Slotting fees: what they are and how to avoid them while you grow

What slotting fees are

A slotting fee is a payment from a brand to a retailer in return for a place on the shelf for a new product. The name comes from the slot the product takes in the store and in the retailer's warehouse. They are most common at large US grocery chains. In the UK and Australia you will more often hear them called listing fees.

They do not always come as a cheque. Some retailers take them as free product, as a discount on the first orders, or as deductions from what they or their distributor pay you. They are usually charged per product, and sometimes per store or per region.

Why retailers charge them

Shelf space is limited and every new product pushes something else off. Many new products are removed within a year or two, and the retailer carries the cost of setting each one up: adding it to its systems and warehouse, changing the shelf plan and moving stock around. Slotting fees move part of that risk back onto the brand.

For a large brand with marketing money behind a launch, that trade can make sense. For a new brand with no sales history, it means paying up front for a test it may not pass.

The other costs of a chain listing

Slotting is rarely the only cost. Ask about all of these before you agree to a listing.

• Free fill: free stock to fill the shelf in every store on day one.
• Promotions: price discounts, multi-buys and features the retailer expects you to fund, often on a set calendar.
• Marketing and display fees: paid placement on end caps, in catalogues or in the retailer's own media.
• Failure or removal fees: charges if the product is pulled for not selling.
• Deductions: amounts taken off your invoices for damaged stock, short deliveries or promotions, sometimes by the distributor.

How much slotting fees cost

There is no standard price. Slotting fees vary by retailer, category, region and the number of products and stores, and they are negotiated case by case, so published figures are rare and often out of date.

The useful thing is to get the full cost of a listing in writing, including free fill and the promotions calendar, and divide it by the units you expect to sell in the first year. If that number is bigger than your margin per unit, the listing loses money until sales pick up. The wholesale price calculator helps you see your margin at each step.

Independent stores rarely charge them

An independent store buys a case. The owner tastes your product, decides whether their customers will buy it, and orders. There is usually no listing fee, no free fill across fifty stores and no promotions calendar. If the product sells, they order again.

That is why most emerging brands start with independents. You learn what sells and at what price, you build a record of reorders, and you spend your money on product and samples instead of shelf rent. Our guide to getting your product into stores covers the store types, and selling to cafés is a good place to begin for most food and drink.

Questions to ask a chain buyer about listing costs

If a chain is interested, get answers to these in writing before you agree to anything.

• Is there a slotting or listing fee, and is it per product, per store or per region?
• How much free stock do you expect, and for how many stores?
• What promotions do you expect me to fund in the first year, and when?
• What sales do you need to see at the next review, and when is it?
• What happens, and what does it cost, if the product is removed?
• Will you order direct, or through a distributor, and what will they deduct?

When paying slotting fees is worth it

Paying to list in a chain can be right once you have sales data that shows the product moves, a distributor who can supply the chain, and money to fund promotions for long enough to build sales. Without those, there is a real risk of paying the fee, missing the retailer's sales targets at the next review and being removed.

If you plan to work with a broker to reach chains, read food broker vs distributor first. Brokers often negotiate these terms for you. If you are still looking for a distributor, see how to find a distributor.

Where LaunchPal fits

LaunchPal helps you grow in the stores that do not charge to stock you. We find independent stores that fit your product, find the owner or buyer, and email each one about their store. Follow-ups stop when a store replies, and you take it from there.

Start with one city and one store type. Every store that reorders adds to the record a chain buyer will ask for later, and by the time a listing is on the table you will know your sales rate, your best store types and whether the fees make sense. Until then, the money you would have spent on shelf rent can go on product, samples for the stores that ask, and visits to your best stockists.