Melissa, I think you're aware the economics and capital needs of tangible products companies are profoundly different than those of software and SaaS businesses. Rapid growth without substantial cash resources is where consumer product companies go to die.
Greg's observations about Walmart are on Target (pardon the mass merchandising pun). Once you move to the BIG players you need to fund their inventory needs; you drop your margins; you often need to pay for position, POP, and marketing support; you are agree to their EDI, insurance and product testing policies and incur the expenses that come with those commitments; you often commit to substantial back-up inventory, delivery and labeling requirements (many of them backcharge you if the case packs or pallets do not match their distribution center requirements) and then you have to collect. When most big chains tell my clients they will pay in thirty days I build my models assuming sixty; when we're told forty-five to sixty I assume ninety.
Lava Lunch is an interesting product but it is in a brutally competitive segment. Whether or not your product is demonstrably better you're competing for shelf space and attention with some gigantic competitors who, if they start losing position in the big chains, will respond aggressively. Assuming you have limited resources, you need to be creative. Here are some ideas:
1. Be visible but hard to hit. Focus on PR, use guerrilla marketing tactics and exploit the internet to build volume and visibility. Make sure you understand your logistics and fulfillment costs. For less than pallet delivery you may be surprised to find your best shipping option is probably the Post Office.
2. Use the alternative selling channels such as QVC and its cousins - they move volume at predictable times. You can negotiate limited inventory tests and if they work you can move forward with more and more confidence.
3. Pick the retail chains you choose carefully. A few a substantially better partners than others. You are looking for outlets who honor their commitments, pay their bills as agreed and make the rules you'll need to play by clear. None of them are easy but there are some who are tough but fair; there are many others who exploit smaller companies ruthlessly.
4. Give careful consideration to working with brokers and distributors. While many companies like yours consider them expensive and an added layer between you and the customer, the good ones understand the customer much better than you do, know what will appeal to or put off the buyers, and how to handle the paperwork, detailing, logistics requirements, etc. of the big chains. It can be the least expensive 5 to 30% you ever give up. Before you sign up with someone interview other businesses who have worked with them to figure out if they are really a good match for you.
Coming back to capital: you will need cash to fund your inventory (if you are producing in China you have a long logistics chain which eats capital because the product spends time on the water, clearing customs, getting into your warehouse and then moving the customers) and you need to carry receivables. At lower volumes paying a higher price per unit to produce domestically or in Mexico is probably less expensive all in than manufacturing in China, largely because of the shorter transport chain, your physical proximity and fewer issues of language and time zones. If you need large inventories for the fourth quarter you need to figure out how early you need to bring in your product - if the big chains decide they are having a big year and need to move more goods from Asia the shipping companies will hold your containers and give the space on their ships to Target, Costco, Amazon and Walmart. Small companies need to bring in product early to offset this risk.
It is very expensive to fund working capital with equity so you need to begin looking for non-equity financing soon. In the early stages this can seem very expensive but as you grow, show profitability and learn your way around the financing world the price will drop substantially.