I keep hearing from many of you that competition is fiercer today than ever before. Quite frankly, I’m not a bit surprised. For the past three years there’s been a whole lot less business to share. For many years clients just kept coming through the doors. Even the folks with very mediocre showrooms, less than professional sales staffs, little or no marketing, and pretty much all the same products as everyone else were getting their fair share of a much bigger pie.
Times have changed - and so has the competition. The same number of showrooms vying for a lot less business - and what do people do? Lower the price! It’s dumb and extremely poor business. If they didn’t run a very good showroom operation before, the odds are they certainly won’t know how to do it now.
Take a serious look at yourself and your competition. Who really is your competition? How do you match up with them in a number of different ways? What can you do to differentiate yourself from the pack?
Have you ever Googled the definition of “competition”? Here’s what I found:
- Rivalry between two or more businesses striving for the
same customers or market.
- A business relation in which two or more parties compete to gain
customers; “business competition can be fiendish at times” (don’t you just love
- Rivalry, opposition, struggle, contest, contention, strife, one-upmanship (and so much more).
Okay, so that’s the formal definition - but you already knew this. Darlington’s definition would be something like this: There’s “X” amount of potential customers and dollars that will be spent on decorative plumbing, hardware and other kitchen- and bath-related products. Plus there’s “X” number of businesses that want a piece of that action. Your job is to find out what you have to do as a business and individually to get your fair share of that business (plus a little) without giving away the farm! Pretty straightforward isn’t it?
So who really is YOUR main competition?
1. Other Wholesalers. They carry pretty much the same products you do, buy at the same costs you do, have the same bottom line expectations you do and market their products and service to the same potential customers you do.
2. Independent Dealers (non-traditional wholesale). These folks can’t buy the traditional wholesale products direct from the manufacturers, but they can and do buy a majority of the products they merchandise direct (and in many cases at better multipliers than the traditional suppliers extend to you). To most independent dealers volume isn’t the main focus, it’s profitability. You may or may not see these nice folks as a serious threat, but if there are 750 of them and they average $2M in annual sales each, they’re taking a very nice bite out of the total pie.
Many of the independents enjoy higher margins on sales, build out nicer showrooms, and are more creative in how they market their products and services. I can say this with a fair amount of confidence because I was one - and I’ve done consulting with a number of them. There’s an opportunity for you to go to school on how these “smaller” competitors run their businesses. If you don’t know how, then call or email me. Maybe I can help you!
3. Big Boxes. There are really two main businesses in this category - Home Depot and Lowes - but Ace, True Value and others take a bite out of the pie as well. These folks mainly cater to the homeowner, the do-it-yourself customer - although now they market aggressively to the trades as well. I remember when the top bosses at Kohler, American Standard, Delta, Moen and others stated emphatically that they would never sell direct to these folks. Hello! Competition dictated that they had to! The potential numbers were too big. Through very clever marketing these big guys create a perception that you can’t buy it cheaper anywhere else. And yes, I mean perception. They continually promote a few of the most popular products at down-and-dirty pricing: the “leader” items. But this is less than 5% of the products in any given category, which means they’re making good margins on 95% of what they sell. I know for a fact that Home Depot and Lowes enjoy a better GP margin on plumbing products than almost every wholesaler in this country and Canada. They’re smart, very smart!
4. The Internet. I’d be remiss if I didn’t include this in your list of competitors. It’s big and getting bigger. I’ve heard many of you say that you can’t compete with this relatively new competition. Wrong! The services that you render bring much more VALUE to the transaction than simply buying something on the Internet - your showroom and products on display. Clients can see, touch and compare your products. You’re local and conveniently accessible and you offer a professional sales team to back everything up. You’re there to give technical advice, design expertise and to sell the many features and benefits of your products and services.
When is the last time you “mystery shopped” one of the above competitors in your area? Never? A long time ago? Shame on you! Do a market survey on each and every one of the main competitors in your market at least once a year (more with the Big Boxes). If you or one of your staff can’t visit one of your competitors, ask a relative, friend or neighbor to do the mystery shopping for you. We did mystery shopping on a regular basis in my market. We knew who our competition was and how they were running their businesses. You won’t believe how much you can learn.
I created a “mystery shopping” form that I used when I owned my business and still use it today when I do consulting work. I’d be pleased to share it with you. Just drop me an e-mail.
I’ve probably mystery shopped more than 200 wholesaler showrooms in the past 10 years, maybe even yours! Some of the things I’ve seen and learned would astound you. Following is a brief summary of some of the things I’ve observed and heard:
- Many showrooms are in very poor locations and hard to get
- Their buildings and landscaping (if there is any) look
- The parking areas for showroom clients are too small or not
- The front window displays are poorly done, perhaps cluttered with
signage, and decals and other distracting materials are on the entrance
- There is no one to meet and greet you when you enter. (In 80% of my
visits to showrooms no one gets up to say, “Welcome, thanks for coming in. What
project are you working on?” Instead they say, “If you need any help I’ll be
right here at my desk,” or “We have a bunch of product brochures. Please help
yourself.” This drives me nuts! Please GET UP and greet your customers. The
next one could be a 7-bath/2-kitchen house!)
- Most wholesaler showrooms are mediocre. Many utilize manufacturers’
displays and have used very little creativity in building out their showrooms.
It’s obvious they didn’t get any professional help in layout and
- Almost every wholesaler shows and sells the same products. They are very good products, but unless you mix in some non-traditional wholesaler products (and not just plumbing) you’ll look like everyone else. With so many people selling all the same products, it’s impossible to make the margins you should.
My frustration is showing. As a wholesaler, if you’re going to be in the showroom business, do it right! Go to school. Learn retail. Be creative. Be smart. Turn a so-so business into something fun and lucrative. One way to do that is to really know and study your competitors. Good luck!