2. Tell a clear story about how to differentiate the big box channel and drive incremental sales for the retailer
Manufacturers are brought into big box when they have proven results, but a strong presence in other channels is a potential source of conflict. Incumbent vendors may be asked to justify whether their support for the retail channel is sufficient; retailers may ask for “like for like” products and services that they see in other channels. All vendors will have to address cannibalization concerns from other channels that may be anxious about the retailer potentially siphoning business from existing channels (e.g., specialty pro channels or lumber dealers).
These conflicts can be best managed by demonstrating knowledge of who is shopping for the category at the big box retailer and how specialty and other channels can coexist with big box. For instance, one retailer was described by some of its contractor customers as the “convenience store” for pros (i.e., the retailer of last/quick resort or convenience). Most pros were buying through a pro specialty channel but were using big box for missed job site items, for weekend purchases and to serve more distant job sites (when a retailer was located nearby).
These specific examples illustrate that a vendor can manage channel conflict concerns by developing a granular understanding of how the customer base and shopping needs in big box can be complementary to other channels. This deeper knowledge of channel coexistence enables vendors to better articulate and “prove” how they can successfully manage channel conflict.
Both incumbent and challenger manufacturers also need to bring evidence that their new ideas will add value. Targeted case studies can inform new ideas and strategies. We supported a vendor preparing for a line review by identifying five strategies based on successful existing vendors at the target retailer that had pursued product, packaging, branding, promotional and organizational alignment strategies.
Vendors supporting ecommerce strategies such as BOPIS (buy online, pick up in store) have another significant opportunity. This strategy allows vendors to play active rather than passive roles, because they become valued digital and logistics partners rather than just responders to big box requests. One manufacturer proactively mapped out the days required to fulfill a special/unstocked item and identified opportunities and practical suggestions for the retailer and the vendor to collectively reduce customers’ wait times. This kind of active participation can increase ROI and customer loyalty.
These case studies and learnings can be developed with or without the target retailer’s cooperation, although a joint effort with the retailer will yield more access, insight and collaboration. Vendors that can draw on other vendors’ successes and translate them into their own category do more than generate new ideas; they also establish their commitment to understanding the big box retailer’s needs, using examples familiar to the retailer.
3. Focus on a long-term perspective — transformative changes may be outside the scope of the typical line review cadence
Many PLRs occur every two to three years, so some vendors consider only shorter-term investments such as pricing and promotional activity for those reviews. Unfortunately, it may be challenging to “move the needle” of the big box retailer’s category share within just two years. Investments in store experience, service and product line take time to develop and gain retailer approval. The retail customer, especially the pro, may be slow to change purchase behaviors, even when there is a compelling offering. Vendors may want to consider approaching big box with a long-term business case of investments that need to be made.
We recently worked with a vendor to lay out the five-year impact of a set of improvement initiatives to a home improvement retailer’s share. Further, we identified a scenario for a 10-year share improvement. We helped isolate the increases in share between in-store conversion from customers purchasing other categories, customer conversions from big box and conversions from other channels — for consumers and pros (see Figure 3).