Selling merchandise through retail stores can be lucrative but it can also be expensive and unpredictable, especially in the beginning. Enventys Partners explains why reward-based crowdfunding is the low-risk and low-cost alternative to direct-to-retail strategies.
Crowdfunding Enables Future Retail Success
Ever heard of Exploding Kittens or Bunch O Balloons? If not, you’ll probably find them in the family fun aisle at your local Target. What were once wildly successful Kickstarter campaigns are now flourishing retail brands with estimated net worths in the tens of millions (one of which Enventys Partners had something to do with—more on that later).
The Pros & Cons of Retail
A retail distribution channel can be attractive for those looking to gain huge profits selling consumer goods. From specialty location-based boutiques to major retail grocery giants and everything in between, retail can give you the chance to achieve record sales.
Selling through retail is advantageous because you get immediate access to brick and mortar as well as online audiences without investing a whole lot into a sales or marketing program. It’s also possible to negotiate an arrangement with a retailer to only stock your product and not your competitors.
With the advantages, there are also disadvantages to 3rd party vendors. If your product is unknown, you’ll probably have a difficult time selling it to a bigger retailer. If you do make it in the store, you’re then dependent on the retailer to provide the right level of customer service for people to buy your product. Additionally, there’s a considerable amount of upfront investment and unavoidable risk that goes into manufacturing, packaging and delivering the right amount of products before they are sold at retailers.
What is Rewards-Based Crowdfunding?
Unlike other forms of crowdfunding where you exchange cash for equity, rewards-based crowdfunding is when “backers” pre-order innovative, trendy, handmade or just plain one-of-a-kind products, usually at a discount, before they hit mass retail. Crowdfunding platforms, like Kickstarter and Indiegogo, are helpful for not only startups dreaming of the retail marketplace but also established brands looking to market test.
To help get a leg up down the road, Enventys Partners explains the reasons why launching your product through a crowdfunding campaign is beneficial for future retail sales.
4 Reasons to Crowdfund With Retail Later in Mind
1. Crowdfunding covers production expenses without the risk.
Especially helpful for startups, crowdfunding provides you with the funds needed to get your consumer product in the hands of financially supportive backers. This is beneficial for those who not only need the necessary capital to start moving merchandise, but also those who don’t want to risk losing cash along the way. Since rewards-based crowdfunding is essentially pre-selling your product before it’s manufactured, there’s no risk because the items you’re making were already purchased.
It also helps lower production costs.
In addition to covering your production costs, crowdfunding also lowers these expenses since you’re ordering a larger volume at once which usually decreases the cost per unit and increases your margin. Crowdfunding also lets you avoid amassing and storing extra inventory since you are only making the number of products purchased by backers, which again lowers overall costs.
And there’s opportunity to make additional sales.
Not only can crowdfunding lower costs, but you can also upsell to backers and make additional money along the way. After your campaign has closed and you are finalizing order information, you can reach out to your customers and offer add-ons and accessories for the product you just launched or introduce other relevant product lines.
2. Generate awareness for your product.
With over 19 million backers on Kickstarter and over 9 million on Indiegogo, it’s a good idea to tap into these platforms’ growing customer bases. Crowdfunding backers are a diverse and loyal community of potential supporters who will not only pre-purchase up-and-coming products, they will also let others know about it. Backers are known to publicly endorse a brand, which raises grassroots awareness through their online communities.
Businesses can spend years, not to mention a boatload of money, building a reliable database. In contrast, successful crowdfunding campaigns quickly and inexpensively build a supportive community of customers who actively engage with a product. Furthermore, the platforms will sometimes even promote your success and drive additional traffic at no cost, thereby enhancing the virality of your product.
3. Improve your product with customer feedback.
Whether you’re a startup or a known brand, launching a crowdfunding campaign is the low-risk and low-cost method to do market research. One of the most valuable things that come out of crowdfunding campaigns is customer feedback. Your community of backers want to be involved, so they’re willing to express their ideas to ensure the success of your product.
Unlike average retail customers who seldom review products after purchasing, your community of backers will often share ideas even before receiving your product. After it’s delivered, the questions they ask and concerns they share can eventually lead to product breakthroughs or price changes. All of the information you gather during your campaign will lay the foundation for the future success of your product, especially if you want to work with 3rd party vendors down the road.
4. Validate a new product and your brand as a whole.
A fully funded crowdfunding campaign, along with positive reviews, is significant validation for your product. Getting into the retail marketplace requires an approval process and many retailers need proof that your product will be profitable in their store.
Just like you convinced backers that your product is something worth investing in, you have to convince retailers of the same point. Crowdfunding gives you the opportunity to prove high margins, strong branding, attractive packaging, a large following and happy customers, all of which can help persuade retailers to carry your product.
Things to Know Before You Crowdfund
With all the benefits crowdfunding provides, there are some things you should know before launching. Since a Kickstarter or Indiegogo campaign lasting 30 to 60 days, you only get one short chance to convince people to support your project. Basically, you’ll need a compelling pitch, photos and videos of your prototype, and a thought-out plan for how the product will be manufactured, packaged and shipped. For more details, Enventys Partners explains the secrets and strategies for a successful crowdfunding campaign.
Jumpstart Retail Sales with Crowdfunding
Selling consumer products through 3rd party vendors requires a slew of upfront costs and inevitable risks. Before making the plunge into retail, consider creating a Kickstarter or Indiegogo campaign first. You’ll avoid high-risk expenses, sidestep guessing demand and inventory, generate initial awareness and a consumer database, as well as improve your product with an outspoken backer community. This capital, support and insight will prove valuable when embarking on your retail journey.
So which of the two most successful Kickstarter projects did we help crowdfund? Bunch O Balloons needed Enventys Partners’ marketing expertise to take their water-filling innovation to the next level. Reach out if you want to get there, too.
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