Distribution into 6,000 Wal-Marts? Just say no.
Image: Paul Sakuma/AP
Why succumbing to retail cornucopia is often the ultimate own-goal
In the halcyon days of my confident youth, I got to enjoy - first-hand - the intoxicating power of the shelf. As a director at Tesco (then the world’s third-largest retailer), I witnessed the streams of clammy-palmed growers, producers and account executives coming to tender deference and offerings before their category buyer chieftains. Striking gold would have meant securing shelf space, or (whisper it), an isle-end feature or promotion. A terminal fall from grace, in contrast, would have come with the stroke of a pen through a simple delisting. Lifetime careers and billion-dollar brands were built and lost in 20-minute slots.
So it’s not surprising when we meet eager founders of nascent brands who tell us with effervescent pride that they’re “but a hair’s breadth” from securing distribution in major retail accounts. Almost without exception, we advise them to do the opposite and walk away.
Saying no to volume might seem like an eccentric thing. However we believe staying clear of multi-site retail can be the difference between life and death for challenger brands.
The world’s great tech companies – Google, Facebook, AirBnB – take your pick – were all built using agile product development: the process of in-depth user discovery, rapid prototyping, and frequent, data-led iteration. Nobody in the Valley talks anything other than dual-track agile these days, and the notion of locking down pricing, features, UX, UI and communication a year out at a time is simply anathema. However a minimum of year-long lockdown paralysis is exactly what distribution in multi-site physical retail entails for consumer brands: once the product is on the shelf at Wal-Mart or Sainsbury’s, brand and packaging execution are frozen, creative is fixed, and control over pricing is lost. And that is not how successful challenger brands are built. Large-scale retail distribution sucks the lifeblood out of gutsy experimentation, data immediacy, and speedy iteration – the three pillars on which our epoch-defining disruptor revolution was built.
However it gets worse: we believe the value of mission-driven challenger brands is diminished from sitting side-by-side the dominant (but lesser) traditional FMCG offerings in their category: they end up forever having to beg for attention, forever whispering their cause, and remain forever apologetic on price. It’s hard to be the champion of healthy nutrition when you’re one bottle facing against 75 Coca-Colas on the shelf, whereas you can stand free and bold, noteworthy all because of yourself, online.
So the Craftory’s advice is this: unless you’re an insurgent ice-cream brand, stay away from physical large-scale retail for as long as you can. Experiment with your brand, your proposition, your communication and your pricing, frequently, speedily and with minimal consequence, by prioritising digital, direct-to-consumer sales. Dollar Shave Club became a billion-dollar brand this way. Huel grew to astonishing size without ever sitting on a shelf. The examples are plenty. And even if you are a delicately perishable ice-cream challenger, think carefully about selective distribution rather than aiming for maximum retail volume.
Because if you don’t, another challenger probably will. And even though they might not have gotten their proposition as right as yours from the outset, come one year and 27 iterations later, odds are they will have outfoxed and overtaken yours - at which point your hands will be tied to the shelf.
Ernesto Schmitt is co-founder at The Craftory, the brand-new counter-corporate anti-VC on a $300M mission to back the world's boldest insurgent challenger brands in the consumer goods space.
