The response from Chip, above, is right on the money and asks essential questions. From being on the product company side, and taking a product development perspective, here is an extreme example and additional considerations exemplifying the power of the retail channel. My supposition in this example is that retail (especially a big box type retailer) has so much power that they can completely drive or overwhelm the development of a product and can sink you in time and effort to comply with all of the necessary planning to support.
1) Quantity - They can order in such great quantities that it completely consumes your ability to support any other channel you may already have in place - this is pretty risky to take on for a small company just coming out. What if you get that big order, then they change their minds right before delivery? They may have this ability in their terms since their agreement with you is so lopsided in their favor. Now you have a pile of product configured for retail, but you may need to re-divert it into another channel. Can your other channels even absorb this? Do you have any place to physically store it. Have you ensured that you have this ability, or is your product for retail different in any way to any other channel configurations?
2) Packaging…where to start? Did you design your packaging to fit attractively and easily on a retail shelf (or peg)? Does it hang askew, does it fit within the space requirements? Can you fit the right number of units on the shelf at a time - big box retailers sometimes have requirement detailing how many they will want on the shelf at a time (like 3 deep) - so does your product fit 3 deep in the space or peg provided? How about that master packaging - is your master pack of a quantity that the retailer will want to order and hold in inventory? From an efficiency standpoint, it may be great to have 200 of your widgets in a master pack coming from the factory, but the retailer doesn’t want to sit on 200 units in one store. You’ll need to figure out how to create inner packs of smaller quantities that will get broken down (by who?) as your product moves into the channel.
3) Logistics Infrastructure - do you have the capability to support EDI, or other order management tools and IT integration points with your ERP or shipping SW? Can you generate the appropriate master pack labels, bar codes? Do you have your SKU management system worked out? Is your product serialized or date coded in any way for tracking?
4) Regulatory (not just for retail) - do you have your FCC, UL, CSA, ASTM, battery certifications, or other testing passed and documented as needed on the product? Even if your product does not require UL, for example, a retailer may just say that UL is requirement for all products they bring in.
5) Shelf Placement and Fit - how much space are you getting or even buying (that’s right, sometimes you have to pay them for space on their shelf - and those isle end caps, they don’t come for free)? You are now competing with the likes of P&G, Coke, Pepsi, J&J, Unilever (these companies' copy writing teams have a bigger budget than the total investment in your company). Is your price point so low, that you are places in the space right on the floor of the store where nobody can see, or on the top shelf where it cannot be reached? Given the typical 4-5 shelfs in a given isle, each level will correspond to similar price points. For example L1 (bottom) will be <$10, L2 $10-25, L3 $25-35, L4>$35. Given this pricing structure, the linear width allowed, shelf height, and desired number of boxes on the shelf you can practically reverse engineer your product to fit on the shelf and define the feature set (I’ve literally have had to do sit in development meetings to determine if we could afford to put a $0.50 feature into a product that was going to sit on particular shelf level - price point target).
We haven’t even talked about if your COGS structure can support retail and distribution channels, how else retailers may nickel and dime you (take back allowances, old stock return) or just completely sink you if you put a product out that has a quality or regulatory issue (do you know for certain if your factory in China use paint with hexavalent chromium in it?).
None of these challenges are insurmountable given the proper experience, planning and resources. As a start up, you may have better uses for your time or money before getting into big league retail. Are you ready for it?