The giant chains are the hottest channel in retail, and they can take even tiny consumer-product makers national overnight. But getting onto their shelves isn't easy, and staying there is harder still. How do you do it? Here's an inside look at one company's 15-week campaign

Las Vegas, January 7 -- It's Saturday, the second day of the Consumer Electronics Show. In the wake of an unpredictable holiday season, John Koss Jr., sales vice-president of Koss Corp., is receiving mixed signals from the major retail buyers here. Home entertainment has been white-hot for the big stores, but lately sales of some Koss audio products have turned cold.

Koss is anxious as he enters a cramped exhibit room for a 5:15 meeting with Target, a $13-billion chain of more than 600 stores. This is one of his biggest mass-merchant accounts, carrying 10 stock-keeping units (SKUs), or models, worth $2 million.

The tension is palpable. Teri Kohler is an influential buyer who has championed Koss headphones back at Target's Minneapolis headquarters, but you'd never know that at this meeting. She smiles rarely and squelches small talk. Koss, for his part, keeps his arms crossed. He'll admit afterward, "I'm still not as comfortable with her as I'd like."

Koss knows that Koss Corp.'s revenues and margins are down, owing in part to disappointing sales to some large retailers. So Kohler's receptiveness is crucial. Will she go for the new products displayed in the Koss booth? Will she at least keep the current Koss mix? Will she continue to force Koss's prices down?

Koss listens closely for clues. If the Koss line fared well over the holidays, he'll survive the downturn and come back strong in 1995. And if not, well, he's in trouble.

Koss Corp.'s five largest customers, including Target, kick in about 40% of annual sales. A powerful group of megaretailers -- comprising electronics superstores, discount department stores, and catalog showrooms -- accounts for well over 75% of Koss Corp.'s revenues.

Koss will meet with many of those accounts at the Consumer Electronics Show (known as CES), the inauguration of the year's whirlwind sales campaign. By April the buyers will have locked in their choices and completed their storewide "planagrams," the master merchandising diagrams that top retailers use to maintain chainwide consistency.

Koss's success at CES will affect Koss Corp.'s sales, brand visibility, and efficiencies on the factory floor -- not to mention the company's ability to retain quality sales reps, fund product development, and keep its bankers happy.

Koss Corp., a second-generation family business, had for many years concentrated its sales efforts on independent hi-fi stores. But when, eight years ago, the company emerged from Chapter 11, it set off with a distribution blueprint that focused on the biggest mass merchants.

The move was a calculated gamble. The Koss brothers, sales vice-president John, 38, and chief executive Michael, 41, mapped out the strategy together. Oh, they had to deal with objections from Dad (John Koss Sr., inventor of stereo headphones) and with the exacting demands of the so-called power retailers, but the brothers have not regretted their decision. "It puts our 'phones on more people's heads," says Michael.

Koss Corp. is profitable, has plenty of cash, and recently surpassed $35 million in annual sales, up from $26 million two years ago. Thanks in part to accounts like Wal-Mart and Target, each worth an easy million or two, "The Chapter" -- as employees refer to that period in bankruptcy court -- is ancient history.

"I cannot imagine starting fresh without these accounts," says John Koss. "If you don't get a Wal-Mart or a Kmart, you have to go regional."

Valley of the Giants
They don't call 'em power retailers for nothing.

Today mass merchandisers book about 40% of all U.S. retail sales, and none of them cast a longer shadow than the discount retailers. By popular estimates, the top discounters -- chains with 50 stores or more -- book 11% to 13% of all retail sales (second only to supermarkets) even though they account for less than 3% of all retail establishments. Discount-store sales have grown two to three times faster than the retail industry as a whole.

Discount retailers define themselves by just one rule: Bigger is better. The average store covers more than 86,000 square feet. And Wal-Mart, with some of the biggest stores, is in every state but Vermont, has more than 2,100 stores, and rang up $83 billion in 1994 sales. Having conquered many of America's small towns, Sam Walton's creation is now moving into the big cities -- along with Target, Kmart, and such specialty stores, or "category killers," as Office Depot, Toys 'R' Us, and Home Depot. Winning shelf space from any of those giants is cause for celebration. Business with the chains, easily worth hundreds of thousands of dollars to several million dollars in sales, can take you national overnight.

But it's not the potentially huge sales alone that make the power retailers so attractive. As Koss points out, their numerous outlets "are the best product advertising. People can see your product and try it." Koss Corp. is betting that customers who have its low-end headphones will trade up during a visit to, say, Tower Records, where music lovers check out Koss headphones at the listening stations. Couple that experience with Koss's guarantee, and chances are, Koss wins customers for life. And it all begins at . . . Wal-Mart or Sears or Target.

Or Kmart. John Koss lost that account several years ago. Should he recover it, in one fell swoop Koss headphones would ship out to at least 1,700 stores.

But how do you win the hearts of the superstore buyers? To start, you need a great product priced to move rapidly. The Koss product line, once reserved for audio aficionados, has expanded to cover a wide range of price points and products, including PC accessories. You must have catchy packaging. John Koss is always trying to improve the company's point-of-sale displays. Don't neglect your office systems: Wal-Mart, Target, and other large chains don't write paper orders these days; electronic data interchange (EDI) is a must that Koss has had in place only since 1993. And you'd best deliver. It's not unusual for power retailers to expect turnaround in three to five days. And, Koss says, "you can't ship Wal-Mart short, or they cancel the order."

To get your foot in most doors, you'll need well-heeled sales reps hitting the pavement. But as important as reps are to certain chains, some chains, like Wal-Mart, all but ban reps. Those chains want to talk directly with company owners. You.

Working the Crowd
Las Vegas, January 6 -- "Please stay at the booth," John Koss implores his older brother as the doors open at the Consumer Electronics Show. "I have three appointments all coming at 2." Mike is dying to walk the floor, but John calls the shots here.

A half dozen independent reps work the booth at all times. Some wait anxiously for buyers to show up for appointments; others wait anxiously because they have no appointments scheduled. The best reps are wanted for booth duty at several vendors' exhibits. That's why you don't see all that much of Koss Corp.'s top three rep firms: House of Representatives, based in Sudbury, Mass.; Consumer Sales, in Chicago; and Triad, out of Eden Prairie, Minn. With vendors competing for the reps' time, it was hard work getting 50 of those reps to the sales meeting the night before at Anthony's restaurant, in Las Vegas. Koss Corp.'s marketing team mailed no fewer than four clever, timed-release invitations to each rep. A $70 Lands' End jacket was the prize for attending. The theme: "Take the chill out of cold calling."

The convergence of audio, video, and computer technology generates a hopeful (and loud) buzz on the floor of the cavernous Las Vegas Convention Center. Koss has aptly chosen to play up its noise-cancellation headphones. The brothers want their booth to state clearly that even in a mature market, Koss is still innovating. "Welcome to the Quiet Zone," says the banner, promising a needed respite from the relentless techno beat.

"CES is the most grandiose version of all the meetings" between buyer and seller, says Bob Griffin, a merchandising manager at Best Buy. Everyone at CES is jockeying for position. "Lots of our VPs and regional managers go to CES," continues Griffin, "and they can see what we go through as merchants." John Koss is truly a resource to the overloaded buyers. That's why one sales rep, Lynn Biter, is so upset when one of his accounts doesn't appear for a morning appointment. "Johnny can tell them what's good, what to order," says Biter. "He could teach them the business."

The Kmart and Wal-Mart buyers won't make appointments; Koss can only hope they'll make a pit stop at his booth. Anyway, buyers who do set times often fail to show. Everyone is routinely late. It's an expensive waiting game.

The show serves also as a forum for unfinished business. Dan Lemon, the buyer for the 205-outlet Army and Airforce Exchange Services, chides Koss about a late shipment, though he concedes, "Koss does a good job."

Koss takes criticism in stride. "It's almost better if you've made a mistake," he says. "Because then they get to see how you react." Bob Norris, the buyer from Ames, a New England chain, remarks that getting an extra Koss speaker "messed up my planagram." The planagram is the buyer's bible. In this case, Koss Corp. was lucky and gained an SKU from its error. While a small chain or an independent store might decide overnight to stock a product, power retailers have little such flexibility. They make decisions by March and April for the rest of the year. If your product's not on the planagram, you're generally out of luck until next year.

Inventory turnover outweighs most other measures of success in these circles, and CES presents an opportunity for Koss to probe his products' sales performance. "Christmas was good," says Kyle Turner as Koss and two sales reps take their places in the meeting room. Turner buys video and audio accessories for Blockbuster Music, a chain of more than 100 superstores. But he brings a mixed message: he wants cheaper models, at $20 or so, from Koss. "Forty dollars is too much for an advertised item," the buyer says.

Koss taps quietly into his Hewlett-Packard pocket computer. "Will Blockbuster Music pick up any new brands?" he inquires.

"No," says Turner. "We don't need to have the world's selection."

Koss pushes. "Are you eliminating any Sony SKUs?"

Actually, Turner shares with Koss, he may add some low-end Sony models in the $10-to-$20 range.

That's the kind of tip Koss has been waiting for. Sony already controls about half the headphone market and threatens to gobble up more. To retain his shelf space, Koss must be more competitive on the low end. In recent years mass merchants have consolidated product selection and reduced the number of suppliers they feature. Koss Corp. has found itself odd man out on several occasions. That's how Koss lost Kmart and, last year, Circuit City. Since then, the company has worked furiously to expand its line and price points. Headphones priced higher than $19 seem pricey to buyers whose stores carry stripped-down versions for $3.

One afternoon, as both brothers head for closed-door meetings, three buyers from Wal-Mart Canada arrive -- unannounced, with no appointment. Other buyers, less important to Koss's future, are kept waiting. When that happens, the marketing team squirms. "These buyers are used to seeing the top guy," explains a staffer.

At times John Koss, the middle child who's everybody's pal, doesn't always know when to stop talking. That's evident when he and Michael meet Nancy Prasek, the buyer from Lowe's, a $6.1-billion home-building chain in the Southeast, a region where Koss Corp. is weak. "We've been trying to get in there for years," Michael whispers.

Prasek says she has time to look at only a few models, but John Koss walks her through the entire line of some 40 products. She glares at her watch. The rep assures her, "We really want your business!"

"You do?" she responds with mock amazement.

Some buyers are not bowled over at meeting CEOs and sales managers. Target's Teri Kohler is another who seems to care little for titles.

When Michael breezes into the Target meeting, the buyer is unimpressed. "My wife loves Target," the CEO says, pronouncing it in mock French, Tar-zhay. She smiles, barely, as in "So?"

The meeting includes the Triad sales rep and Koss manager Lenore Lillie, who was assigned to the account after striking a rapport with Kohler.

Kohler notes that sales of Koss products are down at Target but declines to specify models. She complains that Koss still owes her 1994 product-rebate dollars. And, oh yes, did she mention that Target ran out of stock on a popular headphone? It's almost an aside, but Lillie nearly chokes on the news.

Still, Kohler is not all cold water. She likes the new SportClip model -- which does away with the headband -- but not its $35 price tag. She invites Koss to submit a quote. Kohler must wrap up her planagram by mid-February, so the group agrees to reconvene in three weeks at Target's Minneapolis headquarters.

Koss types into his computer. The deadline doesn't leave much time to work on pricing and packaging.

Milwaukee, January 20 -- "I have never been so walking dead," says John Koss, finally back in his office. "It felt like everyone who came through the booth wanted to talk business. Unlike past years."

He's putting CES into perspective. "My goal was to gain a feeling for the attitude of the buyers. If they're optimistic about Koss and Christmas, we can expect business to grow."

He's in a quandary over the pricing conundrum with Target. "She wants a higher average retail price," he notes. Yet she's wary of taking a chance on the untested SportClip. "I'll put it on a string for her if she likes." Huh? "I'll take it right back if it doesn't sell."

Koss takes his relationships with buyers seriously. "I used to get depressed when he didn't come to the booth," he says, talking about Kmart buyer Tom Hooks, who won't acknowledge having been at CES. Still, at Hooks's request, Koss promptly mails new-product information -- and waits. "Your chances are better than 50-50," the buyer tells him.

But Koss has no time to dwell on disappointment. In the month after CES, the sales chief crisscrosses the country, appealing to buyers on their own turf: from San Francisco to Minneapolis, and from Delray Beach, Fla., to Dallas, to Richmond, Va., to Nashville. Valentine's Day finds him in Chicago. He calls on the Good Guys! (a rising San FranciscoÑbased electronics chain), Software Etc., Target, Office Depot, Circuit City, the Army and Airforce Exchange, Brendle's, and Sears. Wal-Mart Canada requests a quote, and Koss puts a note in his computer to plan a trek to Ontario.

Koss's reps are also working the phones and hitting the road. Within weeks of CES, Triad has landed Koss Corp. a new account. An ambitious young rep, Steve "Slammer" Stamy, placed seven SKUs at Minneapolis-based Media Play, a hot new superstore for books, music, electronics, and sports apparel.

John Koss can't say enough about Triad's contacts. "They know who's who in the zoo when buyers change," he says. "They're located in a retail mecca. Software Etc., Best Buy, Musicland, and Target are all in their territory. They know five or six buyers at Target."

You Can't Just Do It Yourself
"Reps are a conduit," suggests Best Buy's Bob Griffin. "They don't make anything, so they get a bad reputation. But a good rep, he asserts, "can definitely make a line." He mentions Jeff Arundel, Triad's cofounder. "Jeff knows how I work. If I didn't see Jeff, I wouldn't do as much business with any of his vendors."

"There are good sales reps and bad ones," Target's Kohler allows. "Even though the reps are paid by the manufacturer, they have to represent us as well. A rep should be very open with all issues." She won't rate individual rep firms.

Koss, nevertheless, wouldn't dream of going to the Target follow-up meeting without Triad by his side.

Minneapolis, January 27 -- Koss enters the Target meeting with purchasing manager Lillie and a Triad rep. Kohler shares the year-end numbers that show how Koss Corp. stacks up on margin, sell-through, inventory turnover, and product returns. Her opinion hasn't changed on the SportClip. "It's still too expensive," she says. Koss disagrees, but both sides concur that the standard "clam pack" packaging isn't going to tell the SportClip story. Koss knows he ought to have seen that before the show.

Such meetings make up the bulk of "program selling." "You get the stuff placed, and then you have to plan the advertising," Koss explains. Even after the product has hit the store, Koss likes to say, "you still don't know if the dogs will eat the meat." If one model doesn't play with consumers, you must have a substitute.

Out of Stock Blues
Milwaukee, January 31 -- During a lull in sales calls, Koss takes a visitor shopping.

First stop: Wal-Mart. Apparently outranked by Sony, Koss headphones have been relegated to a bottom rung on the slat wall. "We have plans to change that," Koss says, tidying up the display.

The nearby Target store is brighter than Wal-Mart. Target aims for a department-store look. But Koss's best-selling, $20 headphones, the TD-60 model, are out of stock. Worse, three pegs are wasted on a model that sells poorly.

At Best Buy, Koss's demo, a pair of $39 computer speakers, doesn't work. The Sony speakers operate just fine. John Koss fiddles with wires to no avail. "If something's not working, we want to know right away so we can replace it," he says, walking off to find a manager.

"You can get depressed when you go to a bunch of stores and everything is wrong," says Koss.

That is the gap between sell-in to the buyer and sell-through to the consumer. Sometimes it feels as if your product has fallen into a black hole.

To remedy such problems, Koss has appealed to at least one superstore "rebuyer" (the buyer's assistant). Some vendors rely on the folks who actually stock shelves, the rack jobbers, to make things right. Few sales reps will play housekeeper, but the best make spot checks. "The buyer might say that product's not selling," says Lee Adams, a Koss rep in Bedford, Tex. "And I can say, 'That's because it's in the back room.' I gain credibility, and the buyer fixes the problem."

Delray Beach, Fla., February 1 -- Thanks to the connections of a Florida rep firm, Koss is finally talking with the buyers at Office Depot headquarters. The office-supply chain is bullish on Koss products. "Interested in 'phones, speakers, microphones," John Koss enters into his pocket PC. This could be a $500,000 account. But it's unclear when he'll get an answer.

* * *

It Can Take a While
Hoffman Estates, Ill., February 14 -- Sears buyer Marty Burks confides he wants to give more business to a select few vendors like Koss. Burks had the numbers on the headphone market laid out -- the market size, the best-selling price points, where Sears fits in. Koss is impressed. "He's got the market data down better than anyone else."

Recently, Koss discovered that he and his reps have been chasing the wrong buyers at PriceCostco and Brookstone. Or that's what he's been told. And it was only after penning a letter to Kmart's buyer Hooks, several years ago, that he went "direct." The buyer replied, "It's good that you wrote me." The sales vice-president took that as a sign he should handle the account himself, and he says, "I will live and die by that."

Milwaukee, February 23 -- Hooks phones Koss to check sales projections. The Kmart buyer is planning a detailed presentation to his own boss. Koss grows hopeful. "I'd been told no by now in prior years."

It's easy to become agitated by the long selling cycle. It's said that even buyers grow weary. To alleviate the tension, Koss has taken up an aggressive form of gardening he calls "yardening." He has no patience with seeds; he plants large trees.

Sometimes the faxes, the phone calls, the Fed Ex packages, the trade shows, and the endless discussions about pricing, positioning, and turnover ratios add up.

Milwaukee, February 24 -- Kmart calls. It will take two Koss units. After four years of pitches, Koss will get 1,700 new outlets.

A few weeks later Koss is at work on a special Kmart promotion. He imagines a huge bin of earbud 'phones selling for $2.99. "It's great exposure," he says.

But $2.99? "The more traditional thinking is, 'Oh, man, that's dragging the name down into the dirt," he concedes. But from his perspective, he's buying tens of thousands of billboards for $2.99 each. "We've been talking about this a lot, our mission," he continues. "We had a very complicated mission statement. Finally, we all just looked at each other and said, 'You know what it is? We want a Koss stereophone on every head.' That's really what we want. Just like Taco Bell wants a taco in everybody's hand."

Milwaukee, April 26 -- John Koss is gratified to have added Kmart, Wal-Mart Canada, and Media Play as customers in 1995. He continues to improve relations with Target (which will test the SportClip at Koss's price), Wal-Mart, Sears, Best Buy, Service Merchandise, Bradlees, Ames, Lechmere, the Army and Airforce Exchange, the Good Guys!, Software Etc., and CVS. Circuit City, Office Depot, and OfficeMax still have him on the edge of his chair. And he's already admitting he'll probably wait until next year for Lowe's, Brookstone, and Caldor. As for CompUSA, the computer superstore, Koss says, "we're not even on square one."


The power retailers are all the same -- and all different. In the absence of a rule book, we offer commonsense approaches:

Take names. Ask around to identify absolutely the right contact at corporate headquarters. State your case on your own or with the aid of independent reps. And don't go above the buyer's head. Marty Burks, a buyer for Sears, is blunt: "If they don't know whom to get the information to, they're not going to get any consideration from me."

Leave your name. "You'll make six phone calls before you get a call back," Best Buy merchandising manager Bob Griffin warns. But "if a sales rep is a pest," he cautions, "that can definitely hurt."

Get help. Don't underestimate the value of a few good rep firms -- they eat rejection for breakfast. When you reach buyers, ask them for reps' names, but don't put them on the spot. Your company should be "rep friendly," but distributors and rack jobbers can also open stores' doors.

You oughta be in show biz. Trade shows are excellent places to be "discovered" or to meet the buyers with whom you've been playing phone tag. "I like to see people we'd otherwise never be exposed to," says Target buyer Teri Kohler.

Make your pitch. Be opportunistic. "A lot of it is the pitch," agrees Best Buy's Griffin. What impresses? Knowledge of the competition and the consumer. "If you're not customer driven, nothing else matters."

Watch the details. Follow-up is everything. Send out what you've promised. Pronto. After a trade show "there are a hundred people you have to see," asserts Jeff Martin, a onetime sales manager at Koss who now heads his own rep firm, House of Representatives. Be ready -- with promotional ideas and an advertising allowance -- for that next call from Wal-Mart.

Get the first order. This is a test and only a test. How you handle the initial order defines your product's nationwide rollout. One power retailer gave Lisa Frank, CEO of a Tucson arts-and-crafts business, a huge first order and requested immediate turnaround. "We scrambled," Frank recalls. The retailer did delay the ship date, but only after Frank met the deadline.

Get the next order. "Initial orders don't mean anything," states Jeff Martin. John Stone, president of Opus, agrees. Product innovation and snazzy packaging "got us in the door," says the Bellingham, Mass., manufacturer of bird feeders. "What you do beyond that is what keeps you in." Stone has invested close to $100,000 in technology to meet retailers' inventory needs.


The power retailers. Wal-Mart, Kmart, and Target combined operate more than 5,000 stores and account for 80% of sales among 42 discount-department-store chains.

Category killers. Specialty retailers like Home Depot, Office Depot, Toys 'R' Us, and Best Buy have seen their influence expand faster than you can say Newt Gingrich. In 1993 the category killers' sales were up 19.9%.

Regional discount department stores. After years of consolidation and brushes with bankruptcy, regional chains have revived. The strongest -- Caldor, Ames, Bradlees, Venture, Hills, and ShopKo -- kicked in nearly $12 billion in 1993 sales.

Warehouse clubs. Their popularity waxes and wanes. PriceCostco and Sam's Warehouse Club lead the pack.

Supercenters. Wal-Mart, Kmart, Target, and others operate warehouselike stores combining food and general merchandise; they stretch out to 100,000 or 200,000 square feet.