This week’s guest blog post is from ANA founding members, Catherine and Fiona from Darlings Downunder. The article is an informative look at which cloth nappies to stock, from experienced retailers, about the things new retailers should be mindful of before taking on a new brand.
So many cloth nappies! So little time (and space and money)!
Every cloth nappy retailer loves cloth nappies. For many of us, it verges on addiction! While it’s hard enough as a parent to choose which nappy to buy, there are extra facets to that decision when you become a retailer. How on earth do you choose which brands deserve a place in your shop?
Sell what will keep you in business
First off, you’re running a business now, and hopefully your business will earn you enough money to pay you for the time and effort you put in. Cloth nappies are one of the least profitable products that you can choose to stock – honestly, you may struggle to make a living and you definitely won’t make a killing – so you have to be on top of the financial aspect of every choice you make in order to make your business work. To this point, work out what margin you need on each product in order to cover your costs and make a profit (how much profit will depend on you – do you need to eventually replace a part time income to support your family, is it to cover swimming and music lessons, do you want to earn an average hourly wage?). Know what average margin you want across your range and be absolutely certain of the minimum margin you will accept on any product. If a brand offers you a margin less than that or refuses to negotiate, you must have a really good reason to stock it (which hopefully involves it always being sold with another product with an above average margin or something similar – loving the brand doesn’t count!).
Gross Profit = Retail Price – Cost of Good Sold [Wholesale Price + Freight to you etc]
Gross Margin % = (Gross Profit / Retail Price) x 100
Gross Profit/Margin is before business overheads – so from these figures everything from postage & packaging for each order to a proportion of your marketing, printing and insurance expenses will need to be taken into account before you can put any profit in your pocket (or reinvest it back in the business for growth). Don’t forget about GST!
If you’re purchasing from an overseas supplier, calculate your Landed Cost for every single order. A fluctuation in the exchange rate can suddenly mean you’re selling an item below cost if you don’t keep on top of it.
Any sales/discounts will have a dramatic impact on your profit (sometimes meaning you’re actually selling items below cost and losing money), so always calculate the cost of a sale before you decide to have one.
Sell what you love but do your market research
It’s easy to decide to stock a brand you’re passionate about, but be careful not to restrict your lineup to your personal tastes and preferences at the expense of other considerations. Just because you love a particular nappy doesn’t mean you’ll have enough people buying it from you to make your business sustainable, unless you can somehow increase demand.
I spoke to a cloth nappy retailer (no longer in business) a few years ago who was concerned that she wasn’t making sales in spite of good visitor numbers to her website. She was committed to only selling brands she personally loved on her own son, but one look at her lineup revealed problems she hadn’t considered when building her store – overseas brands that had little or no profile in Australia (and no plans to do marketing), brands that had been popular in the past but had been overtaken by funkier and more innovative designs, and a brand that had issues with supply and always seemed out of stock.
Regardless, make sure you know each brand you stock inside out (gather other people’s experiences as well as your own), so you can assist your customers thoroughly.
There will be suppliers you love to deal with and suppliers that sometimes make you want to pull your hair out. Here are some positive things to look for:
- aligned with your values
- respond promptly to communications and keep you up to date (a regular wholesale newsletter is great)
- wholesale prices exceed your minimum margins
- can reliably supply stock with no delays (can you get stock in on short notice? no having to buying on preorder)
- promote their retailers and offer promotional opportunities
- acceptable minimum order $ amount
- excellent reputation in the market place (check out online reviews)
- undertake brand awareness and marketing activities (e.g. expos, advertising, active social media)
- if they sell direct to consumers in Australia they don’t have regular sales or promotions that will impact on your business (a supplier will always be able to beat you on price)
- have excellent warranties, handle warranty claims quickly and easily & have products liability insurance (in case anything goes wrong)
- reasonable shipping charges
- easy to order (online preferred to email/spreadsheet)
And yes, too many negatives should make you think twice about stocking a brand, even if you love their products.
Apart from how much you love the specific nappy, make sure you consider the following:
- Why would a customer choose this nappy over others? How does it benefit your customer making this particular product available to them?
- Does it have a (good) profile in the market? If not, it may be up to you to do the work to raise awareness of the product.
- Do you see (strong/potential) demand for this nappy in the market?
- It must have great product images and/or demo video available.
- Pricing – how does it fit within the wider market place and with what you already sell? If a nappy is perceived as underpriced compared to similar brands (possibly raising quality concerns with customers) or overpriced (pushing price sensitive customers towards cheaper products), it could cause issues selling it.
- Point of difference – how does it fit feature-wise with what you already stock? If it’s too similar to another nappy you sell, then you can cause customer confusion with choices that are too similar (decision paralysis is a real thing!). You also have a limited number of slots to fill, and filling two of those with nappies that are too alike reduces the range you offer.
- The number of colours/sizes/closures available. If the nappy comes in both snaps and hook & loop closure, 4 sizes and 15 colours, then you need to invest a lot of money and shelf space to stock the full range (it’s 120 lines!), and it can be tricky keeping everything in stock at one time. This can also be an issue with nappies that have multiple insert options available.
- Limited edition prints – there are both good and bad points with these!
- Customisable options – can the nappy be upgraded with higher or flexible absorbency available separately?
- Is there a competitive advantage to stocking this nappy?
You can totally design your own matrix, checklist or scoring system to run every potential nappy by to help determine if a nappy gets a ‘yes’ or a ‘no’.
After the Decision
Choosing what to stock in your cloth nappy shop requires continual analysis. Over the years we’ve stocked hundreds of different nappies and we don’t – at the moment – stock a single brand that we had when Darlings Downunder started in 2003 and only a couple that we stocked 5 years ago. The market changes all the time, and you have to be prepared to adjust what you offer to the needs and demands of your customers. And, sometimes, a nappy that looks great on paper (or that seems to sell well for a competitor) just doesn’t sell for you as well as you thought it would and you have to reassess.
On the plus side, with experience you learn more about your target market, your business, and the most important things for you take into account when adding or removing a brand to your store (and which rules you can break!).
Keep a finger on the pulse of the market, don’t apologise for running your business like a business and being paid for your hard work, and learn from every customer.