcome innovative products, they depend on them. Some catalogs — L. L. Bean is a perfect example — compete with retail stores. But most catalogs cannot compete profitably with products that sell well from retail stores.  Catalogs look for novel, unusual and niche products that are not yet sold in retail stores.
  • Catalogs are easy to locate. The Directory of Mail Order Catalogs lists more than 12,000 U. S. catalogs by convenient category.  The Directory is available from barnesandnobel.com and amazon.com from around $30 used (around 10 years old) to $350 new.  Your state’s library system will probably have one that your local library can borrow for you.
  • They’re easy to deal with. No traveling to meet with a buyer.  It’s all done by mail and e-mail. Send them your sell sheet and a brief cover letter. Be sure it’s a standard format sell sheet, not some odd form of pictures and words. No discussion of costs or prices at this point. And keep your cover letter brief. It should contain little more than “calling card” information. Your sell sheet may circulate to several people without the cover letter, so all of the benefits and features should be emphasized there, and not in your letter. Never send a sample of your product unless you are asked.
  • Catalogs don’t mind if you’re a small operation. Many of their suppliers are small.  They aren’t going to ask if you produce in your garage or in a spacious industrial park facility.  They’re more concerned about reliable performance.
  • Catalogs are receptive to single-product suppliers. The big chains want product lines — several related products bearing the same brand name.
  • Catalogs provide free or very inexpensive “advertising.” That’s not their aim, of course. But some catalog browsers will see your product in a catalog, and search the Internet to buy it at a lower price if possible. In so doing they’ll stumble across your Web site, and you may receive the order directly. Your profit on such orders is, of course, much greater than on products you’ve sold at a large discount to the catalogs.
  • Most catalogs don’t return merchandise that doesn’t sell well. Once you’ve sold it to them, they own it, and the only time they’ll return it is if they’ve experienced a high percentage of returns from their customers because of a prevalent product defect, or your misrepresentation.
  • Catalogs don’t require a fancy packaging. Retail stores, on the other hand, demand it. Artwork and the initial printing can easily run up a bill of $10,000. The catalogs want a plain box on which they can slap a label and hand it off to UPS.

The standard response from those catalogs that are interested will be a questionnaire form.  This is the place to state your price to the catalog.  You might have a suggested retail price, but don’t take a hard line on this. Catalogs set their own selling price to their customers.

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Catalogs work on a markup rather than a discount. They will mark up your price to them by a factor of at least 2 (for items approaching a $100 retail price), and more likely closer to 2.5 (for items in the $10 to $20 retail price range).  A 2.5 markup is the same as a 60 percent discount. For example, 2.5 X $10 = $25.00 retail price. A discount of 60 percent off $25 leaves $10.

If you’re too busy to identify, contact and negotiate with catalogs on your own, consider delegating the tasks to an agent. I recommend Jim Tilberry of Tilberry Direct Marketing.

Once you have repeat business from the catalogs and you know that your product is going to have ongoing sales to more than one customer, you can use your sales history to help you get an SBA-backed loan. Typically, the bank will want two years of inclining sales history, and an Income and Expense statement that shows you’ll be able to repay the loan. You don’t have to show high profits, only the ability to repay. The point of borrowing is to lower your direct product cost by investing in tooling.

Catalogs are the ideal “launch pad” for most of our novel products. And if the catalogs don’t love your product, chances are that it doesn’t have much of a future. As Sophocles once said, “If you can’t sell it in catalogs, you won’t sell it in retail stores.”  (I just made that up; Sophocles died in 406 BC.)

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Editor’s note: This article appears in the August 2010 print edition.