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Kevin Mako: Hello, product innovators. Today we learned from one of the top names in retail store sales on why retail is so important for emerging hardware product startups.

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Narrator: You're listening to the Product Startup podcast, a show to learn from top leaders in product development, product development, and everything in between.

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Narrator: Hosted by Kevin Mako, the leading expert on product development for physical product startups, sponsored by PTC's two best-in-class 3D CAD product software solutions, Onshape

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Narrator: , and Creo, and produced by Mako Design + Invent, the original firm providing world-class consumer product,

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Narrator: development services tailored specifically to startups, small manufacturers, and inventors.

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Kevin Mako: Welcome back, everyone. Today I'm very excited to bring back Yohan Jacob to the show. Yohan is the founder and president of RetailBound, an agency that helps emerging hardware

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Kevin Mako: brands get into major retail stores and sales channels. RetailBound has been around for 14 years and has worked with over 4,000 product companies.

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Kevin Mako: Yohan himself has spent 30 years in the industry, including being a major buyer for Sears and OfficeMax. The last episode with Yohan, we talked

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Kevin Mako: about scaling up when in a hardware retail store. Today, Yohan is going to explain to inventors

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Kevin Mako: and small manufacturers why retail is still a huge sales opportunity in 2023 and how to overcome

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Kevin Mako: objections on going into retail stores and how to smartly begin your relationship with retail store chains. Now, on to the episode.

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Kevin Mako: Hi, Yohan. Welcome back to the show. Good morning, Kevin. Morning. Always excited to talk to you about getting into retailers. How do hardware startups,

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Kevin Mako: How do inventors get their new hardware innovations to the biggest players in the world? And retail still counts for more than 70% of consumer products being

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Kevin Mako: bought in North America. So it is a massive channel for selling hardware products, something

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Kevin Mako: where you can touch and feel and get to know the products or just have flashy packaging

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Kevin Mako: that picks the eye of the customer up as they're walking by the aisle and filling up their carts with all sorts of things. So retail is still huge.

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Kevin Mako: And it's a really big light at the end of the tunnel for a lot of hardware startups. that are really interested to scale their brand and to become a world-class product company

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Kevin Mako: through their actual hardware product itself. Now, before we get into all the details of getting into retail, why retail is so important

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Kevin Mako: these days and how it's so valuable to hardware startups and emerging brands, just give us a background.

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Yohan Jacob: How did you get to be the big retail success story that you are today? So I've been in retail for over 30 plus years, start my career like major clients with a product

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Yohan Jacob: manufacturer trying to stop talking to retailers in the U.S. like Best Buy and Target. I made more of my fair share mistakes, more on my own on this podcast because I didn't have

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Yohan Jacob: a retail amount or any consultant here doing the work, or at least fold my hand. So I made a lot of awesome mistakes.

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Yohan Jacob: But I did learn, but took time and effort and force money, right? And then I got my MBA here in Chicago, where I'm based and became a very, very large

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Yohan Jacob: retail buyer for two different bill and dollar chains. And so the good, the bad and ugly when it comes to those who try to present me, you try to work with me.

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Yohan Jacob: I'm one of the few consultants out there that have been on both sides of the retail buyer's desk. And we started coming about RetailBound in 2008s to help

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Yohan Jacob: innovative partner brands who have the time, the experience, or

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Kevin Mako: the connections to get their brand to retail. That's amazing. You guys have obviously worked with hundreds of products now and

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Kevin Mako: millions of units all around the world, largely focused on retail, but you've found all sorts of things from wholesale and whatever else.

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Kevin Mako: I really like your background because you've been on both sides. You've been selling hardware product in your own stuff, and then you were a buyer for these

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Kevin Mako: major chains, seeing what really works and getting to know it from the inside. Of course, that's over 15

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Kevin Mako: years ago now that you started RetailBound to actually help hardware startups get into retail and grow the brand and do a lot of the stuff in and around scaling a

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Kevin Mako: hardware product. So let's get into retail. One of the things I want to address right out of the gate is the importance of retail.

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Kevin Mako: I know there's a lot of people out there that they're kind of toying around with the idea. They say, oh, retail's dead and with the economy and who shops at stores anymore.

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Yohan Jacob: But that's a real fallacy, especially in North America. Talk a bit about what you're seeing. I always say, I hear that all the time since 2020 with COVID.

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Yohan Jacob: Retail's dead. Retail's dead. But there actually were more stores built in 2020, 2021, mostly smaller retailers or in retailers,

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Yohan Jacob: like a home people below, I saw huge expansion, but people being home and doing a home project. I would say that retail was not dead. It's just basically, it's changed.

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Yohan Jacob: Right. Retailers, like a best, but or car, have improved their omit channel for presence, so where it's much as better stores and layouts, but also improve mobile

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Yohan Jacob: and web checkout as well. I would also say that reach to find more creative ways to get consumers not to shop online, but also in store, into demo events,

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Yohan Jacob: very specialized, create assortments and so forth. So this year alone, we see our clients who've gotten to retail, it's an increase in overall sales. I think for brands,

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Yohan Jacob: I'll think about it into retail, why they should do it. I think it's really two reasons why. One, I think to get into a retail like a bus bike or a CBC in the U.S.

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Yohan Jacob: It gives you legitimacy or street credit. You actually may as a brand, right? But two, you give your customers more options where to buy.

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Yohan Jacob: May, especially older consumers, a little wary of buying from yon.com or a Kevin.com, right?

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Yohan Jacob: Because you don't know if you're here, it ain't gone tomorrow where they buy that same product from a London drugs or a Walgreens, they

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Yohan Jacob: feel a lot more confident if by chance that a product doesn't meet their expectations, that that retailer will back them up. And that's why I think

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Kevin Mako: a lot of young brands to consider retail as part of their long-term strategy and growth. Absolutely. I mean, it's huge for your equity valuation as well.

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Kevin Mako: Once you can say that you're in a Walmart, then think about how much easier it makes you to sell to other types of buyers,

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Kevin Mako: maybe not even other retailers, although that'll certainly help as well. But think about your corporate buyers or wholesale buyers or even just investors or a number of

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Kevin Mako: different stakeholders along the path. The more that you can show that you are an established product business,

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Kevin Mako: the more successful generally you will appeal to all of the various stakeholders within your product journey. So being to a major retail that everybody knows the brand is huge.

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Kevin Mako: And another thing that you brought up there, Yohan, which is really valuable is this omni-channel approach. And that also is a misconception with the retail.

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Kevin Mako: The retailers are creeping into the digital space quite aggressively. As you will notice, many, many different regions, many different carriers, many different

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Kevin Mako: companies, they are aggressively working on how to do what really online -only stores can't. And that's both sell online and also have that physical footprint.

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Kevin Mako: So if you do your research online and find whatever XYZ TV that you're looking to buy,

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Kevin Mako: well, you can actually go into the store, take a look at it and then decide, are you going to buy it in the store, buy it online and have it shipped to your house?

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Kevin Mako: You're giving a lot of options to the customer and all the big retailers who have major deep pockets are putting a tremendous amount of effort into figuring out what the future

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Kevin Mako: of this omni channel approach is going to be. So the earlier that you as a hardware startup can get ingrained into the channels

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Kevin Mako: and figure out what's really working or not working for you, the more scalable that will be within those particular companies and channels, both online with their platforms

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Yohan Jacob: and also in the store with the physical store units. That's correct. Retailers are trying to find creative ways from live streaming to VR, right? It's really kind of cool.

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Yohan Jacob: And retail is like Best Buy and find brave ways to capture more people. Because, again, today's consumer a lot more educated than they were 22 in terms

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Yohan Jacob: to products like you mentioned TVs, right? A lot of consumer research online. Maybe you can check as a social store inside which TV, option

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Yohan Jacob: A or option B, they want to purchase. So that's why a lot of retail put a lot effort in building.

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Yohan Jacob: their presence, educate customers before they walk into the store to buy that product and actually cheer it and demo it and so forth. Again, you can't do it online.

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Yohan Jacob: You can see a video for a minute on bestbyte.com or best by dot CA, right? But they go in store, play at the remote, see the

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Kevin Mako: color of the picture on the TV. You can't replicate it online. You have to do it in store, right?

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Kevin Mako: Well, an impulse buys in person are still extremely powerful. I mean, look at Costco. You go there

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Kevin Mako: for a handful of items and all of a sudden walk out with a thousand dollar bill, two carts full of

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Kevin Mako: stuff, right? Especially if you have kids and this sort of stuff that are seeing things throughout the store, right? These stores are very good at that.

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Kevin Mako: So think about your own product and your own product packaging. What area of a store could you sit at? What sort of products could you sit

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Kevin Mako: near that maybe you work with or are better than or whatever else? That if somebody saw that when

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Kevin Mako: they were walking by and they knew nothing about your brand, then have the opportunity to pick it up, Look at it. Read the packaging, front, back, feel the actual product itself.

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Kevin Mako: How valuable might that be for your particular hardware products? So that is difficult to replicate online. Of course, they do try and do things.

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Kevin Mako: Obviously, you see on Amazon where they're suggested products and this and that, but you're looking at a picture.

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Kevin Mako: It's very different when you actually see and feel the product in the store. And that's why, if you look at most of the retail chains, they've got all kinds of metrics around

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Kevin Mako: how much larger they can stack the average cart value of a customer that comes in, generally for only a handful of items, very low value of items.

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Kevin Mako: Sometimes double or triple what their initial expectation is going to be is what they're able to actually drive out. You've got some of the checkout lanes, right?

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Kevin Mako: They take you through this like long maze of really catchy and attractive products, some brands you know, some things you don't, all on that course of action of

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Kevin Mako: checking out along the path of where you thought your cart was already finished. It's not quite

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Kevin Mako: finished yet. These things are very powerful in retail that will take a long time for online to

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Kevin Mako: catch up with. And by then, we don't know exactly how they're going to catch up. And we don't know how

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Yohan Jacob: the retailers you're going to compete. But what we do know is they still command the majority of the market. That's correct.

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Yohan Jacob: That's correct. Retailers, they call it the market basket theory. You go and buy that new DVD movie. And I'm really dating myself. That releases today.

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Yohan Jacob: It's at cost or just above pause. But you go in there and hey, I want my idea? I have like real all you do the store, right? Use the gas, the park, right?

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Yohan Jacob: And you walk in the store by a DVD movie. They buy some toilet paper, some magazines, a candy bar, eventually now, you know, the retail is making money, right?

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Yohan Jacob: Costco, you mentioned, they called it treasure hunt. That's what they call it, where you walk in Nevada at borders of diapers at

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Yohan Jacob: Costco, and, oh, that's kind of a cool thing on Taco. That's why you see at Costco and Sam's, they have, especially on the weekends, they have these demonstrators.

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Yohan Jacob: They demonstrate food and beverage, and there's no job why they do that. So there's a science behind it, and that's why in retail, especially when you're going to buy that milk,

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Yohan Jacob: and on the front of the store, in the back of the store, it forces you to go to other parts. It's like clearance. The clearance is also in the back of the store.

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Yohan Jacob: So you have to go through all the name-brand stuff. So RetailBound has done a really good job in getting the buyer to know it's a small brand, right?

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Yohan Jacob: When you're in store, it's a very curated assortment. Online, there's, you know, using iPhone cases. There's probably a thousand iPhone cases on Best Buy Dots.

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Yohan Jacob: But they get in store, they only be like 50 of a certain color

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Kevin Mako: or style, right? So that's why I get it in store to greatly stand out from your thousands and tons of like products online.

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Kevin Mako: And imagine the media you can use. I love when especially hardware startups use the pictures of the product in store to sell

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Kevin Mako: product online or at least to drive people into the store to actually purchase those things or just validate the actual brand on your website or on your website or on your.

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Kevin Mako: your videos or whatever else, how good does it look when you have a crate sitting there at the

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Kevin Mako: retail store at a Home Depot and all of a sudden you got the pictures of your product there and there's a hundred units of it?

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Kevin Mako: That stuff looks really cool for online and is very strong in terms of brand validation. And coming back to the concept of your various stakeholders, which there are

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Kevin Mako: many, this really helps. Now, let's talk about the profitability of retailers because, again, that's a sticky point with a lot of hardware startups.

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Kevin Mako: Again, a lot of misinformation out there that basically states that, well, it's not profitable. The retailers basically take all the profit and you're left with nothing.

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Kevin Mako: Well, that's not true because these retailers and the manufacturers have been around basically forever doing this exact process and being very profitable to both

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Yohan Jacob: sides, if done right. So talk a bit about what you're seeing in terms of profitability and how hardware startups can become profitable, especially over time and at volume.

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Yohan Jacob: Correct. Retail's got to make mind, right? They buy a cost up X and separate price of why, right? So obviously, if I'm a market perspective.

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Yohan Jacob: In the beginning, right, you can make a little less money and you got to sell it to a retailer. And sometimes if you're a smaller brand, you may have to go through a distributor,

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Yohan Jacob: which is a million between you and a retail. However, there's more volume that a retailer and a distributor will purchase over time.

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Yohan Jacob: Obviously, the more value you do, you can go back to your factories, right, hopefully negotiate lower prices. Because you matter, if you sell on your own

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Yohan Jacob: website, there's not that it was at a time of scale. When you had a Best Buy or a Target or a PBC or a Costco, right? Mind your brand.

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Yohan Jacob: They're buying hundreds or millions of units, right? Just seeing how lower the cost, right? Now you make more money. Now, honestly, as a retailer,

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Yohan Jacob: hopefully if you're doing well with product A, we want to product by B, C, D, and E, right? And now you get more products in. It's great from product building.

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Yohan Jacob: Now you have five products at Best Buy in store

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Kevin Mako: versus one online only, right? So it's the reason why brands like a Sony or has Santa been in retail for a year.

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Kevin Mako: They know probability in the long run to make more money. Absolutely. And that's, I think, the bigger picture with retail is you can't expect that your first order is

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Kevin Mako: going to be hugely profitable because the first order is generally testing. In fact, maybe many orders testing first at one store or multiple stores

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Kevin Mako: until they get more and more growth. That's what you really want to be trying to achieve is getting in validating the tests, doing well.

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Kevin Mako: on those tests to show that the product is selling and at the price points and that it's a good product

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Kevin Mako: that people love and the returns are at a minimum and all this sort of stuff so that you can start to scale essentially with your retail firm as a partner.

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Kevin Mako: It is a relationship. The more you sell, the better both sides make and vice versa. So if you can really get that product in and focus on

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Kevin Mako: the long run, that also really helps you on the manufacturing side. I always look at it from the design engineer side of things and manufacturing, the more volume that you

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Kevin Mako: sell and the more reliably you can predict that volume, which is also very helpful with retailers, the better it is

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Kevin Mako: to plan ahead and build economies of scale into your actual manufacturing. So not only will your

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Kevin Mako: quality of the product increased because you can put a little bit more effort into fine-tuning a lot of those details in manufacturing, you can also put effort into costing

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Kevin Mako: down each of those parts based on volume. There's a whole bunch of different tooling techniques, product landscape

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Kevin Mako: techniques, manufacturing techniques that can be different from 500 units to 5,000, the purpose being

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Kevin Mako: cheaper products that are better quality over time. So that as you start to scale into the tens of

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Kevin Mako: thousands, your price point for actual production and the quality is amazing. And you're still

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Kevin Mako: selling at the retailers for a very similar amount, but now at volume. And that's where the profitability gap really starts to increase.

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Kevin Mako: And that's where you start to see very strong margins profitability over time. Right.

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Kevin Mako: Yohan, I want to talk a bit as well about getting into the retailers because, of course, as a new brand, nobody knows who you are. You're starting to build your momentum.

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Yohan Jacob: You've got this new innovative product that's going to change people's lives in some way or another. How do you actually get the retailers to buy into your product so

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Yohan Jacob: that you're on the shelf as opposed to something else? If you were brand new, there's many resources. The best is to exhibit various trade shows, right, where it's

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Yohan Jacob: CES or toy fair, right? When you're at those shows, right, you want to make sure that, A, you have established sales the street, right?

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Yohan Jacob: That, you know, brand new with no sales, hopefully it's Kickstarter, into Google, Amazon, Shopify, right? You want to make sure you have a marketing plan?

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Yohan Jacob: Because any day, these retailers have three metrics. Well, your cool Harvard product will drive top line sales, bomb my profit, and turn X more time.

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Yohan Jacob: So you have a marketing plan and ready to go, drive driving. Is your pricing succinct and rated, you know, that's accepted by retail, right?

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Yohan Jacob: Do you have the ability to, I call post-sell support, follow up with the retailer, make sure that they're happy with the order and they're ready to place and learn.

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Yohan Jacob: So, a lot of our clients, again, a retail is not too hard, normally speaking, but you want to start small. So maybe it's best buy.com. They have a vetted marketplace.

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Yohan Jacob: Same for Walmart here in the U.S. Maybe start some of these marketplace sites that are owned by a retail like Walmart and Best Buy.

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Yohan Jacob: that I guarantee you, the retail buyers are looking at marketplace data. And if you're doing well on Walmart.com through Marketplace or BestBuy.com, it's a

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Yohan Jacob: good opportunity to get in with a buyer who buys that product, Kevin, for the aid for the store piece, right?

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Yohan Jacob: So start small, make sure your sales are consistent, make sure your supply chain is

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Kevin Mako: bulletproof. And make sure you getting paid by the retailer. Once those three things are happening, we call the slow burn, then it makes sense

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Kevin Mako: of scale, as you said earlier, Kevin, for a big opportunity. If you had to go from zero to a million overnight, it does take time. Yeah, that's amazing.

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Kevin Mako: And I love how you mentioned as well, the after support feedback. When you're small, you can do that pretty easily as a hardware startup. Think of it.

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Kevin Mako: If you've only sold 500 units to the retailer, then your support can be amazing. You have a phone number.

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Kevin Mako: It could literally just be you or to maybe one part-time staff member or one assistant. It could be a virtual assistant if that, basically just covering those handful of emails or

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Kevin Mako: calls that are going to happen for after-sales support or Q&A or whatever. else. If you can really handhold at least those initial customers, first of all, you're going to

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Kevin Mako: learn a ton. But second of all, you're going to prove scalability to the retailer. And that's,

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Kevin Mako: I think, the beauty and the simplicity of the model that you operate in, Yohan, especially for smaller brands is start small and do a really good job of that.

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Kevin Mako: Of course, all that trickles down to a great product. Make sure your product is great. As Yohan mentioned, make sure your supply chain is

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Kevin Mako: solid. And that means don't have some sketchy manufacturing or some rough together product or whatever else, make sure this is world class because you really

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Kevin Mako: only get one shot at it, especially with a retailer. If your product is a flop, it's very difficult to convince them that you've redesigned it,

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Kevin Mako: re-engineered it, reproduced it, and now all the headaches that went through in the first one are not going to come out in the second one. They won't believe you.

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Kevin Mako: And it's too late at that point in time. So when you're getting into the retailers and something that you mentioned as well, leverage some of the

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Kevin Mako: stuff that you've already done in terms of sales. So if you've done a crowdfunding campaign,

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Kevin Mako: If you've done a Kickstarter and you go just selling direct online, maybe just selling through

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Kevin Mako: a trade show, selling in your local community, maybe even through small stores, whatever it is,

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Kevin Mako: whatever way you're selling product right now, leverage that to prove to the retailers that

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Kevin Mako: you're worth a shot and then start small with them and create a great product with great after sales

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Kevin Mako: support. You do all those things well, just in a small way, which is why it should be comforting to a hardware startup.

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Kevin Mako: Don't have to worry about building a huge team and a huge infrastructure. Start small, be aggressive with your quality and your support, and you will,

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Kevin Mako: prove that you're a great partner that is worth them investing their

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Yohan Jacob: floor space on you and you investing your time on growing the relationship with them. So you hit that profitability gap as it gets further down the road.

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Yohan Jacob: And so you can start hitting those big scale numbers that the retailers have ready to go for you if you can just prove it in a small way. It seems so easy, but a lot of

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Yohan Jacob: young brands, their own worst enemy. They tend to overcomplicate things or they doubt themselves. That's why they like having a RetailBound, be their Jimmy Quicket,

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Yohan Jacob: their adult advocate, right?

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Kevin Mako: Their sign board, right? Hey, I thought about going to go option A, option B, you know, at the fourth of the road, where do I go?

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Kevin Mako: I mean, I asked Yohan, even though it's for 30 plus years, he can tell me which way should I turn, right?

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Kevin Mako: That makes sense for me and my comfortability of the risk I may take down the road. Yeah, that's so helpful, especially because if you can just guide the entrepreneurs to the

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Kevin Mako: easy, small ways of doing it, but the correct way, then allows them just to focus on the things that we were talking about, to make sure that it's executed well.

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Kevin Mako: That's really what I want the entrepreneurs to do. I want them to focus on building the business and building a business in a quality standpoint. I don't want them

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Kevin Mako: focused on the kind of impossible myriad of complexity and strategic thinking. There really could just be a simple question to an expert.

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Kevin Mako: So if you can guide them, point them in the right direction, they can simply fill the shoes with the great product that they have. At the end of the

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Kevin Mako: day, the true innovation here is the product. The idea, whatever you've done that's going to improve people's lives.

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Kevin Mako: So if you don't overcomplicate it and you're not afraid, as you mentioned, it allows really the hardware entrepreneur to pursue that and pursue the good parts of it while

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Kevin Mako: having people and a team support the strategic direction and the execution of a lot of those things as well. Well, I'll say, Kevin. Yohan, much appreciated for all your words of

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Kevin Mako: wisdom here on retail stores, a lot of the hesitations of going into them, why it's so important and how you can actually get in the doors.

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Kevin Mako: Thanks again for your time today, and we look forward to talking to you again soon. You've done, Kevin. Have a great day. All righty. Take care.

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Narrator: Thanks for tuning in to this episode of the Product Startup Podcast. If you found some value in the show, please do us a huge favor and leave us a quick five-star review.

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Narrator: If you have any questions, guest suggestions, or anything else, feel free to reach out to us anytime at our email, podcast at MakoDesign.com. That's podcast at MakoDesign.com.

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Narrator: This show is hosted by Kevin Mako, North America's leading expert on product development for physical product

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Narrator: startups. Huge thanks to our sponsors, PTC, and their two best-in-class 3D CAD product development software solutions Onshape and Creo, and Mako Design + Invent.

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Narrator: The original firm providing world-class consumer product development services tailored specifically to startups, small manufacturers, and inventors.

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Narrator: Thanks for joining and see you next time.