Any manufacturer who deals with big boxes and with smaller stores must understand the differences between them-and how to meet their needs.Ĭonsider how Pella, a window manufacturer, came out ahead of a much larger competitor at Home Depot. The same holds true for the retailers themselves they too require different products and different levels of service. A consumer shopping at a big-box retailer often has different needs from someone shopping at a specialty retailer. Their strategies share three core elements. Far from suffering a premature death, some manufacturers have turned relationships with the big boxes into a competitive advantage. Like so much conventional wisdom, this scenario overstates the case. Faced with shrinking margins, manufacturers cut back on investments in product innovation and brand building, further stunting their products’ growth. Consumers become conditioned to buying on price and exchange loyalty to brands for loyalty to the retailer. In the process, they destroy brands and transform entire product categories into low-margin commodity markets dominated by private labels. The conventional wisdom goes this way: Retailers like Wal-Mart, Toys R Us, Staples, and Home Depot cut prices relentlessly to squeeze out smaller retailers. Many consumer-goods manufacturers believe that big-box retailers are bad for their business and a scourge on their brands.
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