More Tech Hardware, More Startups, More Problems.
To someone who’s been involved with consumer electronic products — whether that be selling, creating, managing, or purchasing — it’s easy to see the shifts in the market with new ways of lean manufacturing and funding new product ideas. Crowdfunding, product incubators, startup programs with large retailers, and many other options exist to help product startups establish their identities and launch their product.
This article discusses what hardware/product startups should be aware of in the changing environment of bringing a new product to scale in retail and distribution.
So what are the new problems?
This article from Bolt — “Who Invests in Hardware 2016” — highlights the trends for consumer product startups (hardware startups) receiving funding. One of the key takeaways is that while the amount of money being invested towards hardware startups is increasing, the number of deals is leveling out. Despite the increasing amount of crowdfunded products and startups, this would indicate that VCs and investors are getting better at determining the likelihood of ROI and focusing efforts on more selective startups/products.
To compliment this, retailers are also getting better at determining which new hardware products will produce ROI for their online and offline stores. During the earlier years of crowdfunding, VCs and retailers were much more ready to take-on new products and risk with expressed promise from crowdfunded or investment sources. This can be seen when retailers realized that hot categories like smart home products and wearables where improvements are still needed to limit risk for the retail buyer (i.e. smart home products not communicating well with each other).
While retailers and distributors are always looking for new, innovative products their primary focus remains on making money. Your startup’s financial stability, ability to manage and handle increasing sales, and ability to drive customers into the retail channel are just a few of the factors buyers use to filter the good startup products from the bad.
What does this mean for you?
As a CE hardware startup and product entrepreneur this means that competition is steadily increasing not only for funding but retail placement too. The only way to combat increased competition in your category is to be more competitive yourself — this involves a large variety of topics.
Because my expertise deals with the retail-side of being a hardware startup we’ll be focusing on ways to be more competitive once you have your finished product ready to ship into distribution.
- Education — Understand the general process and requirements of bringing your product to retail and distribution channels and achieving short and long-term sales growth.
- Evaluate — Review your internal capabilities and resources to develop and execute go-to-market strategy in line with your risk tolerance and specific product.
- Execute — Hire someone or find a partner that understands your business and fits your specific needs to fill internal gaps necessary to carry out the process and requirements — from strategy to acquiring purchase orders.
Of course no business or product has the same needs. Some startups have more expertise in manufacturing than retail, some consist of 20 employees while others are only a handful. The one phrase that has become more and more true for hardware startups is… “You don’t know what you don’t know” — which makes step 1 (listed above) so important. The sooner you have a firm grasp of how to bring your product to market, the strategy, and requirements to execute that strategy the sooner you’ll be able to spend your time and money efficiently moving forward.
For many hardware startup CEOs the retail strategy can only be understood and developed to a point until an expert should come in for specifics. For example, you might know that you should start small and work your way up to the big box channels; however, deciding which smaller channels to start with requires a knowledge on their processes, costs, payment terms, expectations, and more.
Many hardware startups look for mentors from incubators, business connections, or hired consultants to gain an understanding of the retail scene. The more expertise you can bounce ideas off of the better, and you’ll soon get a better picture of who the experts really are.
The moral of the story
To be competitive in this changing hardware startup environment you have to consider not only your target customers’ perspectives but also the perspective of your retail buyers. Retailers and distributors expect more out of you than a shipment of products to their warehouses. They want a partner who will continue to work with them on marketing, develop new products, and be a consistent source of income.
One of my favorite articles about this is “10 Things Your Buyer Hates About You” and a quote used in the article (below) that shows the importance of having retail expertise in your startup team.
In the buyer’s eyes it’s all about sell-through and effective channel management.
Acquiring a purchase order is simply a chance to prove yourself, not the stopping point. This is exactly why we started Retailbound and why our hardware clients continue to outperform. Whether you’re looking to bounce ideas or ready to start building your retail team — let’s set up a time to talk — email@example.com