How to Sell Your Product to Costco: 11 Crucial Steps!
Making the decision to do business with one of the most successful retailers in the country is not one of those quick ideas that comes with a coffee and a bagel at your local Starbucks. I’m sure you’ve stayed up at night dreaming of your product prominently displayed at Costco with thousands of members clamoring to grab the latest item before they all run out. You’ve no doubt rehearsed your response to Costco’s frantic phone call asking for more products, offering anything to get one more shipment. Calm and carefree, he pauses before telling them that he will see what he can do, while at the same time asking for better terms.
Fortunately this has happened and could happen to you. You may never be invited to Jim Sinegal’s house for Christmas dinner, but that doesn’t mean you’ll never be successful selling your wares at Costco if you’re prepared.
Thousands of companies like yours have joined Costco and sold their products successfully for years. What makes the difference between companies that enter and those that do not? Successful companies had the following in common:
They were prepared: they did their homework and they had a plan. They knew what they were getting into and had already made the necessary adjustments to be successful.
They hired a company or individual who had experience selling Costco to fill in the gaps in their plan and advise them through the process.
They understood Costco’s business model and that Costco wouldn’t bend their rules even for them.
They were in the right place, at the right time with the right article.
Will your product be the next big item at Costco? Only time and preparation will tell. To get started, I outlined the first 11 steps that are crucial to preparing for a meeting with Costco.
Product Selection – Determine whether a single product or multiple products will be offered. Sometimes, to create the value necessary to meet Costco standards, you may need to bundle products. The combination of products can also help with your distribution network, since you have created a different and unique article number.
Pricing – Research your distribution network to determine the lowest selling prices on the market for the products you would like to offer to Costco. Make sure you have a check on all the prices and products that are offered for sale. If you don’t, you can be sure that Costco will. They will do their research, which means you should too. Create a possible pricing structure taking into account the prices that are currently offered.
Distribution Effect: Determine how selling products to Costco at reduced prices or value added will affect your current distribution network. Distributors and dealers can sometimes get tough if they think you’re underestimating them by offering the same products to Costco.
Packaging: Determine what type of packaging you will offer Costco. Costco is very specific in its packaging requirements. They generally require a single display pallet. Get quotes from a couple of different companies on graphics and packaging.
Logistics – Take a look at your current logistics capacity to determine if you can serve a large customer like Costco. Knowing your ability will help you understand what your expectations of selling through will be. Review Costco’s routing guide to make sure it includes all the necessary aspects when analyzing logistics.
Other costs: Review and be aware of these additional costs.
1. Customer Service: Do you have the necessary telephone support to handle the influx of customers or will you have to hire a company to take care of this aspect?
2. EDI Costco (Electronic Data Interchange) – Price EDI for inclusion in your finances.
3. Promotional costs: Do you want to participate in a promotion? The various promotions at Costco are where sales really skyrocket and should be planned accordingly.
4. Shipping: Costco will require a shipping cost to your warehouses. You need to calculate the average cost of this and include it in your cost structure.
5. Returns and defects: How will you manage the part of returns and defects? This can be costly and must be carefully evaluated.
Potential Sales Across Quantities – Based on the Costco divisions you are looking for, create some scenarios that show potential quantity sales. Costco has 3 divisions in the US and one international division:
For. Wholesale costco,
vs. Costco Road Show,
D. Costco Canada,
me. Costco.com Canada,
F. Costco Mexico,
gram. Costco UK,
h. Costco Taiwan,
I. Costco Japan,
j. Costco Korea.
- P&L – Create a P&L of the item using the information above to determine the feasibility of the program. You never want to do this after the deal has been made. Entering a program and discovering after you are successful that you are losing money will be devastating.
Costco – Decide which division to contact first. Make initial contact with the buyer and measure the interest. You probably need help here, as communicating with Costco shoppers can be very difficult, if not impossible. If there is enough interest, schedule a kickoff meeting at Costco HQ in Seattle WA.
Pre-meeting: Final decision on at least two, no more than three packaging options. Set your options, as you’ll only have about 30 minutes or less to present your idea to Costco, and you want time to discuss the next steps. Make your final decision on the cost price to include in the presentation. Create your presentation and print more copies than you think you will need. Confirm your meeting one week before the date.
Meeting: Be thorough in your presentation, but not over the top. Keep your tone smart and to the point. Be prepared for Costco to have a few questions, not just about your product, but about you and your business as well. Know your competition and your market. They will put you to the test. Be sure to define the next steps and follow up before leaving the meeting.