Many construction brands in building materials, fixtures, supplies, tool and related categories sell to industrial or pro channels of distribution, as well as retail home centers like Home Depot and Lowe’s.
Construction Marketing Advisors works with brands selling both channels, and has witnessed some trends: home center retailers becoming increasingly active in developing brands, and dictating manufacturers’ branding initiatives, from packaging and merchandising, even product assortment. They are demanding custom or retailer-specific merchandising from manufacturers. At the same time, retailers are launching “proprietary” brands, or appointing and sometimes sponsoring new category brands.
Home Depot Category Management Strategy
Home Depot has instituted a long-term strategy to focus entire product categories on one or more national brands, along with a corresponding “price” brand, that is often a retailer or proprietary brand. With a full-time buying office in China, Home Depot has openly stated an objective to source 15% of its products from China.
As an example, in outdoor lighting, Home Depot offers Malibu lighting, with a large dedicated display and in-aisle pallet stacks. Directly adjacent to Malibu is the Home Depot brand, Hampton Bay, with a similar packaging design. In the hand tool category, Husky and WorkForce are Home Depot sponsored and proprietary brands respectively. In power tools, Black & Decker is the appointed consumer brand, while DeWalt and Ryobi are contractor brands. Recently, Home Depot sponsored Ridgid Tools as a “contractor brand”, even though Ridgid was known for plumbing tools. With Home Depot sponsorship, Ridgid entered the general power tool market with drills, saws and other lines. Tool merchandising is closely coordinated in the “Tool Corral” with signage, displays and promotions.
Lowe’s Knows Home Merchandising
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cross the street (literally in many markets), Lowe’s is demanding that manufacturers rollout packaging that can only be used with Lowe’s, so-called retailer-specific merchandising, in order to differentiate from competitors. Lowe’s will request merchandising tools and support for the higher percentage female shopper and, of course, expect any cost to be shared by the manufacturer.
For a recent line review, Intermatic submitted custom packaging and merchandising for it’s timers to Lowe’s. The strategy helped to displace a competitor and secure the contract, but the packaging cannot be supplied to other retailers. For outdoor lighting, Lowe’s considered sourcing and proprietary branding, but in yet another twist, opted for custom branding from Intermatic, with a brand extension Malibu Manchester, coupled with unique fixtures and packaging. Lowe’s continually evolves its merchandising strategy and is widely emulated in the industry. Lowe’s merchandising options for manufacturers are becoming increasingly stringent.
Uncooperative Co-Ops
The largest retail hardware co-op networks, Ace Hardware, uses a similar strategy to Home Depot, typically pairing a national brand with an Ace-branded product. Ace corporate offers margin incentives and promotional assistance for stocking Ace brands. Like Home Depot, Ace employs a buying office in China, and aggressively promotes Ace- branded products.
Manufacturers Must Be Proactive
To succeed in today’s hardware/homecenter retailer environment, manufacturers must be proactive, and continually build their brands, deliver new innovations, while maintaining 98% fill rates and steady margins. Manufacturers must work closely with retailers, and actively participate in category management initiatives. At point-of-sale, the most visible aspects of branding are packaging and merchandising. Only effective brands will
stave the threat of retailer proprietary or sponsored brands.
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