Any historical look at the home improvement market will show a dramatic consolidation in sales. For example, in 1990 the top two retailers accounted for 7.3 percent of industry sales. In 2000, that figure had grown by over four times, reaching 30.3 percent. Regional home center chains have been most vulnerable to this shift with a very long list of once-proud operators now only a distant memory and a note in the history books.

Many companies look at this information and reach the right (and obvious) observation about consolidation and the resulting value of distribution in these top chains. Where they go wrong is in concluding that their job is to get the product to the shelf, and then it is up to the retailer to push it through. They believe that success must be assured by virtue of the quality of this distribution. Let’s look at the changes from 1990 to today and see why this is very wrong and potentially financially disastrous.

Back in the early 1990’s there were many viable retailers selling home improvement products. A manufacturer could expand distribution or launch new products fairly easily and at low cost. If the product didn’t sell through to the end-user well, it was just de-emphasized and then eventually discontinued. It really was a form of the old, "let’s throw it against the wall and see what sticks" approach. Push marketing all the way. Getting that retail shelf space is a very different story today. The top outlets serving the market are much harder and more expensive to break into. The price of the product has to be right and pressure from line reviews makes sure that shelf-space competition stays very high. But it does not stop with price requirements. A competitive program has lots of support money, particularly in the form of co-op ad dollars. Display materials and other POP, buy-backs of displaced products, and retail staff training are all elements of most successful programs. Then once the product is on the shelf, these top retailers require impeccable product replenishment. All of this adds up to a huge upfront and ongoing investment for the manufacturer.

What happens when the product doesn’t sell well? It is a disaster for the manufacturer who will lose tremendous sums of money and for the retailer that won’t get the expected sales and margin. It is the ultimate waste of resources.

The right conclusions to be drawn from industry consolidation are the following:

• Make sure that the consumer really wants your product. Know your consumers and what they want or need. How do they like the products being offered? What is the essence of why a consumer would want this product? Marketing research is a huge help to obtain unbiased information and move a company from only using experience-based judgment to making true fact-based decisions. Ultimately nothing proves a product’s salability better than real in-market results, but test markets are under-utilized tools.
• Develop follow-through programs that build on retailers’ strengths. Besides an implied endorsement by selling a product and actual availability, retailers make the process work by bringing traffic (potential customers to see your product), pre-purchase support (help of store employees) and post-purchase assurance (satisfaction guarantees). The savvy manufacturer will make the most of all of these elements. Great packaging is vital to getting your message communicated to the consumer. POP materials and training of store associates is also extremely important. Working with the retailer’s advertising department can build effectiveness for all concerned.
• For the right ideas, put some money in true pull marketing. Have something really new or just plain under appreciated? Pull marketing — primarily in the forms of advertising, publicity and consumer promotions — can get the word out and pull that product through. While clearly not for every product in the industry, this can make all the difference in sales results and build a valuable brand.

Start with knowing the consumer and then build it from there.

Fred Miller is President of Consumer Specialists, a marketing and consulting firm based in Germantown, Tenn.