How DTC brands can best approach retailers and win on-shelf

This two-part series started with Why digitally native natural brands are rocking retail.

In today’s omnichannel world, digitally native natural products brands are increasingly expanding into brick-and-mortar, aiming to drive awareness, encourage trial and increase total sales. Many are achieving these goals and then some, growing from niche DTC labels to beloved retail lines.

Meanwhile, more retailers are actively pursuing partnerships with innovative CPG brands, hoping to elevate their assortments and drive additional traffic to their stores. This includes natural retailers, of course, which have always supported emerging natural, organic, better-for-you and local brands. But even they—both small independents and large chains like Whole Foods Market, Sprouts Farmers Market and others—are stepping up their efforts to partner with digitally native standouts.

“Sprouts is one of the many retailers doing a really good job with bringing in new brands, many of which are DTC,” says Benji Fitts, director of customer education at SPINS. “Sprouts’ forager program funnels brands into the store by building Innovation Centers, which are displays in the middle of the store stocked with only new products. I always see new and interesting things in this section, which makes shopping exciting and discoverable.”

Related:Meet the 9 brands competing at this year's Naturally Network National Pitch Slam

But natural-channel retailers aren’t the only ones playing ball. A growing number of conventional supermarkets, big-box chains, club stores and even convenience stores are also trying to capture natural DTC brands’ magic and scale it on-shelf.

“Access to mass-market retailers has never been greater, and these retailers have been more proactive,” says Tim Avila, president of Systems Bioscience Inc. and a longtime New Hope Network advisor. “Retailers are upping their game and trying to bring in brands that have been out there in DTC world and make sense for that store.”

Target, for example, has bolstered its natural CPG offerings in recent years and is hungry for partnerships with innovative online brands. With nearly 2,000 stores across the U.S. and a robust e-commerce business, the retail giant also helps brands get shelf ready and scale through its multitiered Target Accelerator program. 

“Target feels like the prime testing ground for DTC supplement brands to enter mass-market retail,” says Samantha Brewster, vice president of growth marketing and account management at Pure Branding. “The retailer has that curated, trendy, premium appeal for the mass market, so there’s a natural window for DTC to thrive here.”

Related:Unboxed: 15 nourishing, savory snacks for summertime

Of course, not every DTC-to-retail story has a happy ending. Plenty of natural products brands score a spot on-shelf but then don’t generate enough volume to keep it. And sadly, if an aggressive retail expansion falls flat, it can bankrupt a brand—even one that’s innovative, on trend and dominant in DTC.

Undoubtedly, expanding into retail presents certain risks and challenges for digitally native companies. But when entered strategically and executed deftly, a strong retail partnership can turn a DTC darling into a juggernaut consumer brand. The key is kindling the right relationship with the right retailer at the right time in a brand’s growth trajectory. Here’s how to do that.    

Become an expert on your brand, market and more

“There are a few things that DTC brands should know before they dip their toes into retail,” Fitts says. “What’s the size of the market? And does that match their projections and estimations? What are the [category’s] key brands and how are they doing? What retailers are doing well—or not—in this category?”

Hammering down these details is critical to crafting a data-backed pitch for retail buyers. “If a buyer offers a brand a line review, they are relying on the founder to come in with expertise on their product, their category and all of their offerings as a brand,” says Tahaji Felder, senior accelerator program manager at Target.

Related:Unboxed: 10 chili crunch varieties to spice up any dish

Since syndicated data can be prohibitively expensive for small brands, SPINS created Ignite, a free portal that lets them “dip their toes into the world of data and get essential pieces of information,” Fitts says. For example, companies can access category size and growth, along with which ingredients, packaging types and other product attributes are trending currently. “Knowing simple facts like these can help a brand make better decisions and growth projections,” Fitts notes.

Know your target consumer

“Understanding your target customer is foundational for developing your retail strategy,” Brewster says.

Speaking of supplements specifically, “we see many brands eager to enter retail without a clear understanding of what touchpoints their target customer relies on as they research, shop and purchase their supplements,” Brewster says. “What are the main factors and influences driving their path to purchase?”

A single supplement purchase “is part of a much larger journey toward health and well-being,” she continues. “Successful DTC brands will understand how one retail touchpoint fits into this larger omnichannel story.”

Find the right retailer

Picking the right retail partner for an individual brand is absolutely essential, says Fitts. “The allure of a national mass retailer with thousands of doors is powerful but are the people who shop there your customer?” he says. “Will your pricing be aligned with their expectations?”

Beyond shopper expectations, each retailer has its own set of expectations, Fitts adds, particularly around margin, which could overburden an emerging brand’s budget.

Large chain retailers’ demands can be especially daunting for small companies, even if they’ve had some previous retail experience. “Brands think ‘Great, I’m going from DTC to regional or mom-and-pop and then into Target or Walmart,’” Felder says. In reality, though, the big guys might not be the best option for every brand—at least not yet. It’s also possible that brick-and-mortar retail is the wrong channel altogether. “Keep in mind that retail is not the end all be all,” Felder adds. “It’s just another outlet to sell your products.” Depending on the brand and its offerings, it may be a better fit for the practitioner channel, for example, or health clubs or food service.

Provide proof of traction

“Shelf space is really tight, and buyers have to consider which brands to bring on shelf and which brands to exit,” Felder says. Because of that, most retailers, when vetting potential brand partners, want to see proven traction.

“Many founders assume that traction means having a lot of social media followers,” Felder says. “That’s one indicator, but bigger indicators are things like, are those current social media followers actually converted customers?”

A solid DTC sales record is pretty much imperative—and it’s something brands can leverage when presenting to retail buyers. “For brands that have had good success, really optimizing how you’ve performed in DTC and built repeat purchase base is very helpful when approaching retailers,” Avila says. “Because then you can negotiate all of the costs [of retail] from a position of strength.”

Beyond DTC sales traction, large national chains may also want to see prior retail traction, such as success with local independents or small regional chains.

“Having traction also means that you are in X number of other retail doors first before coming to Target,” Felder says. “You’ve already gone through the ebbs and flows of being in retail, so you know what it’s like. That way, by the time you get to Target, where the stakes are a bit higher, you’ve already tested a lot of things.”

Expect more work once on-shelf

“Remember, this is a partnership, and once you get to shelf, the work doesn’t stop,” Felder says. “The retailer won’t do the marketing for you. They are relying on you to constantly bring consumers into the store, and there are a lot of continued costs associated with marketing your brand once you get to mass retail.”

Fitts says that getting on-shelf may even seem easy compared to getting off the shelf and into shoppers’ baskets. “Retailers often make assortment decisions based on velocity, so how many units per store per item per week are you moving, and how does that stack up against the competition?” he says. “If you’re in the top 20% or 40%, you’re probably safe. If not, you’ve got work to do.”

That work, Fitts explains, will likely include customer education, demos, marketing and promotions—tools that “can help boost the number of new buyers trying your product and convert them to longstanding loyal customers.”

Consider a retail accelerator

Increasingly, retailers are offering incubators, accelerators and other programs aimed at nurturing emerging brands.

Target is a prime example, having launched Target Accelerator several years back. The program now features three levels of support—Forward Founders, Takeoff, and Growth and Activation—catered to emerging brands at different stages of growth and scale.

“I’ll frame it up like this: Forward Founders is for brands getting their bachelor’s degree in mass retail, Target Takeoff is like getting a master’s and Growth and Activation is like getting a Ph.D.,” Felder says. Across all tiers, founders get access to education, retail data and Target’s vast network of mentors and external experts.

“We don’t just want brands to get to shelf—we want brands to succeed once they’re there,” Felder says. “So, our goal is to provide as much education before and during that process so that founders are best prepared for being on shelf, when the stakes are high.”