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Ep. 60 – Jeremy Smith on the Future of Brokering Part 2

 

DECEMBER 15, 2021

 

Welcome to Episode 60, Part Two of my interview with Jeremy Smith of LaunchPad. Let’s jump back in.

Dr. James Richardson:

How do you manage and build a sales team with people who are not necessarily all super experienced and that, even at five million, right? That’s your reality. You’re not going to get the rock star sales VP who just left Chobani He’s not going to work for you.

Jeremy Smith:

Right.

Dr. James Richardson:

There’s no way in hell. You got to take raw talent. Yeah, what would you propose?

Jeremy Smith:

One of the things we did when we started LaunchPad in 2017, is that we offered consulting services so that a brand can come in and say, hey, here’s our broker network. You know a lot about Costco. What are we doing right and what are we doing wrong? So they don’t have to hire us as the broker, they could use someone else or they could use their own team.

Jeremy Smith:

I go in and look at it and 90% of the time it’s the same thing. It’s their messaging and how they’re presenting their presentation. The presentation is the exact same presentation pretty much they’re using four Whole Foods or someone else and it’s adapted for Costco, but it’s not enough to get the point across that you need to to help you stand out. Because you have to remember Costco buyers looking at everything in per ounces pretty much. So if the competitors at 36 cents an ounce and you’re coming in at 43, you’re already at a disadvantage unless you can explain why are you 11% more than the competition? First of all, you don’t need a broker to go to Costco. What you really need is knowledge. And so somebody like me can provide you with the knowledge and all of the ins and outs and secrets and what you need to develop a business at Costco.

Dr. James Richardson:

Yeah and I see a similar thing emerging for Walmart, with the big boys, right? So there’s, I mean, there’s bad Walmart brokers too, trust us, but there’s also some guys understand this a super complicated account. Obviously I pooh pooh [Walmart] in my book until you’re at least a hundred million dollars in almost all cases, almost all cases. And one of the reasons is that it is the most brutal ball busting account. You talk about 20 minutes late, how about ‘I forgot the fucking meeting and I don’t care.’

Jeremy Smith:

I had it happen to me. Years ago, we called on Walmart and Sam’s and the buyer didn’t show up. And he says, “Well, can’t you just stay another day?” And I said, “No, I can’t.” And he said, “Well, we’re Walmart. We don’t need you.”

Dr. James Richardson:

That’s it right there, Jeremy, literally that’s going to be a LinkedIn post because, unfortunately, when you get into the world of mass retailing and I’ll throw Target in right there, that’s exactly their unconscious bureaucratic sentiment. I don’t care how much the 29 year old assistant buyer is smiling at you, reality the institutions and mass retail is they ball bust you on price per ounce and these highly mechanical things. And the other issue is they just got out of a nasty meeting with Frito Lay.

Jeremy Smith:

Yeah.

Dr. James Richardson:

Or something like that. Right? And Frito Lay gets to be an asshole, you don’t.

Jeremy Smith:

If you think Costco is fair, you shouldn’t be selling to Costco. They’re not. Costco is about their members. The member comes first every time.

Dr. James Richardson:

Absolutely.

Jeremy Smith:

I’ll give you a quick example.

Dr. James Richardson:

Oh my God. And if you don’t use that word in the meeting, you’re really screwing yourself.

Jeremy Smith:

Yeah. And so we had an item in the Texas region that the female buyers really loved the two owners of the, it was a granola company. They were male models. I mean, they were great looking guys. I mean, Tom Brady would go into the room and he’d be the ugliest guy next to these two guys. And so the buyers liked meeting with him and they were very funny and they were very, very good guys. So we go into Texas, we do road shows, the item bombs. 200 bucks a week it works out to when you divide out the numbers. It was terrible. A Costco member calls Jim Sinegal and says, “I love that granola. I want it in my Texas region where I live.” Jim Sinegal picks up the phone, calls the buyer and says, “Bring this item in.” And we’re like, “No, it’s dog. Don’t bring it in.”

Jeremy Smith:

But we went in and we had a 39 week supply that the buyer had to get through, but that’s how responsive, that’s an example of how important the member is to Costco. And I tell people in the beginning, just because I’m a consultant, doesn’t mean I’m not going to push you. I said I look at my experience of working with consultants when many, many years ago in another, in the advertising world, and what happens is everyone gets excited and wow, that’s great. And this and that. And then nothing happens. But I’m there and I will beat the client up. I’m like, “Hey, do you want to have a business at Costco that works for you? Because if you go directly to the buyers and you don’t understand how they think, they’ll eat you for lunch.” I had a client come to me that they should have been paying a half a percent on spoils and the buyer, they went directly to Costco on their own.

Jeremy Smith:

This was at the time the company’s 500 million now, they were a hundred million and the buyer convinced them that they should have a 4% spoils allowance. I said, “So here’s the first thing, stupid. Don’t you already know what your spoils allowance is out in retail? You’re in 10,000 doors.”

Dr. James Richardson:

Yeah, I know.

Jeremy Smith:

I said, “Why would you offer 4%?” “Well, that’s what the buyer said that he normally gets.” I said, “He’s full of shit.” So we took over, I called him the buyer on it and we got them down to a half a percent.

Dr. James Richardson:

Very good.

Jeremy Smith:

But it was ugly and he’ll never talk to me again, but we had to do it. And they’re very successful at Costco.

Dr. James Richardson:

Well, that’s what I’m getting at is do you think, is it your sense, because you’re focused on building this kind of business, which I find interesting because it adds capability to an early stage company as opposed to creating a dependency on third parties. Do you think that the current crop of five to 25 million startups is coachable enough to benefit from this? Or is it a small group that are coachable enough?

Jeremy Smith:

It’s a smaller group because one of the things that I always assess right away, whether I’m looking at representing a company for brokerage is in the old days when my brother and I first started out in this business, all we did was look for great brands to represent. Then we realize you have to know that there’s a team there that knows how to execute. And so that now all we look for is the ability of the team to execute because so many brands fail that have great products, that we have a questionnaire that we go through with the client and we talk to them about how they currently are executing. Do they have the supply chain in place that currently right now can handle the up and downs?

Jeremy Smith:

Okay. So today you got a 10 truckload order from Costco. That was one rotation, we did really well. Now you’re not going to see any for six months. How can you afford that financially? Because brokers don’t care about profitability. And it’s not their fault. It’s how the system is set up. If you’re not paying a retainer and all you’re doing is paying a commission, then why does the salesperson care about profitability? If you lose money, they still get 5%.

Dr. James Richardson:

I like what you said earlier about the fact that if you actually go in big at Costco and show up in a whole bunch of regions, that is the biggest, well paid trade ad almost industry advertisement of your existence to all possible stakeholders, including the big boys and girls. And so you got to be ready when you go into mass to just, you have to be operationally ready to hit the gas. If you don’t have a defensible manufacturing technical process, which I increasingly urge people to invest dollars in because that’s how you’re able to defend a success at a place like Costco or Target is that nobody actually can rip you off in six months. It’s the pretzel chip theory, right?

Jeremy Smith:

Yeah. And if you do it right, yeah, if you do it right, people will imitate you, but it won’t be the same.

Dr. James Richardson:

No, it’ll be half-assed. Yeah.

Jeremy Smith:

But what you just said is one of the most important things you just said. That’s why you have to work with a broker who understands branding so that they stress the values of your brand and the story to Costco so that Costco understands what they’re paying for. If they don’t, then every pretzel chip is just another pretzel chip. And when I was working with this company, I said, it’s not the buyer’s fault that they don’t understand the difference in your kale chip versus the competitors, it’s your fault. It’s not your broker’s fault. It’s your fault because you didn’t explain to your broker why you’re different. So when that information is left out, then the assumption gets made.

Jeremy Smith:

And that’s why the buyer’s talking to you about going down to 34 cents an ounce. Quick story, Chobani. Buyer comes to us with an idea to develop a cup of yogurt, a plain cup of yogurt in a little cup, a yogurt cup and just sell packs. And it was a stupid I idea and Chobani knew it and they said no. So here’s what happened. Buyers says, “Well, I’m going to go to your competitor.” And they said, “We welcome you to go to your competitor.” And the buyer went to the competitor and it was a disaster. It had to be marked down. But you know what happened? By saying no, the buyer knew Chobani understood their business and she trusted them from that day forward.

Dr. James Richardson:

Well, Jeremy, this has been lively as I expected it would be and extremely informative. Thank you so much for your time. And that’s all we’ve got folks for the second part of this interview. As always, be safe out there.