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Founders often dream of being sold at Costco – but when Costco offered to stock my beverage brand O2 Hydration last year, I said no.
It was a heartbreaking decision. I love Costco and I would love to be in Costco, but I also knew a terrible truth: My brand just wasn't ready yet. And if you go big before you're ready, retail can ruin you.
If you have a product you want to sell on the shelves, there are three things you absolutely must have in place before awarding the contract to a retailer.
1. Understand your market and prove demand
Before you expand as a consumer goods business founder, you need to know your market well and prove that there is a demand for your product.
For my brand O2, we started our retail operations in a single region with a single retailer, Whole Foods. Within a year, we expanded to 10 Whole Foods and then to an entire region. This approach allowed us to find what worked and then build on it.
For example, we discovered that product samples attracted customers and they were immediately excited when they heard our story. That's a great insight, but it also meant we had to scale accordingly. By going slow, we built a loyal customer base and secured more shelf space – and we did that in every store and in every region.
2. Secure the necessary resources for replication
O2 was a hit at Whole Foods and we thought we were ready for prime time and agreed to launch nationally the following year with Kroger, Publix and Sprouts.
That's when we learned our first hard lesson about retail.
As we expanded nationally, the lack of geographic focus weakened our efforts. We initially found success by focusing on the Midwest, where our team could actively support and promote our products. But as we expanded nationally, we couldn't hire and train people quickly enough to replicate what we were doing nationally, and we were promptly shut down.
Pro tip: A concentrated geographic focus allows you to manage and support your retail partners more effectively. It also helps build brand awareness and customer loyalty in specific regions before expanding further. Without the right resources, you won't be able to handle the increased demand and logistics that come with larger retail locations. This can lead to inventory outages, a poor customer experience, and ultimately retailers dropping you.
3. Be confident to say “not yet”
When a retailer offers to stock your brand, it can seem like winning the lottery – and founders are often afraid to say no. They fear that doing so will close a door for them.
That is not the case. It is entirely appropriate to say: “Not yet.”
Retailers want brands that are set up for success, and they rely on brands to know if they're ready. Brands need to make sure they have the resources they need in the right regions before agreeing to a retail expansion—and they also need to know what tools they'll use to get their product off the shelves.
For example: How often do you advertise your product and at what price? What merchandising do you need to be successful and how do you get it?
Retailers won't do that for you. They're Odysseus and they're the Sirens. They see something working and they want to spread it as fast and as widely as possible, and they'll throw a tempting six- to seven-figure order in your face to get what they want. They assume you know what works, you've figured out how to scale it, and you've secured the resources to do it, so if you say yes, you should know all that!
If not, say “not yet.” The retailer will respect you for that. You just saved everyone a lot of heartache.
Expanding in retail can be incredibly tempting, but it's important to make sure you're truly ready before you take the plunge. By understanding your market, securing the resources you need, and building geographic concentration, you can position your brand for sustained success. Remember, saying “no” when you're not ready can save your business and turn future opportunities into even bigger wins when you are.
Now you understand why I turned down Costco. I know my market well; my product sells well in many regions and at specialty retailers across the country. I'm working toward a national mass-market business – and if I finally agree to Costco, it will be because I'm confident I can make it a win-win for both of us.
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