If the goal is to maximize sales, margins, and customer satisfaction, there’s a lot wrong. There’s a lot of missed opportunity for both big boxes and building product manufacturers.
Anytime someone is as successful as big boxes are; they start to avoid risk, and blind spots develop. This results in big boxes settling for growth that is lower than what’s possible in category after category – including yours.
What Could You Do with Over 35 Million Customers a Week?
There are around 9,000 customers per week per location. If you take 9,000 customers times 52 weeks times the number of store locations (around 4,000), you come up with a huge number. These are qualified customers with a need and with money to spend. If big boxes were an advertising medium, they could charge a very high rate.
Big boxes are so good at bringing qualified shoppers to your products that I’ve wondered why they don’t charge a slotting fee for the benefit of being on their shelves.
What Could Home Depot and Lowe’s Do Better?
From my years of working with building product manufacturers, here’s what I see:
1. Big boxes focus on selling products and not projects or solutions. They may run a project-oriented consumer TV spot, but they are all about products when you get in the store. This makes it harder for the new or infrequent DIYer to accomplish a project. This difficulty makes them less likely to take on the next project. If ever there was an end opportunity, it’s projects not just low prices.
2. Big boxes aren’t selling the next project. Today’s insulation customer may be tomorrow’s window customer. If you walk in and buy some insulation, you won’t run into any messages planting ideas for your next project. Big box stores aren’t clubs with a treasure hunt mindset. Home improvement is a never-ending endeavor, yet they wait for the consumer to come up with their own ideas.
3. There is no inspiration for what your home could be. The customer has to seek their own inspiration outside of the store when the store should be a daily house and home show. Even though many builders give allowances and send their customers to the big-box stores to make selections, those same stores are limiting options and driving shoppers online (and not to their sites) to see what options they have.
4. There is no cross-selling. As each department is measured on its own results, the last thing they want to do is help the consumer or sell something from another department. Many projects require tools. You’ll be hard-pressed to find a list of tools you should have.
The consumer then gets home and realizes they don’t have what they need. The store loses a sale, and the consumer is less inclined to take on the next project.
There are also complementary projects, such as roofing. If you are reroofing your house, a contractor will suggest ventilation, gutters, and upgraded underlayment. At a big box, you will just get the price of the shingle. Those big box stores are missing every opportunity they have to educate and inform. That creates loyalty far beyond what low prices create.
5. Giving away margin when they don’t have to. Contractors know the price of a product, as they purchase it frequently. Most consumers have no idea how much a building product costs. Yes, they can go online, and find a price, and many of them do. Many of them are also looking for the right product at a good price. Seeing the product in store is a great way for them choose the right product.
6. Focusing on the lowest price dissuades customers from buying a higher-margin, upgraded product. There is usually always a “good-better-best” product option, and a relentless focus on the lowest price makes it seem foolish to buy a better product.
7. Big boxes drive quality out of products. The relentless pressure on manufacturers to lower prices results in them finding ways to take costs out. Being pressured to be more efficient and reduce waste is a good thing. But being pressured to the point where a manufacturer starts reducing the quality of their product is bad for both the manufacturer’s brand name and for the big box. Big boxes may not see it at first, however, as the decline in quality is usually in small steps that take place over time.
Contractors, on the other hand, are the first to notice a decline in quality, which drives them to shop at pro dealers. Eventually, consumers too will start to notice and, unfortunately, form a negative opinion before the brand, or big box knows what has happened. And in today’s world they will share these negative opinions online.,
8. They drive you out of business with their own private label brands. More and more big boxes are throwing the brand name manufacturers out of their stores and sourcing directly. By taking fewer risks and opening fewer stores, they’re playing a profit game to keep Wall Street happy. You became the middleman who’s cut out in order to grow margins. Innovation suffers and consumers become even more frustrated.
You may think that I see Home Depot and Lowe’s as losers. I do not.
I see them as amazingly successful merchants. However, being a contrarian who is never satisfied with incremental improvements to the status quo, it pains me to think about how much better they could be.
Like most successful companies, they focus on getting better and better at what they do. But I don’t see it as focus, I see it as distillation. The more you distil something, the more single-minded it becomes. This leads to blind spots that grow larger and larger. I see Lowe’s and Home Depot distilling their successful practices while they remain blind to the opportunities they are missing and the consequences of their actions.
They are also large enough now that they avoid risk, seeing only how much they could lose instead of how much they could gain.
What Can a Building Product Manufacturer Do?
Keep fighting the good fight!
1. Push to get your product out of the aisle and be the next project.
2. Fight for merchandising and packaging that communicates the benefits of your better products.
3. Resist price cuts for the sake of a price cut.
4. Resist the pressure to reduce the quality of your product. Create a trade-up strategy that makes the benefits of upgrading clear.
5. Relentlessly bring big boxes ideas about how you can help them grow. Keep their goals in mind and constantly bring them promotions, new products and use their marketing tools to become their best supplier in store and online.
If you change your mentality from “those big box stores are killing me” to “how can I change the game by growing their business”, you will be rewarded with more sales, new product placement and, ultimately, higher margins.
If you have an upcoming line review and would like a more powerful presentation, contact me.