Unless they are personally involved in retail, most people have no idea how stock of a product gets onto the shelves. Many are perplexed when a product such as a toy is in great demand, they don’t understand why the retailers don’t have stock of a product that customers want to buy.
To find out why, let’s take a look at the process a product goes through to get from ideas to product on the shelf.
There are a number of routes by which products may come to market.
Wholesalers, distributors and importers research their source markets for new products. They may be shown ideas by designers attached to the factories they work with.
They may be shown extensions and additions to successful ranges.
They may see product in the factory showroom which has been commissioned by others, or successful in other countries. There may have been an exclusivity agreement in place for a couple of seasons which has now expired.
Or they may themselves commission ideas for new products.
Sometimes a retailer works directly with a manufacturer to come up with an “own brand” product.
Often the owners of a licence, such as Disney’s Frozen will commission relevant product associated with a Film release or TV show.
So the wholesaler, distributor or importer, assembles a range to show to Retail Buyers at Trade Fairs
Or perhaps the retail buyer visits various source markets themselves, searching for new product to import directly for their company. They will probably also list product from wholesalers, distributors or importers that they can buy domestically.
Multinational toy manufacturing companies such as Hasbro, Mattel, Fisher- Price and Crayola will all design, source and manufacture their own ranges to offer to retail buyers.
Once the product is ready for selection, attention must also be given to packaging, in terms of customer appeal on the shelf, or from a photo in a catalogue or on a website
When a product is considered for launch on the market, whoever is bringing it to market ( the vendor ) often gauges reaction from retail buyers.at Trade Fairs and other preseason meetings, prior to deciding whether to run the line.
Based on the reaction, if they decide to run the product, they offer it on the market to buyers who in turn may decide to list the product. They will liaise with their colleagues in stock control, produce an estimate of sales for the product, often based on their perception of the product and the company history with similar products.
They will then give the estimate to the vendor, and place an opening purchase which is a percentage of the estimate. This will vary according to product category, type of retailer and many other factors, but is likely to be about 35% of the estimate. The retailer is only contractually liable for the opening buy, but expects the manufacturer to be able to supple the balance.
It is now up to the vendor to manage the product into the marketplace and try to maintain a flow of product that will satisfy demand, but not result in surplus stock. Any surplus will have to be sold below cost and will negatively affect any profit made on the line.
The vendor must balance risk and reward, anticipate demand, buy raw materials, book production and arrange shipment. But he doesn’t know what the demand is going to be!!