The 7 key steps to developing an organic product range
When starting any kind of business, customer satisfaction must be paramount.
Your business depends on your customers: if they’re not happy to come to your shop and if they’re not delighted with your products, they won’t come back and you’ll have problems running your business.
Choosing your products (and the suppliers you’ll work with) is therefore a major consideration.
At Kami Store, we offer organic shops a wide range of products, focusing on hygiene, cosmetics and sustainable accessories.
In this article, for once, we’re going to highlight the advantages of the service we offer. Let’s go over the main steps which I suggest you follow to develop your organic product range.
Step 1: Create a list of products, based on your business plan
Your business plan should be your starting point: it must include a description of your business, your market research and the types of potential customers you are targeting.
Of course, if you want to open an organic & zero-waste grocery shop, you won’t have the same range of products as if you open a shop which sells organic cosmetics.
There are other considerations too, depending on your location:
- the average income of local residents, which will affect your pricing,
- the ethnic diversity of the area, which may encourage you to sell products from different ethnic or geographical backgrounds,
- the age of potential customers: some neighbourhoods are more likely to be popular with couples with children, while others are more likely to be occupied by retired people. This will also affect your product range.
This basic analysis will help you to develop the list of products to stock: you don’t necessarily need to establish the specific details of the products at this stage.
The first step is to ensure that your product range reflects your business and your future customers.
Step 2: How can I reflect my values?
Secondly, you need to think carefully about your values and your corporate social responsibility. Do you want to support the ecological transition? Create local economic activity? These questions can guide you towards products which will reflect your values.
Why bother with this introspective analysis? Simply because it’s much easier to work on a daily basis when you’re surrounded by products which you like and which are meaningful!
You’ll also find it easier to advise or even convince your customers to buy the products if you find them useful, if you like them and use them yourself.
This is the mantra for any good salesperson: love your product!
At this stage, it’s a good idea to ensure that you’ve chosen products which your customers will like and which you like.
Step 3: What are my core products?
Ask yourself the following question: which products will my customers need on a regular basis and will provide them with a reason to visit your shop regularly?
For example, for an organic grocery shop, the answer would be fresh products (fruit and vegetables, cheese, milk, etc.) and store cupboard essentials: pasta, rice, cereals and so on. These are the first items to be put in your customers’ baskets. :-)
It’s very important to stock these products because they are the reason why customers visit your shop on a daily and regular basis, excluding occasional and one-off purchases.
Step 4: What are my high-profit margin products?
The next question focuses on your products with a high-profit margin: your customers may buy them less often, because they’re bought for pleasure, but they will help to increase your margins.
In general, these should be items which are bought as a treat or as gifts.
You need to consider these products carefully:
- they can provide you with significant additional turnover,
- but, by definition, they are less popular than core products, so you don’t want to stock too many of them or you won’t sell them.
In addition to these “treat” products, it may also be a good idea to ensure significant margins for a selection of frequently purchased products. This will help to ensure that you meet your target in terms of your overall margin. For example, if you stock three varieties of organic flour, you could aim for a higher margin on one of them, while leaving the other two with a lower margin.
Step 5: Consider the layout of your shop
Another important step is to take into account the “geography” of your shop:
- how is the space organised?
- how much room do you have for each aisle?
- how can you display certain products?
- do you have a large or a small stock room?
These issues also have an impact on the available shelf space which you should consider when choosing your products (some take up more space than others!) and your level of stock.
Step 6: Create an overview of all these elements
Using your answers to these questions, you can now create an overview.
The best way to do this is to create an Excel file which will contain a list of the following information:
- product category (or aisle),
- product name,
- purchase price,
- retail price,
- applicable VAT,
- gross margin per product in absolute terms (with an Excel formula to calculate the ratio between purchase price and retail price, e.g.: a margin of €5 per product),
- gross margin without additional costs (for example: 42%),
- minimum order for this type of product,
- possible shipping or ordering costs and/or cost for free shipping,
- gross margin with additional costs (shipping costs, order costs, etc.): this is your “real gross margin”.
This will give you a complete overview of your product range, with all the financial information you need to make informed decisions.
You can also compare the retail prices you are considering with those of your immediate competitors in the local area.
You can then create a formula to calculate the average mark-up across all your products to ensure that you are on target with your financial projections.
As you prepare to open your shop, you may want to create a list with all the initial quantities you wish to buy per product and calculate the total price: this is the value of your initial stock (which is important for your business plan and for financing from your bank).
Step 7: Things to consider when choosing suppliers!
As you’ve probably realised during the previous step, there are “hidden” charges with some of your future suppliers.
Some will require a minimum order: this may force you to stock products at a loss. Others will charge significant shipping fees which will eat into your mark-up.
Some will ask you to fill out tedious and complicated order forms, something which wastes valuable time which you’d rather spend in your shop with your customers. Others will ask you to pay in advance, before the items are delivered, which is bad for your cash flow.
When it comes to these issues (and plenty more besides), Kami Store aims to help you to save time and money:
- no minimum order,
- a tool which is very easy to use,
- supplier prices (you pay the same price as you would when ordering from the supplier),
- 15-day payment terms,
- free delivery on orders over €300, regardless of the quantity ordered.