Streamline Your Sales Advisory Process for Retail Trade

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hey guys today we're going to go over the retail  distribution model so essentially you make a   product how are you going to sell it to stores so  there's really only four different ways and most   of them are all pretty similar so let's start  with the most complex and most advanced so the   most complex the most advanced way to sell your  products to the market or get them into stores   is going to be you over here at the start as the  manufacturer you're going to sell your product in   bulk very large bulk to a master distributor think  of a master distributor sort of like a broker   they're going to buy a bunch of inventory put a  small markup on it and then they're going to sell   it to other distributors who are going to sell  it to stores so your master distributor here   those master distributors are most likely going  to sell your product to regional distributors   a distributor is essentially a wholesaler  someone who buys products from a manufacturer   who is then going to sell it to their network of  stores before it ends up in the consumer's hands   so it goes you the manufacturer  the master distro buys your product   they then sell it to regional distributors  who then sell to their network of stores   who then sell to the consumer so let's go through  and talk about the margins and the breakdown that   these people are looking for so we'll do some  simple numbers let's start with a retail product   that costs 10 so you go into a  store you buy a product for 10 bucks   let's see where all the money goes so all  stores are looking for like a 50 margin   meaning if they buy something for five  bucks they're going to sell for 10.   if they buy something for 20 bucks they're  gonna sell for 40. they're looking for a 50   margin a margin can be determined by taking the  amount of profit and dividing it by the sales cost   so if you bought something for five bucks and  you sell it for ten bucks you made a five dollar   profit so five divided by ten is going to be  fifty all stores are looking for 50 margin they   pretty much won't do anything less sometimes  they'll do a little bit more but 50 percent is going to be your sweet spot now you have the  regional distributor you know they're buying   large amounts not extremely large but  enough to supply you know they're 20   stores 50 stores 100 stores thousand stores  a regional distributor on average will supply   anywhere between like 50 and like 2 3  000 locations depending on their size   so the regional distributors are going  to be looking for somewhere between 20 and 35 on average so the store  is gonna buy it for five dollars   and they're gonna sell it  for 10 because they need 50   now a regional distributor let's say they have you  have a really hot product it's selling very well   they're going to be willing to take lower margins  so let's say they want to make 20 on your product   that comes out to four dollars so they're  gonna buy something for four dollars   put 20 on it and sell it for five dollars so you  bought it for four you sell it for five you made   one dollar you take that one dollar you divide  it by what you sold it for which was five dollars   and there's your 20 markup now you have your  master distributor they're normally willing   to take a little bit less money because they're  buying such large bulk and they're pretty much   just breaking that bulk huge bulk order into  smaller bulk orders and selling it to their   network of regional distributors so a master  distributor is normally going to look for anywhere   between 10 and twenty percent margins so if they  buy something for three dollars and fifty cents and they sell it for four dollars  that means they made 50 cents   so if you take 50 cents and you divide that  by four dollars i believe that comes out to like 15 or 16 percent somewhere in that range so  you have the master distro if you buy your product   at 3 and 50 cents they put their 10 20 mark up on  it they're gonna sell it to a regional distributor   for four dollars that regional distributor is  then going to sell to their network of stores   for five dollars who is then going to sell the end  consumer 10. so now you have you as a manufacturer   over here now depending on what industry  you're in there's some industries like the car   industry who they're looking for you know one  two three four five percent and then you have   other industries where you're at you know 85 90  but on average a manufacturer should be looking   for anywhere between 30 and 50 margins so if they  sell if their cost to produce a product is 2.50 and they sell it for three dollars and fifty cents  that means they made one dollar so if we take   350 sorry if we take one dollar and  divide it by 350 let's see what we get one divided by 350 comes down to 28 so as a manufacturer if it costs you and fifty  cents when you sell it to a master distributor   for 350 you're making a 28 margin so that  28 is essentially money that's left over   after your cost of goods your shipping cost  everything like that it's what you're going to be   operating your business on and what you're going  to be taking a profit on so this is just this is   a standard this is going to be for your product  that you're looking to truly go mass market with   there's no way you get into tens of thousands or  even thousands and thousands of retail locations   unless you put in a [ __ ] ton of leg work  or you get into a master distributor who has   their network of regional distributors who then  the regional distributors have their stores so   that's going to be the most complex advanced  method for getting your product mass market   but now we've got three other options and  these are pretty much just cutting out   one step in this initial scenario so your  your next option is use a manufacturer   sell to a regional distributor who then they sell  their stores the stores sell the end consumer so   essentially your costs are the same 250 but now  you're cutting this person out there's no longer a   master distributor so you're gonna sell straight  to regional distributors that say four dollars   so you're going to make an extra 50 cents  when compared to a master distributor   the regional distributor is going to sell  to the same cost of the store at five bucks   then the consumer pays 10. the pros and cons  between option one going the master district route   versus option two going their regional distributor  route is really going to be one can you afford   to lose that extra 50 cents going the master  distributor route if you can't afford to give   up that 50 or you know that 10 to 15 margin  that the master distributor needs to make   this this is going to get you mass market the most  amount of storage quickly now option two isn't   bad this is where we sort of started with clean  af cbd so we went to regional distributors who   really only sell their product you know in their  city or maybe they sell a little bit online but   for the most part you know a regional distributor  their order size is going to be anywhere between   you know five thousand and twenty thousand dollars  while a master distributor's order size could be   you know fifty thousand to millions of dollars  at least it depends on how hot your product is   so next we have option three and that's  getting rid of the regional distributors   and that's you selling your product straight  to stores who are then gonna sell to the end   consumer so your costs stay the same here  250 stores you're still paying five bucks   so now instead of you selling your product  and making one dollar to a master distributor   or making 150 to a regional distributor you're  now making two dollars and fifty cents on stores   now there's pros and cons all these things the pro  of option three is gonna be you're making an extra   buck or an extra dollar fifty so you're making  more money the problem is it's a lot more work   it's much easier to sell twenty thousand dollars  in product to one distributor rather than selling   five hundred dollars in products to 40 retail  stores we recommend that you start with option   three or option two if you can get into regional  distributors go for it it's going to be your best   bet to get into as many stores as possible as  quickly as possible but sometimes you have to   start with option three sometimes you've got to go  out get your product into stores first show that   there's a demand for it show that it sells and  then essentially you go to one of the regional   distributors in your area and you say hey we're  in 50 local stores they're selling extremely well   we want you to start distributing our product  if you go into a distributor and you say   we're already selling 50 or 100 of your local  stores they're going to be much more inclined to   pick your product up because they already know the  demand's there and they know people are buying it   now we've got option four  which is direct to consumer   so with direct to consumer the pros is you're  making all the profit you're not having to   have a store make their money a regional  distributor make their money or a master   distributor make their money you're simply making  a product and selling it straight to the end   consumer you make more money you're able to offer  lower prices because you're not having to give up   50 to the store 20 to the regional distributor and  15 to the master distributor but you're gonna most   likely sell a lot less obviously the e-commerce  space and online shopping is really ramped up over   the past few years but in reality people are  always going to be going into stores they're   always going to be buying things from their local  grocery store or smoke shop or whatever it is   so you should always have a direct consumer route  an online website where your products are listed   where you make you know if you're if your  product cost is 250 and you're selling it for 10 now you're making seven dollars and fifty  cents compared to one dollar on the master   distributor right master distributor route i  mean the big thing you have to think of is one   how much inventory can you produce and isn't  going to sell if you can produce a ridiculous   amount of product and make less money per  product that's the right that we prefer going   we'd much rather sell a million pieces and make  one dollar than sell 10 thousand pieces and make   five dollars or seven dollars whatever it is so we  recommend always offering a direct consumer route   an online website something to make that extra  large margin and cut all these people out   but if you really want to be successful and  you really want to get out there and go for it   it's best to start with option two or three you can prove your product concept getting into  stores once you've gone into a few stores you go   to some regional distributors in that area you say  hey this is how many stores we're in this is how   we're selling we want you to sell our product  to your stores if you already have locations   near them they're much more likely to purchase  so now you've got a few regional distributors   then it's time to go the master distributor route  a master distributor sort of like a national   distributor they have reach all over the country  they can get you in tens of thousands of locations   with pretty much a few phone calls but you need  to make sure that you can supply the amount of   inventory they're going to be looking for but then  these people are also only picking up tried and   true products it's going to be very unlikely that  you sell a brand new product that's never been in   stores straight to a national distributor  because they don't know there's any demand   they don't know the quality of your product  this first option your product and your brand   really needs to be proven before going that route  but if you can this is definitely the way to get   into as many stores as possible as quickly as  possible wearing some talks right now with a   couple different master distributors their network  of stores is anywhere between 10 000 and 50 000   so they're supplying convenience stores gas  stations smoke shops um and while we are going to   make a little bit less money selling to the master  distributor route we're essentially going to get   blown up throughout the country  you know almost overnight   so if you guys have any questions let me know hope  you enjoyed distributor michael talk to you later