Today I want to talk about a dirty little secret in the retail industry, particularly the grocery industry, and how it relates to dentistry.
The dirty little secret I mention is the practice of "slotting fees" (sometimes called a "slotting allowance"). This is the practice where retailers / grocery chains charge a fee (anywhere from a few hundred dollars all the way to six figures) to carry new products on their shelves.
Let's stop to think about something for a moment. Just how does a product find its way to a store's shelves? It's one of those questions most people don't think about. Heck, I didn't think about it myself until recently. I just always assumed it was a combination of salespeople, distributors and store buyers. I mean, that's how they did it years ago, when I was working my way through school. And to a large degree, it still is that way. But in the grocery business, we have an extra layer / roadblock -- slotting fees.
We'll get to the why of slotting fees in a moment, but before that, let's point out that these fees mean one very important thing for consumers: The products you see on store shelves may not be the best products. Instead, they are products that may have paid to be there (or, in some cases, paid to be put in a certain spot, like sugar cereals at child-eye levels).
Now, I know I'm not revealing any great mystery here -- of course not every good product finds its way onto store shelves. But the reality is this: There is a certain psychological aspect to the "it's sold in stores" thought that automatically makes a product seem more legitimate. This was especially true in years past. As recent as 15 years ago, if you wanted to buy something, it was either stores, mail order, or for insomniacs, late night TV. So store shelves definitely have some cachet.
But it's starting to change: Today, the Internet has opened up an entire new buying stream, and thankfully, products that don't want to go the "pay to play" route have another avenue that gains more acceptance daily. All we have to do is look at toothpaste for something that hits close to home for me (more on that a bit later).
OK, we've established that stores do this ... Now, why do they do it? The answer is fairly complex, and even has a bit of legitimacy (in my opinion, anyway).
To start, stores do it because, well, they can. The reality of the retail business has always been one of deals, from store buyers negotiating favorable payment terms to "we'll take this off your hands if you give us a deal on that." And that logically evolved into slotting fees. Probably because some manufacturer or distributor said "we'll pay you to carry product x," and it just grew from there.
I mentioned slotting fees can have a bit of legitimacy -- here's what I mean by that: In the case of grocery items, you have to take spoilage into account. If a retailer buys shirts, and they don't sell, they (at least) still have the shirts -- tangible inventory. It can be returned to the manufacturer, it can be sold at a discount, etc. The point is, something can still be done with it. But in the case of food, that isn't so. Generally speaking, food goes bad. Thus, grocers have more risk. And that risk is elevated when it comes to new products -- a new, untested product presents a big dilemma for grocers. On one hand, they'd like to carry it, on the other, they are afraid to. Enter slotting fees -- it takes some of the risk away from grocers, and allows them to stock newer products without fear that they will lose their shirt if they don't sell.
Thus, to a small degree, I do see some justification for slotting fees. But now let's talk about dental / oral hygiene products. Slotting fees certainly apply here too, and I'm not so sure it's justified. Yes, everything has an expiration date, but some of them are so far out, that slotting fees are somewhat unjustified if the spoilage argument is used. As I type, I am looking at a tube of toothpaste -- the expiration date is 10/2012. That's two years from now. I'm pretty sure that tube of toothpaste will sell by then. So really, how much risk is there in carrying that tube of toothpaste? Or mouthwash? My readers know I'm not a fan of mouthwash, so I don't have a bottle handy to look at, but if I did, I'll bet the expiration date is similar to the toothpaste (and truthfully, that mouthwash could probably outlive us all).
I got on this slotting fee kick because I was sitting here one night, thinking about oral health care products that I recommend. They truly are the best products out there (in my opinion), but you can't buy them in most stores. Why is that? Truthfully, I don't know (I'm not going to ask the higher-ups about their business deals), but I do suspect it's because getting into stores is a very expensive proposition.
But like I mentioned earlier, the Internet is changing this. The Internet gives consumers much more choice and far more power than they ever had before. So my advice is this: If you want the best products, don't limit yourself to store shelves. Do your research, and don't be afraid to bypass stores if you find something better online.
Until next time, keep smiling.
Follow Thomas P. Connelly, D.D.S. on Twitter: www.twitter.com/dr_connelly