Skip to comments.Distributing products through Costco? (Vanity)
Posted on 02/19/2011 10:09:43 PM PST by Namelesshero
Has anybody ever distributed a product with Costco? What are their business policies like? What type of information about my company are they going to ask for?
I do not want to list my suppliers, list my profits, costs or other information. I heard that they drive a hard bargin. Would they ask for this information?
Also what kind of information do I need to prove to them that my product is worth their floorspace?
Why don’t you ask Costco?
On the other hand, one could ask someone who has dealt with Costco in the past.
Retailers usually squeeze you for price, pay slow, have tough return policies and if it “ain’t” selling will ask for markdown money. Slow pay part can be the toughest. They may say 30 day but it can run 60 or 90 days.
They may want to know if you company is financially viable. They should not ask you who your suppliers are to try to reverse engineer what you are selling.
Anybody run a D&B on Costco? I doubt that it pays “late,” unless it’s heading toward bankruptcy or something else I am not aware of.
I talked to a guy who supplied COSTCO in Arizona and the U.K. He said that they were hard-nosed about moving product. If your product wouldn’t move they wouldn’t waste shelf space on it.
Almost all retailers play the float on t6he backs of suppliers. Why? Because they can.
I have no info on Costco in particular; I can however weigh in on the advisability of getting involved with “big box” stores in general. Depending on what you are selling, this may or may not apply:
In summary, if you are a very large company and can control your own destiny...go for it. If you are a start-up niche producer without a customer base...go for it and ride it for as long as you can; just know when to get out. If you have an existing customers base, play with the “big boys” at your peril.
Maybe this will help:
I found this :
I have no idea how good they are.
Consider going to one of Costco’s smaller suppliers and asking them directly. One I can think of is: http://www.amberlynchocolates.com
When deciding to work with any superlarge retailer/distributor, ask yourself how much real control you have over your production. If you are already quite large, great. If this is a first break and you will need to add manufacturing capability and employees, make sure it won’t break you to then lose the account.
I second speaking to Costco vendors. If you do trade shows, this is the best place to find information. If you use reps at the shows, spend some time there yourself, in the booth and on the floor and find out what the other exhibitors think of various buyers. Make certain you have an attorney take a look at all contracts and agreements, especially as relates to net payment, terms, stocking/restocking fees and markdowns. Get everything in signed contract form. Make sure you can survive without them, if it comes to that. They need product just as much as you need accounts. Don’t sell to anyone just because it means more volume. It has to mean more net profit.
My largest distributors are extremely anal, these days. The lists of vendor *guidelines* (which are inflexible and strongly enforced) keeps growing, mostly centered on lead times to fulfillment, packing slips, PO numbers on the outside of the package, over/under counts, quality control fees and assessments for late fulfillment or any other infraction and a growing intolerance for any mis-addressing when dealing with multiple locations that includes monetary assessments and a refusal to automatically ship back to the manufacturer unless shipping is prepaid are becoming commonplace. Your shipper should have tracking that includes notification of delivery, specifically with time/signature from the customers’ loading dock. This has saved me several times.
That said: congratulations and good luck!
I would say they are among the better big-box retailers to deal with, Wal-Mart is somewhere in the middle and I would put Best Buy and Home Depot at the absolute bottom of the pile.
Their policies on returns are extremely harsh to vendors. If you don't want your merchandise tossed into an industrial shredder you have to pay dearly to get it back. They don't really care about fraudulent returns, you will get returns back from Costco with a phonebook in the box.
No supplier is indispensable to them, they are in the process of dropping Apple - they pulled Coca-Cola off the floor in a dispute earlier this year.
Unless you are willing to give up control of your production and margins, I would be very careful.
You are locked into a price structure and believe me they can care less how much your costs go up. As soon as you raise your prices they will look for a less costly supplier for similar products and if you are sitting on million dollar worth of inventory O'well. your problem if they de-list your product and be prepared to take back unsold inventory.
You will be paid on the contract price, even if you are losing money on every thing you sell them
Be prepared to Supply them with a lot of financial information, D&B type information, they will not ask about your costs or profits
They will have you sign a supplier agreement which means you are on the hook for damage product, store returns, and penalties for product cuts in your deliveries.
Be prepared to be paid based on their terms which typically will be 60 to 90 days so have LOTS of working capital on hand.