Be Your Own Broker
I am certain there are some good brokers. I have heard of many. In fact, I have heard legendary stories about some major brokers that do a phenomenal job selling Coke, M&M’s, Budweiser or other very well supported and nationally advertised major consumer lines. I have also heard stories of excellent brokers representing dry goods lines, sporting goods, clothing, etc. so I know they exist… somewhere. I just have never done business with one that ever delivered the kind of orders to me or my clients that ever added up to more than a hill of beans.
I will tell you one universal truth, in my experience, brokers do not work well for pioneering a new product or a product without national advertising, or without enormous support such as huge discounts, guaranteed sales, catalogs, sell sheets, push money, free goods, etc. given in addition to the commission to the broker, presumably required to stimulate the successful introduction of your item and to help your brokers to do their job. Hmmm. Maybe we are getting a clue here as to what is wrong. In the end, it all does not work anyway. A broker can do a fair job taking orders. If your product is a runaway winner with huge brand acceptance, supported by a major ad program and all the other goodies mentioned, then yes, a national brokerage firm may be just the thing for you. But the likelihood is that if you are reading this blog, you are not in that position.
In fact, I will assume you are a small regional manufacturer or importer, or are attempting to develop a more significant national distribution and are contemplating (or currently using) a broker network and I bet you are unsatisfied with the results. This plan nearly always fails. Why?
1. Brokers are not designed to place new items in the marketplace. There is way too much risk and it will not happen. They are order takers, not pioneers. The retail buyer has no time nor the desire to take risk so they go only with the winners. It does not pay for brokers to experiment as there is far less money in it for them, far too much risk as some will fail, and their loyalty is to their buyers, not to the manufacturers.
2. Brokers tend to represent a number of lines and can only expect so much commitment from each buyer at a chain, for example.
The broker pushes whatever the buyer wants or is asking for and dares not take his precious time and limited influence to push something new, different, or lacking in bells and whistles like free goods, obscene discounts, and other bone-crushing requirements meant to weed out anything other than the large successful items that everyone wants. Thus, while your item may be innovative and unique, if there is not an existing demand, brokers are not the way to go.
3. If you cannot afford all the bells and whistles, free goods, long terms, sell sheets, huge opening discounts, extra push money for the brokers, ad money, guaranteed sales, etc., do not even waste a moment of your time on a broker as it will not be a successful relationship.
4. If you are going to a broker that specializes in either an industry or product line and you hope to capture your share of market on his successful coattails, it is unlikely you will. The broker is more afraid of failure than the buyer, who is protected by a guaranteed sale deal.
If you do use brokers and are lucky enough to capture one with great contacts and a successful sales background who is willing to pioneer your item, I have one and only one suggestion and it works. It may be the only strategy that will work and it goes as follows: Ask your broker to arrange for a two-day field trip with you, the manufacturer. Tell him you would like him to take you around for a few days and make appointments with his best accounts. Arrive bearing gifts of a better deal and help him make the sales as only a business owner can do. This works, as the dynamic is set up.
The buyer understands he must behave appropriately as the broker typically has a relationship with the manufacturer and the buyer understands the dynamics of a manufacturer coming out with a broker to meet and sell the buyers. He usually feels obliged to cooperate in such a setting and should give an order as the broker will look bad if he does not create a sale for the manufacturer. Thus, the buyer is inclined to buy. You will do all the selling as the broker does not really sell and thus the job gets done with everyone smiling except, of course, the manufacturer who had to give away the ship to get the sale. But, at least a sale was made and now maybe the broker can use his extreme influence by telling the next buyer that the last chain he visited bought quite a bit! That’s about as good as it gets.
After that trip the broker will be waiting to see what happens. If the product sells he may sell into another chain, if the product does not fly off the shelves, he will not promote it to another buyer, no matter what. He will want to be commissioned for all existing customers sales within his territory. That’s to be expected. He will tell you he will do a better job and will get much more out of them than you will, and it demonstrates commitment and helps override the expenses of creating new sales which are huge, he will tell you.
Have I ever had a good broker relationship? Sadly, no. Has anyone? Definitely, yes, for the well established and well supported product line. Is it all worth the effort and cost? I do not believe it is. It’s a great concept but seldom works in pioneering situations. My answer is to do it yourself. It will take longer but it will be done more effectively and profitably under your control. Unfortunately, there are no shortcuts.
