Navigating the World of Sales Reps
I know from talking to hundreds (if not thousands) of artisans, producers, and manufacturers that want to get their products in retail stores. Sometimes, they employ the assistance of professional sales reps. Working with sales reps can either be the best or the worst decision you can make for your business. With the right information and a little preparation, you can ensure that your sales rep experience is a win.
For many of you product moms looking to increase sales, the problem lies in navigating the world of sales reps. Let’s get you on your way.
But first, let me explain who sales reps are.
A Manufacturer’s Representative, also called agent, manufacturer’s rep, sales representative, or sales rep – or more commonly, just “rep” – is a self-employed person who contracts direct selling and marketing services to one or more related, but normally non-competing, companies in a particular industry.
As part of their service, reps call on prospect businesses and present the client’s products in a positive light. Effective reps must answer product questions intelligently; offer promotional materials, terms and other information; and ask for orders and re-orders in person, or by phone, fax, or email, and via their own web sites.
Sales reps earn commissions as compensation for their selling services, rather than making their money by buying your product at a discount and reselling it for a higher price, like distributors and wholesalers do.
From the point of view of a producer, sales reps probably qualify as the lowest cost option for expanding sales regionally or nationally. Independent reps operate as a contract sales person, or in the case of rep “groups”, as a contract sales force, working on a strictly commission basis, minimizing overhead for a producer.
Reps typically have a designated territory; visit or contact their buyers regularly; and most importantly, have a relationship with buyers who rely on sales reps to introduce the best and newest products to sell in their stores. In any given time, I personally sold up to 47 lines to 300+ stores that I visited 2 to 5 times per year, depending on their location. By frequenting their buyers,sales reps build a trusting relationship beyond what most producers or artisans could accomplish dealing directly.
So, How Do Reps Work?
Sales reps work on a commission and don’t get paid unless they sell your products. Typically, in the gift business, the commission payment is around 15% of the wholesale price. For example, if a sales rep sold 12 of your items for $10 each, the order total would be $120 plus shipping and handling. The commission to the rep for this order would be $18. And since you would not pay your rep until you got payment from the retailer, there is little risk to you.
Sales reps also act as a liaison between you (the producer or artisan) and the stores. In this capacity, I have negotiated package purchases for the buyer, helped with billing issues, encouraged buyers to try new items in a line, and helped solved any problems between buyers and producers.
Reps also represent your lines at Gift Marts and/or Trade Shows where hundreds of buyers are attending. Being from Idaho where there is no local gift show, I was mostly a road and internet rep.
If you have sales reps working for you, it allows you to focus your attention on your creative endeavors rather than worrying about contacting and working with retailers.
How Do I Make My Product Line ‘Rep Ready’?
Most legit reps will not be interested in taking on your line until you’ve established yourself in the marketplace or been in business for several months to a few years. Before seeking out a sales rep, you need to make some initial sales calls to retailers and sell your product to a few key accounts. Doing so will provide valuable experience and feedback from wholesale buyers about your products. Here’s more on how to get ready.
Unfortunately, sales reps are wary of unestablished product companies. There are horror stories about new companies coming and going without fulfilling orders or paying reps their commission. Sometimes, small companies can’t handle the growth that a new rep will bring them, others just don’t have their businesses in order, and others…well, you get the picture.
Experience selling your own products at wholesale to a local retailer, before hiring a sales rep, will help you appreciate what reps do for you, and also generates a presence in the marketplace. This adds value to your line by demonstrating to potential reps that you have established successful accounts. Consider this a trial period where you work out the kinks in your ordering and delivery system. A store or two will be more forgiving of your inexperience than a large rep firm.
The sales statistics you accumulate during thus process are helpful in giving your company distinction and awareness when you present your product line to a potential sales representative. Telling a rep that your re-order rate is 75%, or that stores turn over your inventory 3 times a year, provides the type of news a rep longs to hear about a prospective product line. Having experience working in the business will enhance your confidence, as well as that of potential sales partners, in your line and your systems.
What Does a Rep Need to Sell Your Products?
If you are already wholesaling your items, most of the sales materials a sales rep will need should already be in place.
1. Determine your wholesale and retail pricing. A pricing discussion is a whole presentation by itself, but to give you a quick formula:
Product Cost x 2 = Wholesale Price
Wholesale Price plus s/h to the retailer x 2 = Retail Price
2. Determine payment requirement and/or terms. I suggest first time orders by credit card which switch to Net 30 days after the second or third order.
3. Set up an online account with UPS, USPS, or FedEx for shipping your products.
4. Develop sales flyers with full color photos of your products, individual pricing as well as case pricing, terms and plus turnaround time for orders and re-orders.
5. Create a set of samples for the sales rep and potential buyer to see, touch and feel.
6. Have a signed, written agreement in place with each of your sales reps. I have always been a big believer in ‘good fences make good neighbors’. The best way to let each party know what is expected of each other is to have it in writing.
For more on getting your business retail ready check out these resources:
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