Amazon vs. Retail: The Hard Truth Every Seller Needs to Know | Doug Pick | MMP #034

Amazon vs. Retail: The Hard Truth Every Seller Needs to Know | Doug Pick | MMP #034 Doug Pick: I think one of you said that you have one to two seconds to get someone's attention. I would say that it's a millisecond. You have a millisecond to get someone's attention and prompt them or motivate them to actually lift the product off of the shelf or the peg. Unknown Speaker: You're watching The Marketing Misfits with Norm Farrar and Kevin King. Kevin King: Mr. Farrar, good to see you. Another week, another time. I got to look at your beautiful face. Norm Farrar: And you too, K-squared. Kevin King: K-squared. K-squared. Man, so I got a question though for you, Norm. Okay. There's something that I think you like better than anything. And that's ice cream. Which one actually wins? If I said you got to go to a desert island and you get to take one thing with you, would it be Coke Zero or would it be ice cream? Assuming there's a refrigeration on the island where you could keep the ice cream cold. Norm Farrar: So hopefully there's three, you know, including the woman. Kevin King: No, no, I still choose ice cream. I'm not talking about the woman. I'm talking about, you know, that's different. Maybe she's there. Norm Farrar: No, no, it's not. I would take the ice cream. Kevin King: You take the ice cream. So a lot of you don't know this, but Norm is like a huge ice cream fan. And I'm going to tell you two quick stories about this ice cream. So Norm, We were at a podcast event in Washington, D.C. in August of last year. And our tradition is every night we go and we smoke a cigar and just talk life and business and whatever. And at the end, Norm usually has the munchies. So this is sometimes like two o'clock in the morning. Norm Farrar: Always. Kevin King: And at this hotel, the little tienda, the little store was closed. And so there's nothing to get. So we're walking over to the elevators and I'm looking out the corner of my eye over kind of this is probably 100 feet away. And you see these two vending machines, but they don't look like Coke machines. They look like something different. Almost like one of those things that you'd see at a fair where you put a quarter in and you get one of those big arms that goes down and you try to grab the teddy bear or you try to grab the iPod or whatever and you get like one chance at it. And I'm like, Norm, that looks like an ice cream machine. I didn't know it was an ice cream machine. It looks like an ice cream machine. He's like, ooh, ooh, what, what, what? Let's go over there. So we head over to this ice cream machine. It turns out to be an ice cream machine and he was like, he was giddy. He's like a little kid in a candy store. He's like, oh, look at all the flavors they got. Look at this. I'm going to get two. So he puts his credit card in and he's like, Kevin, you want one? You found it. I'll buy you one. So we go back to the room with our arms full of ice cream. So that's one little story. But the better story is Norm came to my house one time to stay. We were doing some business. So I have a spare bedroom. So we stay in the house. We've been out smoking some cigars out on my balcony, set our pleasantries and everybody went to bed. Sometime in the night, Norm's like, I got the munchies. He goes into the refrigerator and opens up the door and inside the refrigerator are these little self-serve ice creams. I have Blue Bell ice cream. I'm in Texas, so Blue Bell ice cream. And the little self-serve, like 160 calorie little small containers. And there's a couple of different flavors in there. So he grabs one, starts eating it. And he's like, this kind of tastes funky. Kevin's, I'm wondering what kind of ice cream this is. Norm Farrar: Can ice cream go bad? Kevin King: Can ice cream go bad? He looks at the container and it looks like it's, oh, this looks like birthday confetti. It's like a lot of little colors. He didn't have his glasses on, a lot of colors and stuff. And so he takes another bite. Then he looks at it, looks a little bit closer. I don't know, maybe you put your glasses on and then you look a little bit closer. You're like, wait a second, that's not confetti or like little birthday flavored ice cream. Those are little paws, like of a dog. He's like, looks at it again, flips it over. It's dog ice cream. It's ice cream that they make. It's called frosty paw. So he's eating this frosty paw ice cream. And so he goes and he goes into the trash can, doesn't just throw it in the trash, buries it in the trash, like halfway down. So nobody, it's not sitting on top the next day when I come in and then like, all right, I got away. I got out of this. Norm Farrar: I thought I got away with it. Kevin King: A couple of days later, we're at dinner and he's talking to some people at the other end of the table. He starts telling the story. And my ears perk up and I'm like listening to him. And when he got through this whole story, I just started busting out laughing. I couldn't stop laughing for the longest time. So now it's a running joke. And we were just in another event and he said, he went to his refrigerator at his house and opened it up and there was some ice cream in there and he started to grab one. And his wife was like, what are you doing? He said, I'm grabbing an ice cream. She said, no, no, no, that's for the dog. That ice cream is for the dog. Norm Farrar: That was human. That was human. Kevin King: She had bought it for the dog. Norm and his ice cream get you in trouble, but that kind of plays into a little bit what we're talking about today. You know, when it comes to CPG or most people don't know what that means, that's consumer packaged goods. And so the way something is packaged, you talk about the ice cream with the, you know, the paw package and getting confused. You got confused. Is this birthday confetti, you know, flavored ice cream that some people have? It's got all these colors on it. Or what is it? And when it comes to consumer packaging, There's a lot that goes into it, but one of them is the physical look of the package. Do you kind of take that message of what this is and why this is for you within a second or two when it's sitting on a shelf and how do you stand out when it's on the shelf? Our guest today is one of the top experts when it comes to consumer packaging. He's been doing it like 25 years. He's had a very successful brand that he developed and exited. Now, he helps people, especially a lot of you guys that are listening to this are coming from the e-commerce world, Amazon especially and some other, Shopify. Maybe you're like, you know what? Maybe I actually want to get into retail. I want to get into Walmart. I want to get into Best Buy. I want to get into some of these big consumer places, but it's a whole different animal. A lot of people, a lot of you listening are coming from the e-commerce space and that's what you know. And what you don't know is the CPG space and what you don't know is the CPG space is actually considerably bigger than the e-commerce space. Despite all the press that you hear, despite all the Black Friday sales were up this much in Amazon and this much here, that's all great and you should be taking advantage of that. If you can do retail right, retail is still the biggest opportunity, but it's a whole different animal, a whole different approach, a whole different mindset, a whole different financial model. That's what our guest today is going to be telling us about his story and about what you got to be thinking about. And I actually probably give you some really actionable tips that you can do on your own or maybe you can even reach out to him and actually he help you actually accomplish these. So I'm excited to talk about this. Norm, you got a big background in doing this, helping people go to retail. You've got a whole company that helps people do that with a partnership with somebody else and Dragonfish does that kind of stuff too. So this is going to be cool, I think. Norm Farrar: Yeah, because and we're gonna get to Doug in just a second, but I see so many people making mistakes trying to bring their online product and packaging into retail and they just don't get it. So I'm looking forward to this. I'm sure I'm gonna learn a few things today, but why don't we just bring Doug on board? Kevin King: Let's do it. Norm Farrar: All right so welcome to the stage Mr. Pick. Doug Pick: Great to be here what a funny intro with the dog ice cream. Norm Farrar: But it's a perfect like the dog ice cream first of all. It looked like confetti ice cream. Let's face it. So I think that the packaging should change, just personally. Doug Pick: Well, you know what's funny about that is when I started my business, I had zero experience developing any consumer packaging. So I literally went to, in Los Angeles, a local drugstore chain, it's called Thrifty Drug. And because I didn't know anything about packaging, I had no budget to hire anyone to help with the packaging. I literally sat on the floor of this drugstore chain and just stared at brands like Gain Laundry Detergent, Budweiser Beer, Coca-Cola. I'm thinking to myself, if these multi-billion dollar international conglomerates know how to package goods, I'm just going to copy from them. And one of the things that I find very interesting about this story that you just told about the dog ice cream is I call them reads as it relates to brands and packaging. The first thing I always looked at was the first read that I wanted to communicate, which was, what's the brand name? And then quickly, the second read after that is, what is the intended use? So it seems like a misfire for Frosty Paws to not have said very clearly, dog ice cream, so that you got that really fast. So anyway, we all learn from those mistakes and certainly you learn from it as well. Norm Farrar: You know, Doug, it's interesting that, you know, we're talking about, you know, that brand standing out and then what's the next thing that you're looking at? Well, with Budweiser, you know how it has that little seal up top and there's probably about 30 different, no, maybe about 50 words. You know, I don't know what it says. I'm sure you guys don't know what it says, but this was a college trick. So my buddy would go, I don't drink anymore, but my buddy would, we went into the bars and how do we get free drinks? You know, we'll bet you one beer, two beer that he can read that label from 10 feet away and he'll put his hand over and then he would say it and he'd win a couple of beer and then the next night, but he had already memorized it. So it was perfect. Kevin King: Speaking of that same thing, Norm, what was that little, you teased me one time, I think we're in San Diego or somewhere, you asked me about a couple of brand logos, Consumer Packaged Goods logos. You're like, I forget what it was. It's like, does the kefir elf, does it have leaves on the tree or something? It was something that everybody thinks is different. Do you remember what I'm talking about where there's a couple of logos and can you give us an example of that if you can remember what I'm talking about? Norm Farrar: You know, I'm old, so no. I completely forget what you were talking about. Kevin King: You said, does Budweiser have a red dash over the top or not? And everybody thought, of course it has a red bow on the top. And you're like, nope, it actually doesn't. Go look at it. It's misconceptions that happen with a lot of brands and their logo design and their packaging. Norm Farrar: Hey, look, Kevin, we were just on the phone with somebody and if they ever tried to take that seal and put it into a retail store, they would fail miserably, even though it might be a really great product. So this is, you know what, we're taking away your steam, Doug, but this can be found anywhere where somebody will go to Fiverr, They don't know anything about branding or CPG, and they'll get some packaging done for online, and that even sucks. Their logo sucks. Everything about it. But one step further, I mean, this is a whole lot You have to know what you're doing when you're starting to get into retail. And you won't get in because the buyer will shut you down. They won't even look at your product. Kevin King: So how did you get involved in doing this? I mean, you said you went to the grocery store and you sat on the floor, but what were you, were you working for somebody else and said, Hey, I just got this idea for a product. And this is before the internet, because as you said, this is like 25 years ago. So it's actually longer. Doug Pick: It was, it goes back to 1992 actually. I had just left my job at A&M Records. It was my dream job. I came out of the USC Entrepreneur Program and as a former photographer for Motley Crue, as a teenager on the Hollywood scene, I was really interested to become the next David Geffen or Jerry Moss. and manage artists. It turns out that I was very fortunate that Jerry Moss, my idol, actually recruited me to work for A&M Records where I stayed for two years. Around the time that I was turning 24, I started to take a long-term look at my life and as someone who just believed in myself that I could become a successful entrepreneur. Both my grandfathers were entrepreneurs. I saved and I ended up managing a rap artist. Upon leaving my job at A&M Records, I had $15,000 in savings and I quickly found out that this rap artist was more interested in girls and smoking pot and really not focusing on his career. Norm Farrar: That's surprising. Unknown Speaker: I know, I know. Doug Pick: It's crazy to think about that. So I really learned very quickly that I didn't want to be in adult daycare. I really wanted to control my destiny and And I had been wearing earplugs to sleep for about three years prior to that. I also used them to go into concerts. And what I found as just a retail shopper, the products that were available to me, just the products themselves, they actually hurt my ears. And then it just kind of clicked one day as I went to buy a package of earplugs. That the category itself was incredibly boring. It was commoditized. There was nothing going on from a packaging, sales, marketing, promotion, publicity standpoint. And here was this niche that I felt was never going to go away because we really catered to noise reduction, hearing protection and water protection. And I thought, huh, well, there's no Procter and Gamble here that I have to compete against. Unilever is not present. And there's all these kind of smaller niche players. And so I just started researching the category. And before I knew it, I had come up with... Kevin King: This is researching not online. This is having to go to the library or something back then, right? Doug Pick: Yeah, this is just like... Kevin King: I'm not typing in the... There was no Google. There wasn't... AOL online might have had a few little things, but this is like old school. I just want to explain it to everybody. This is like real research, like real hit the pavement. Doug Pick: Yeah, it was it was really a lot of working the phones and going to stores and and really, you know, research was Information was not available in 1992 the way it is today. And before I knew it, I had come up with this concept for a high quality consumer brand of earplugs that I named Heroes. And people would say, Heroes, well, how do you spell that? We spelled Heroes, H-E-A-R, like I hear you, O-S. And anyone can go to heroes.com. Today and see what ultimately became of that. But that's what that's how it really started. And that started in 1992. November 1992 was when I actually came to market. And over the next 16 years, as I started out as a distributor of 3M earplugs, Honeywell and 3M earplugs, I grew this idea that I had, working literally every day, probably every day of those 16 years, to build Heroes to become the number one selling earplug brand in the country, along with a sister brand I had created, kind of like your shirt, Kevin. It's called Sleep Pretty in Pink. And I built those two brands to be the number one and number two bestsellers with ultimately what would become multi-decade relationships with Walmart, Target, Walgreens, Rite Aid, CVS, Whole Foods, Kroger, Albertsons, and even Guitar Center. We sold them on concert tours. And I was just having an absolute blast Being the founder and CEO of the company, did some very unique things in terms of outsourcing that we can touch upon and just really continue to grow at it. It was a wonderful run that I ultimately oversaw for 26 years before being acquired by a multi-billion dollar private equity group. Kevin King: And now a word from one of our sponsors, one of Norm and I's favorite tools, Stack Influence. Norm Farrar: Are you looking to quickly boost new Amazon product launches or scale up existing listings to reach first page positioning? The influencer platform StackInfluence can help. StackInfluence pushes high-volume external traffic sales to Amazon listings using micro-influencers, and guess what? You only have to pay with your products. They've helped up-and-coming brands like Magic Spoon compete with Cheerios for top category positioning, while also helping Fortune 500 brands like Unilever launch their new products. Right now is the best time to get started with Stack Influence to crush it during this holiday season. Kevin King: That's right, Norm. Sign up today at stackinfluence.com or click the link in the video below and mention Misfits, that's right, Misfits, M-I-S-F-I-T-S to get 10% off your first campaign. Head over to stackinfluence.com right now. Norm Farrar: So your experience as we stated earlier just to get the packaging right takes a skill and yours your skill was doing the research is that correct well you know it was. Doug Pick: Let me just say this. I can't draw a circle to save my life. I can't draw a straight line to save my life. But what I will say is thanks to technology that was available at that time, and it was just starting, I was able to work with some designers over my career. I've only worked with We're packaging designers. My last packaging designer I worked with for 15 years and he unfortunately passed away. But packaging design, I'll give you a little bit of perspective on it. Number one, all cool packaging for the most part has probably been invented or brought to market by some company. So what I did was I literally, when it came to new packages, I would simply walk the aisles of Walmart and Target and really just put my mind in a neutral space and just look at what's happening on the aisles and what is like catching my eye. Because packaging is something that I think one of you said that you have one to two seconds to get someone's attention. I would say that it's a millisecond. You have a millisecond to get someone's attention. And and prompt them or motivate them to actually lift the product off of the shelf or the peg. And so in my designs that I've created and if and if you go to heroes.com, every package that you'll see every word of copy, it all came between my two ears that just became I'm a student of packaging. I love it. It's it's it's a wonderful creative outlet and I always look to push the boundaries of what's happening in packaging. Many examples that that I did over the years and really the earplug category is just a small niche. So if if you or your your podcast guests Our listeners go to see Heroes or our competition. You'll see that Heroes is like this bright, shining star in color and graphics because my grandfather taught me, sell the sizzle, not the steak. And so I applied that to my packaging activities. But I would also say what I quickly learned in product marketing is, quite honestly, I don't care how great packaging is in some regards, because unless the product The Marketing Misfits really delivers on the promise of what the packaging says, you're dead in the water. So whenever I go to market with any product, it's all about quality. It's all about delivering on the promise. And that's what our heroes, Sleep Pretty and Pink products always did. It always started with the product. And sometimes in many regards, there are countless examples of products where the packaging may not be that great, but because the product is so extraordinary and creates such an experience for the user, It's somewhat irrelevant. It's kind of like cream of the crop rises to the top. One last thing I would say in regards to packaging is because I loved it so much, over the 26 years that I ran my company, I probably updated the Heroes and Sleep Pretty in Pink packages More than two dozen times, because I was always trying to be on the cutting edge, stay ahead of whatever was happening in the marketplace, because it's important for a consumer packaged goods brand to refresh. You know, you look at Pepsi most recently did a refresh on their brand. Think about the tens or hundreds of millions or billions that they put into that brand. And yet they're still looking to refresh. And keep the experience on shelf active for their customers. Kevin King: Well, that can backfire though. Look at what Jaguar just did. Jaguar just completely rebranded, was it Jaguar or am I getting, the big car luxury, they just rebranded to this whole different look and they're getting, it's totally, it's like aimed at like the 22 year old millennial, the way the colors and the schemes and it caused all this controversy online, like alienating all their previous customers. So you gotta be, but I agree with you, you should constantly be testing, but I'm gonna go back to something you said about the product quality. I agree with you 100%. Product quality is how you build a sustainable. That's one of the key components of building a sustainable brand because it doesn't matter how good the packaging is. If the product sucks, it's just not going to fly. But product quality usually comes from some previous experience with the product or word of mouth or general advertising. So if you don't have that and you're trying to stand off of people, if you're not running When you first started Heroes, and I'm looking here, you got the red bar across and everything. If they don't know you, and I haven't been in the market for, they always say you pay attention to what you need. So if all of a sudden I realize I'm going to a concert tomorrow night, And I need some earplugs or I'm going on a trip and somebody is sleeping with my brother. My brother's coming with me and he snores like a freaking Mack truck. I need to get some earplugs to plug this up. I wasn't in the market looking for that. So I don't know what the brands were. I weren't really paying attention in the last five, 10 years. So I go into CVS and I'm looking at the shelf. And to me, it's like, which one of these do I get? I have no idea. There's one that's $4.99, one that's $9.99, one that's $29.99. And to me, I think that's where the packaging It makes a huge difference because I may go with the $29.91 even though it might be virtually the same thing as the $4.99 one. Because of the packaging and because this looks like it's a better quality, people eat with their eyes first. It's a perceived value thing. How do you balance those two things? Because packaging can add to the price. It's just like online. I always say some people that are selling online, I say packaging doesn't matter. People aren't holding their hands. They're not touching it. They're not flipping it over. But I'm like, so we can just put in a plain brown box, who cares? And sometimes you might be able to get away with that. But a lot of times I think that the packaging reconfirms the price you pay, reconfirms the purchase. It's that reconfirmation thing. And so when someone gets in the mail like, oh, wow, I just spent $99 for this thing off of Amazon. This is a nice box. It must be worth $99, even though it might be only worth $10. So can you talk about that a little bit? Doug Pick: Sure. I mean, there's so much to unpack there. And it's a very interesting question. We dealt with it in many ways. I'll approach it from just a couple of angles to start. First of all, what you talked about is certain packaging conveys a story. I would also say to you that the price tells a story as well. If I told you that a Mercedes-Benz is $150,000 and a Hyundai is $40,000, right there, your brain will automatically go to, there is a higher value for that Mercedes-Benz. Even if you haven't even seen the car, you haven't sat in it, you automatically, our brains are just logical to the extent that you think that there's going to be greater value there. The other piece of that is with retail today, not Amazon, but I'll just speak within regards to retail. There are some retailers that just offer one brand and that is their store brand. So you really don't have a lot of choice. Kevin King: Like Trader Joe's or Aldi or something like that. Doug Pick: Well, you know, many of the retailers and there's a story that I wrote about On my website, DougPick.com. And I'd also encourage any of your viewers to go to my website because there's a free digital box set, which is called From Hero to Zero. They can read five kind of fun, interesting stories about my journey to sell 500 million earplugs. But I'll give you a specific example, Kevin, in that regard, which is there was a point in time when my company was going through due diligence. And we were a month into due diligence to sell it. And my number one customer, Walgreens at that time, I had a conversation with the category manager and I learned that the product, all of my products without my knowledge, were discontinued from the chain. They were discontinued because the category manager decided to go with an all-store They did that because their profitability would be maximized because when you work with store brands, that's what happens. So I had to tell the CEO of the acquiring company, guess what? My number one customer that I've had for 22 years that was one of the reasons that you wanted to buy my company is now gone. And at that point, the deal could have imploded. However, my guidance at that time was that I didn't think it would work. Because we had worked with Walgreens for 22 years. The Heroes and Sleep Pretty in Pink brands had worked with that shopper. So they were incredibly, a good contingent of those shoppers were loyal to our brands. And I would also say to you, the consumer in the earplug space, believe it or not, is very educated. They know their products. And if you read any of the reviews, In that space, they know their products inside and out. So what ultimately happened in this particular case was six weeks into Walgreens going live with this new national store brand assortment, I got a call from the new category manager and he says, I'm losing market share every week. Can you please help me? And so I knew instantly what to do. And I designed four innovative, unique branded products for them. In about a week, I flew to Chicago, presented them to him. He loved them. We went in and they became national bestsellers kind of overnight. So Getting back to the high level, is packaging important? Yes, of course, it's important. Does the price tell a story? Does the packaging tell a story? Yes, it does. And it also depends on the venue of where the products are being sold. On Amazon, you know, you've got dozens and dozens of brands where people really don't know what they're buying. And I can tell you and your listeners that in the earplug space, a lot of it's garbage. They're bringing in very low quality products, but that just leads to returns. In this day and age, whether you're shopping at Costco or Walmart or Amazon, The consumer is empowered in a way that if they're not satisfied with the product that they just bought, they'll return it. So it's really in the best interest of the vendors that are selling goods to really bring high quality products to their products. Otherwise, they're going to eat that product along with other costs associated with poor quality product. Norm Farrar: When you're taking a look at packaging, at least on Amazon, and I'm sure this is in retail as well, I always look at three tiers. The product cannibalization tier, these are people that just come out so low, they don't care if it's garbage packaging. They expect a low quality product or an okay product for that cost. Then you have that We've got the middle tier, which is a bit better perception. This is the average that people buy. It might be a little bit better packaging. Then you've got the high level tier. I'll give you a great example, Dead Sea Mud. It's a commodity. It comes from the Dead Sea. Eight ounces. Check it out. It's on Amazon. I don't know if they're still there. They're probably under by now, but it was eight ounce. $7, went up to $14, first tier, product capitalization. And he went up to that second tier. And there was a few prices in between, but it was $24 to $44 when I did my research. And better quality listings, probably where some of the best traffic was coming in. Profit, not so good. Next one was, it was 75 to 99. But the difference was the 99 was 3.5 ounces. And the 75 one was, I still think it was eight, I think it was eight ounces. But it was Dead Sea Mud from the Dead Sea. What convinced people was a good listing, but perception and incredible, really incredible packaging. However, just on that note, still wouldn't cut it in retail. But it's the same in retail. If I'm going out there and I want to buy some cheap crappy thing, great. Then you have the average and you have the upper end. But I know where people will not do that. Pets, for example, if I see a $30 dog bed and I have a dog and I know I'll pay $140 for a dog bed, which I know because I have or babies, you know, there are certain things that price is really no object unless it's absurd, but it has to be in the right package and a huge fail. If you try to take a poor or an average at tier one, tier two, and put it into really good quality packaging, people are going to think, and you have that price point, they open it up. That's a huge fail. Expect one stars. You have to provide. I just wanted to mention that. Doug Pick: Yes. Value, quality, the experience. The other thing I also think about in regards to this conversation, which I've always leaned on and I think is very interesting, which Warren Buffett once said, if I gave you a billion dollars today, you could not replicate the goodwill that Coca-Cola has. If you think about the brands that he owns, He owns brands where the lineage is decades. In the case of Coca-Cola, it's over a century old and it's that goodwill. I can look at even the brand that I started back in 1992. It's now 32 years old and there are still people, even though I'm not associated with the company or the brand or anything that's going on with the product, there are still very loyal shoppers because in many cases, It is when one has a good experience with the product, We as humans tend to stick with what works for us, unless there is some extraordinary compelling reason or the product fails to deliver on the promise that we have expected over years. That is the value of brand over time, is people have in a custom experience that they're going to enjoy with whatever products they purchase. Norm Farrar: So can we start talking about getting prepared what do you have to do with your with your packaging to get prepared for retailing colors and materials and how do you start in start to even. Know what's good and what's bad. Doug Pick: Well, what I would say is, you know, and I and I go through it in my book. I recently came out with a book. It's called Stop or Go. It's the 25 critical factors that every CPG prospective founder needs to learn, research and analyze before they make their stop or go decision. So the packaging component is an aspect And, you know, first and foremost, the way that I approach products is by by ensuring that I've got a great quality product. Once I have the great quality product, then I come up with the brand name. I make sure that I can get the appropriate URL as well as the trademark. Then I move on to the packaging norm. And with the packaging study, it is again, it's really kind of three components. The first component is what's the competition doing? Because if the competition is using red as a base back color or white or black, I'm not going to use any of those. I'm going to look for an iconic color that's going to be recognized as that brand. So I'm already thinking of, even though my strategy will start essentially with a Amazon DTC, I go to market because I want to make sure I've got that product market fit before I even start to contemplate the type of hundreds of thousands or, pardon me, potentially millions of dollars that I or my investors would need to consider before making a decision. Do we want to work with Walmart? Do we want to work with Target? Because the costs of doing business are extraordinary. And the risks can be a game ender for succeeding brands if they don't get it right. So it's those first two components. And then the last thing for me is just what kind of spin do I want to put on it? What's the excitement? What's the sizzle that I want to build? And what's happening in the category that could be very interesting? Kevin King: A lot of people come from the e-commerce world and they don't understand that they like that because they feel like they have a sense of control. They feel like, well, yeah, I can control, I can manipulate the rankings on Amazon a little bit, or I can do this or that, or if I have my own Shopify site. If I go into Walmart and I have zero control, a Walmart might order 10,000 units and they sit on a pallet in the back of 10 of the 15 Walmarts because the store manager never puts them out for whatever reason and they just get returned to me, or they can't control where they're at on the shelf because there's a planogram that some buyer somewhere designed and says this is how you do it, or their product packaging doesn't fit the allotted space on the shelf, and there's all these other little control variables. How do you handle that and prepare for that when you're planning to go CPG? I'm assuming this is part of the 25 things, but how do you do that? Doug Pick: Well, all of the points that you mentioned, believe it or not, Our are completely handled before one unit of your product is shipped. So for example, the first step is you meet with the category manager. You make the presentation if it and this is during what's called a category review for some of your listeners out there. They might have a great product that they want to bring to Walmart today being December 17th. It may turn out, though, that in November of 2024, the category manager closed their review process. So guess what? There's no opportunity to sell the product to Walmart for the next 10 months because they only go by Windows. So you have to be able to follow that calendar in order to get going with them. Assuming that you are in the calendar review, you make your presentation, there's a complete process, Kevin, that goes along with it. So, for example, if the buyer is interested, You fill out vendor forms. You fill out new product forms. You get approved as a vendor. The next step is we need samples of your product because what happens then is let's assume that there are two items that Walmart's going to buy. You send in about, let's just say a dozen samples of each. And what they do is they have what are called planogram rooms. That are duplicative of what is occurring in the stores because there's different planograms. So they allocate the space for every single product. So there's no confusion whether it's going to be on a peg or it's going to be on a store shelf. The real estate has been properly accounted for. So there is no, there's no issue in that regard. Then in regards to inventory, the retailers are incredibly adept at allocating inventory and they look at it from inventory that is shipping. To their distribution centers, to product that is in the store, to the velocity movements that will be occurring at the store. And there's this magical formula that their programs are able to utilize so that it is all timed perfectly. There is no product that's generally left in the back. If your product is slated to be on the third shelf up two slots in, it will be there in every single store without question. Norm Farrar: Now, a quick word from our sponsor, LaVanta. Hey, Kevin, tell us a little bit about it. Kevin King: That's right, Amazon sellers. Do you want to skyrocket your sales and boost your organic rankings? Meet Levanta, Norm and I's secret weapon for driving high-quality external traffic straight to our Amazon storefronts using affiliate marketing. That's right. It's achieved through direct partnerships with leading media outlets like CNN, Wirecutter, and BuzzFeed, just to name a few, as well as top affiliates, influencers, bloggers, and media buyers, all in Levanta's marketplace, which is home to over 5,000 different creators that you get to choose from. Norm Farrar: So are you ready to elevate your business? Visit get.levanta.io slash misfits. That's get.levanta, L-E-V-A-N-T-A dot IO slash misfits and book a call and you'll get up to 20% off Levanta's gold plan today. That's get.levanta.io slash misfits. Doug Pick: Also in regards to an account like Walmart, Walmart requires that you as the vendor help to manage the business with your category manager. So the category manager has dozens of vendors. He or she is pulled in a million different directions. It is incumbent on any Walmart vendor to help to manage their business. And that is done through a program which is called Retail Link. So you either have to have an expert in retail link that you hire or on board because what you're expected to do amongst the 4,000 plus stores that they have You're expected to look at all the inventory levels of every single store, every single distribution center. And in the event that there are shortages, you need to notify your category manager of those so that the proper allocation can be made to the reorders, which, by the way, come every single week. So once you're plugged into the system, it always comes down to execution. And I'll share with you one thing after. So it took me eight years to land Walmart. And one thing that my first buyer said when she said to me, Doug, if you could have one item in our chain, which one would it be? I told her. We finished the meeting. She looks up at me and I'll never forget, in a rather stern way, she said, now just don't miss any of my ship dates. And the reason why she said that is because she was making a bet on me and my small company at the time that we would be able to support Walmart in their needs to number one, sell product and make additional profit. But think about the risk that she was also bearing by going forward with this kid. I was probably in my early 30s at the time. And what she was gambling was that if she made a bet to bring in one of our heroes items in the event that we didn't make our ship dates and we were late and there were out of stocks on the store shelves, that's like the kiss of death in retail because the way the retailers look at it is it's kind of like a soda fountain. If you press in on the soda that you want, you want Coca-Cola, but they're out, it's a lost sale. And the retailers don't like lost sales. They have real estate that they need to account for. And so execution of any and all purchase orders that my company got. We beautifully executed. We always carried, just for your listeners to know, we always carried between six to eight weeks of inventory because you never knew if there was going to be a spike in sales. So it's a very complicated, complex business with some great upside, but also some very difficult downsides if you're not bringing your A game. And that's why I always said that. A-plus is the only score that they're looking for because one last thing in this regard is that Walmart, Walgreens, Target, doesn't matter who the retailer is, they are all evaluating their vendors' performance and you must ship to the level of 98%. And they have some exceptions because sometimes shipments gets lost or some other factors occur. But for the most part, if you're not shipping at a 98% of all purchase orders, you're going to lose the account. And I never took that chance. I always invested bigger in my inventory in order to do that. So we're kind of a long winded answer. Kevin King: But there's a whole industry of people that monitor The retail because I used to have a buddy that worked for a company. It's a third-party company and he was hired by that Mars that, you know, Hershey's and they distributed all the chocolates and everything that would go in. It's like a $40,000 a year job, but he had 160 Walmarts. He didn't work for Walmart. He worked for the third-party agency of the brand and he had to go into all the Walmarts and cycle through them once a month and adjust, make sure that there wasn't these pallets sitting in the back. So that happened quite a bit. And going to the shelves where the guy coming from, I don't know what the competitor to Mars is the, I don't know, my Hershey's. Yeah, Hershey's had come and moved the Hershey's Kisses over into his space. And the stocker that was getting paid $7.99 didn't care to do the planet gram. And he'd have to straighten up stuff and see where there's holes because the buyer wasn't actually resupplying the shop. It's this whole complicated thing. And there's a whole industry around the United States that that's what these guys do for these big brands to stay on top of the retail. So that was kind of what I was referring to earlier. It's complicated and there's all these little Just like in the Amazon selling, there's always little, little fingers going out to do different things. Doug Pick: Absolutely. I mean, so what you're talking about is that sounds like a direct to store relationship. We're the vendor is of such magnitude that perhaps they are shipping directly to the stores. My relationship was much smaller for Walmart. So we would ship to any one of their 40 plus distribution centers. And then from there, the products would roll out. So we didn't have the direct management of stores. And I could see that that could be that certainly could be problematic. I totally get it. Norm Farrar: I remember, oh, this goes back a few years, many years, but we had a lot of arts and crafts in Walmart. And exactly like you said, we probably had six weeks to eight weeks that we had because there was penalty clauses too. So we, no problem. We had a great relationship for some reason on this one brand that we made blew out the doors. And I remember that we had to go to Taiwan, make it like ASAP, get it and fly it over. It cost us $50,000. Just to make sure that that relationship with getting it on the shelves was like, you can't describe it better. It's a must-have or you're dead. Doug Pick: For sure. For sure. I mean, one of the blessings of being in CPG was that you really didn't, again, for my size of a business, it was not a Procter & Gamble, Colgate size, very small niche player. But I really didn't talk to my Walmart or Walgreens buyer, Target, emails, very few and far between because they were so busy. But if I ever got an email or a call, that was like all hands on deck because you didn't know and the importance of these relationships. You know, you just can't mess up. I'll just share with you one example. And this was with a regional Northeastern grocery chain that I worked for 11 years to get. We shipped the first order. There was some complication related to the second order where my director of ops did not get the correct date right. The shipment for this grocery chain arrived one day late. The buyer said, that's it, you're out. We lost the chain right then and there and never got back in. So there's a degree of intolerance and what any future prospective CPG entrepreneur needs to know is there's always someone knocking on the door looking to take you out. Kevin King: Can you talk about the fees that a lot of people don't realize happen when you go CPG? I mean, they think that, okay, my wholesale price is this to Walmart. It's a $20 item and I'm selling it to Walmart. They like to at least keystone it if they can, sometimes better. Let's just say it's Keystone, which means double. Let's say it's at $10. But then there's all these other fees. If I don't put the label exactly half an inch from the left-hand side and 17 millimeters from the bottom, it's a $50 per box fee. There's an advertising co-op fee, whether they advertise my product or not. There's shared markdowns in many cases for seasonal stuff that if they have to discount The Christmas stockings after Christmas from $10 to $5, they're now paying you half of what the original PO was for those. All these additional things and risks, can you talk about some of those that people may not realize? And I'm not saying these are necessarily bad, you factor them in, but it's things that people got to think about. Doug Pick: Well, it's amazing I still have any hair, believe it or not, because it is, wow. It's one of the reasons that I actually needed to take some time off because some of the costs, some of the fees, I call them blindsides. They were blindsides that came in. A lot of them you know in advance. I'll give you a couple of examples. The first one is in regards to Target. Assume that we come up with a product that we think is great. We present it to the Target category manager. She says, I love this product and I love a second product. And we say, great, let's get started. She says, OK, terrific. Now, our new vendor setup is $50,000. So in order to get set up as a vendor, it targets $50,000. And then for the two items that you wish to bring into our stores, that's $15,000. So now you're $80,000 in the hole to a relationship you haven't shipped or sold one unit to. Then you have to factor the inventory that you're going to ship to the chain. And imagine that... Kevin King: And wait forever to get paid on. And wait forever to get paid on. Doug Pick: Well, yeah. So assume that... I'll walk you through it. So you're $80,000 in the hole there. And then you have to fill 2,000 doors with your inventory. Perhaps there's six units for the store and six units for the distribution center. That's 12 units. That's 24,000 units just to get started that you funded in addition to the 80,000. And then your payment terms are net 60. So after about two weeks of shipping your first order, you're going to start to get hit with reorders on a weekly basis. So then you're talking about eight weeks out on shipping replenishment. If it takes off, you're even further in the hole. Now you get paid on your first order two months out, but they've deducted the $80,000 for the new vendor setup as well as the slotting. And now the next thing is you have promotions. So you need to create awareness for your product. So there's a cost associated with the promotions as well as the redemption value. And I give the example in my book, which is with Walgreens. Great account, wonderful to work with. We had a new promotional setup fee of $25,000. So for the right to offer our products at a discount to the Walgreens shopper, it was $25,000. It's probably more today. And then on the product that we wanted to promote, it sold, we could expect a lift or an increase in sales. And for that month period, we expected that it could sell 24,000 units. And so you multiply the 40 cents that we gave for the redemption value. On 24,000 units, that's 9,600 bucks. You add that to the 25,000 and now you recognize that I just invested $34,600 for one promotion at Walgreens. Why do we do that? We do that to increase sales so that when category review time comes around, the buyer recognizes, oh, we saw a 7% year over year sales lift. This must be an item we need to keep for the next 12 months. So it's all part of that. I'd say one of the dirty little secrets that people don't know about retail is chargebacks that are associated. And you touched upon it, Kevin. There are chargebacks. If you don't put the label in the right place, bam, you get hit. If you don't order, if you don't deliver your products on time, bam, you get hit. And sometimes those charges are erroneous. But it doesn't matter because in some regards, Your money is in their stores. And if they have control over your product, they've got you right where they want you. So it becomes a kind of sometimes a friction filled situation, especially if the charge is erroneous. So there's a lot that goes into it. A lot. Kevin King: And these buyers, a lot of times, too, like you said, these category reviews come up typically about once a year. I was told by someone that there's high buyer turnover. A lot of times it's like six months. And so you're constantly having to re-educate the next person, like, why should you continue this? And they're just looking at a spreadsheet. So maybe that's why you do this promotion, because they're just looking at a spreadsheet going, oh, they're not paying attention that you did a promotion. And it's like, oh, the numbers say OK. So how do you deal with that constant, I mean, business is about relationships in a lot of ways. Doug Pick: Yeah. Kevin King: It's also about making money, but relationships play a key factor. And like you said, it took you 11 years to get into one, eight years to get another. And I'm assuming that's just because there's buyer turnover and you just had to hit the right person that's paying attention to you that you resonated with. Doug Pick: Well, you know, here's what I'd say. It is that, and it's also one other thing, which is I kind of mentioned in the Walmart story, which is you might have a great idea, you might have an incredible product that really is filling a need. But you know, again, the retail buyer is, you know, anyone that's working for a company is navigating the question, if I do this, will it get me fired? And the one thing that category managers have to be very cognizant of is, what is the financial wherewithal of my potential partners? So it is that, there's that calculus that the buyer must evaluate because the last thing he or she wants is to make a commitment We don't go into any one vendor only to see that that vendor now is out of business because they can't supply the chain. And then we go into, okay, what's the contingency plan? And that's just, that's a headache. No, no buyer and really no vendor wants as well because it just becomes very friction filled. Kevin King: So Costco that actually has a rule that they cannot be more than 20% of your business or something like that. Yeah, I mean, their PRs cannot be more than 20% of your income or something like that. Doug Pick: Walmart used to have they couldn't be 30% of one's business. Unfortunately, with the consolidation of retailers, you know, and I'm going back 30 plus years, that was something that could have been possible. But in today's world, sometimes Walmart is 60% of someone's business, 70% of someone's business. And they were about 40% of mine. We had pretty ubiquitous distribution. And it also depends on if the relationship is going well, that buyer really wants to keep growing that brand and that relationship because number one, they know they can count on the vendor for Filling their stores and number two, they're coming up with innovative products. So sometimes that's, that's a percentage that no one ultimately can control. And, and hopefully everybody is making prudent decisions to make sure that everybody is safeguard against some unexpected issue. Norm Farrar: You started, I guess, sitting down on the floor of CVS or wherever and did your research. I'm a bit more of a fossil. I'll just say that. Doug Pick: I'm right there with you. I'm a dinosaur. Norm Farrar: I'm sitting on a rock, not a floor. I think you'll get a chuckle out of this and our listeners, too. Back in the day, We would actually go to our buyers who were there for years probably. You know, these category managers, you take them out. And you'd go for lunch. And you would buy, like, I know that we would go into the liquor store for some of these. We go, okay, this one's XO. This one's, you know, cheap bottle of wine, you know, Ripple. But we would pick out, I remember having these three different categories that you would give to your buyer, right? Try to do that nowadays, but you don't get to know them and it's for a reason. No, but yeah, back, back then and even, okay, so this is even further. But I remember sitting down in an office and you could have a cigarette. It was crazy. But, uh, Times have changed. Doug Pick: Yeah, I remember one thing. My whole thing was really interesting when I was running Heroes. I always wanted my business to be important to a category manager. One of my reps ultimately told me, he's like, Doug, there's nothing you'll ever do to become important To a category manager, and I remember before my Walmart buyer came into our cubicle for the category review, I was like, well, maybe I can give her a hero's pen. So I set up a notebook before she came in the room. I put a hero's pen there and she was able to write with it, but she did not take it back to her office. So they're very, very, you know, the leadership is like, even I would say this, at Walmart, because graft was something that started to spread, because if you think about it, if you, you know, if you incentivize a buyer to bring in your products to a Walmart, that could be tens of millions, hundreds of millions of dollars of business. So at Walmart, they literally have in the rooms, you know, amongst all the meeting rooms that they have, They have a camera overhead, over the top of the desk to see what's happening in that room. So, you know, that's a whole other story. But yes, buyer turnover is frequent. And the ability, you know, I would say this also, to get an email response from a buyer is sometimes very rare. And that's, you know, I mentioned to you about Walgreens, where I lost the account I didn't know why. I went back and I reviewed all of my notes. The buyer that actually kicked us out of the chain or discontinued our items, I noted that I sent her 18 subsequent emails post our first meeting and she never responded to one. So, you know, part of the stress of working in CPG is sometimes you're working in a vacuum. You don't hear from people sometimes until it's too late. And that just, you know, again, that makes it very precarious. And I would say also there are some situations that, you know, it comes down to what I would do before I met with any category manager is I literally would plan out the financials of what that year would look like if we work together. Because there could be situations where I would have to fire the customer and I actually, for one particular grocery chain on the East Coast, I actually had to say, thanks, but no thanks. I'm not interested to do business because I'm going to lose money doing business with you. Kevin King: Hey, Kevin King and Norm Farrar here. If you've been enjoying this episode of Marketing Misfits, thanks for listening this far. Continue listening. We've got some more valuable stuff coming up. Be sure to hit that subscribe button if you're listening to this on your favorite podcast player or if you're watching this on YouTube or Spotify, make sure you subscribe to our channel because you don't want to miss a single episode of The Marketing Misfits. Have you subscribed yet, Norm? Norm Farrar: Well, this is an old guy alert. Should I subscribe to my own podcast? Kevin King: Yeah, but what if you forget to show up one time and it's just me on here? You're not going to know what I say. Norm Farrar: I'll buy you a beard and you can sit in my chair too. We'll just, you can go back and forth with one another. Doug Pick: Yikes! Norm Farrar: But that being said, don't forget to subscribe, share it. Oh, and if you really like this content, somewhere up there, there's a banner. Click on it and you'll go to another episode of The Marketing Misfits. Kevin King: Make sure you don't miss a single episode because you don't want to be like Norm. Norm Farrar: I know a person right now this year that they had a really nice premium soap, shampoo, conditioner, lotion company. They went into wholesale, they went into whole food and they had to say goodbye because they got nailed with so many nickel and dime charges that at the end of the day they were losing money. But look, we are at the top of the hour and I want to know a little bit more about your book. Can you tell us some? Doug Pick: Well, really, so the book that I wrote, it's called Stop or Go. It's available on Amazon. Your viewers and listeners can receive a free five chapter excerpt from Stop or Go on my website, dougpick.com. The book was written, number one, for my children because I wanted them to see what their dad did for 28 years and beyond and get some idea for the expertise that I have. Also, it was written really for myself of 1992. I had no blueprint. I had no idea what to do. And I just kind of stumbled forward, making a lot of mistakes. And so I really wanted to put together something that memorialized This is a pre-production print of it. This is called Stop or Go. It's small. It's a little booklet and it takes like 60 minutes to read. The narrated version that I had a lot of fun doing is 87 minutes. The secret to it is The answers to how to start a CPG company are in the work that is required because I highly recommend that anyone that's interested take it on like a college course. And I refer to people in the book as taking on the role of being a CPG detective. Don't come to any conclusions that your product is great until you've completed this analysis. And that's why I list 25 critical factors that I recommend any prospective entrepreneur go through before they make that stop or go decision, because that decision should be based upon prudence, that they've done their homework, they've done their research, they've looked at the financials, they've looked at the risks associated, and they make an educated decision to either stop and say, This isn't something for me for X, Y, Z, A, B, C reasons or this is a thumbs up. Let's go. This is something that makes a lot of sense. So that was the whole, that was the whole motivation of creating that book. Norm Farrar: All right. So we're at the top of the hour and we always ask our misfits, do they know a misfit? Doug Pick: Oh, I know plenty of misfits. I know plenty of them. Most of my friends are all misfits for that. And there is someone that I'm thinking about that I think would actually be really great for this podcast. And I'd like to check with them first and then get back with you guys for a referral for who might be someone you might like to interview. Norm Farrar: Fantastic. Kevin King: That'd be awesome. That'd be awesome. Norm Farrar: Great. I would look forward to that. So, Doug, we're going to remove you. Oh, first, before that, how do people get a hold of you? What's your contact information? Doug Pick: Yes. Easiest is either through LinkedIn. You can just look me up, Doug Pick, or you can go to DougPick.com and there's a way to contact me through that website. Norm Farrar: And get those five chapters. Doug Pick: Yeah, there's a lot of collateral on there. I think one of the things about the box that I think people will enjoy, one story that is true, which is called How Making Earplugs Landed Me in a Mexican Jail. And I won't create any spoiler around it, but it's a story that really happened. I really was in a Mexican jail. And I'm amazed I made it out. Norm Farrar: Kevin's got me put into a Mexican jail once or twice. And that was all, we won't get into it. But hey, Doug, thanks a lot for coming on today. I'm going to remove you and then we'll bring you back in a sec. Doug Pick: And guys, thank you very much. It's been a pleasure. Thank you. Unknown Speaker: Appreciate it. Norm Farrar: All right, buddy. Kevin King: Yeah, that's good stuff. I mean, it's an area that a lot of our listeners I don't have a lot of experience with, and it's an area that I think, you know, you got to approach it right. And like Doug said, you got to have a strategy to it and understand what you're getting into. But if you do it right, it can, like he said, that was, what did he say, 70% of his business at one point? Or Walmart was 77% of his business, I think he said. It can be huge numbers. I mean, Walmart can move a lot more, as much or even more than Amazon. And a lot of times when people need like a product, especially like in his case, They need earplugs. They need it now, not tomorrow or not in two days or not even in some areas where Amazon delivers the same day. They need it now. And so people still go retail. I mean, it's one of those things that people, especially in our world, just kind of discount and they shouldn't be. Norm Farrar: You know, just to get an example, so anybody who's listening, check it out. Go over to Heroes, H-E-A-R-S, and check out, what's that? Oh yeah, OS, and check out the packaging. If you're walking down an aisle, that red stands out. It's almost like just pointing you right over to that direction because of the packaging. And the second thing, why not create your packaging when you're creating your online products? It'll save you time and it'll save you money and a lot of it You don't have to have two sets of packaging. You just got to do it right the first time. What do you think about that, Kev? Kevin King: That's exactly what I do. I mean, I've done that since I started selling e-commerce is all my packaging is designed for retail in mind. So even though it's going on Amazon, I don't cut corners. It's got all the descriptions on the back. It's got all the UPC codes, got all that as if it could go straight into retail immediately. I did that with several of my My Slow Feet Dog Bowl went into Chewy and other online places, but also went into a lot of retail stores. And the same thing with my Apple Watch charging dock and all my calendar products are all made for retail. So everything I do is made for retail first, even if I don't end up taking that product to retail because it fails or because for whatever reason, it's a cash flow thing. We didn't get to talk to Doug about that. But retail at a successful level is serious cash. That you're having to float like you mentioned the 60-day terms. There's companies out there that will factor your invoices. So they know that Walmart is going to pay you even though it's net 60 terms. They probably will not pay you in that 60. They will probably pay you net 120 or net 90 unless you give them a On invoices, you can do something like 210.16. Sometimes that will motivate them. That means if they pay you in 10 days, they get a 2% discount or 210.30. There's ways to actually accelerate that. Retailers will take advantage of it. Others, they pay you whenever they want to pay you, basically. And sometimes it's tough if you're robbing people to pay Paul, growing your business, especially if you're expanding, to keep the lights on and make payroll. So there's companies that will factor those invoices because they know Walmart will eventually pay. You basically assign the invoice to them. They take 5%, 7%, 10% depends on the situation for doing that. And those are costs. So there's a whole number of things that we could go into much deeper. Norm Farrar: Podcast is over, Kev. Kevin King: It's still a really good opportunity. It's all right, though. I'm delivering value, so we're going to keep going. Norm Farrar: Okay. But that's it. I do know what I'm going to do when I get off this call and after the next podcast. I think I'm going to approach that bloody dogpaw ice cream company and tell them to redesign their bloody... Kevin King: There you go. Norm Farrar: How's that? You want to come in on that? Big bucks. Big bucks if we can redesign it. Kevin King: Big bucks. Big bucks. Cool. Well, if you like this episode, be sure to forward it to somebody. Make sure you hit that subscribe button so that you don't miss a single one whether you're watching this on YouTube or you're on Apple or Spotify or whatever. We'll be back again next Tuesday like Norm said with another edition of The Marketing Misfits. Until then, take care everybody. Norm Farrar: See you later. Unknown Speaker: I'm Ausha.