Valuable Lessons From Home Depot
Donald R. Libey
Libey Incorporated
Advisors and Intermediaries for the Direct Marketing
Industry
We're Really Not Interested . . .
Here's
an interesting little vignette. It doesn't make any difference
what the exact accessory to a product was that I went to Home
Depot to buy recently because they didn't have it anyway.
More important, no one was interested in figuring out if they
could get it for me. It was simply too much trouble and the
only person I could find to talk to me was on his lunch hour
and really couldn't be bothered. So, I left to pursue Plan
B: calling the manufacturer direct.
That
plan didn't work very well either. First, the manufacturer's
web site had no contact information to indicate that they were
any more interested in a customer than Home Depot. There was
no telephone number of any kind. Clearly, this was an Amish
manufacturing company.
The
next step was to go to the Thomas Register and enter the manufacturer's
name. There it was: an actual telephone number for a company
located in Bowling Green, Kentucky. Things improved momentarily
when a living human answered the telephone, but resumed the
downhill slide when she informed me they don't sell their
products direct to consumers, only through "authorized
retail distributors." When I informed her their big-box
retail distributor wasn't interested in selling their product,
she foisted me off by connecting me with the Sales Department.
What a Revelation This Was
The
person in the Sales Department had heard this tale of woe many
times and immediately agreed that it was impossible for me to
get the accessory product I needed through the retail distributors
because they won't stock them and they won't special
order the product for customers. It's too much of a hassle
since it's only a $50 sale. But, she told me there was
a solution. I was given an 800 number to call; she could give
me no name or any other information about who I was calling,
just the 800 number. Wondering whether I was now entering the
murky area of the black markets, I made the call. A really nice
guy answered with an obvious Bowling Green, Kentucky accent.
He listened to my story and said, "Thank Heaven all those
big-box stores won't stock or order these products, otherwise
we wouldn't have such a successful business supplying all
the people who want them." I sort of wondered if this guy
was the brother of the nice lady in the manufacturer's
Sales Department. Regardless, I was glad to have found him because
my accessory was out the door within an hour and arrived on
my doorstep the next morning via UPS. The price was the $50
list price and the shipping and handling was standard UPS overnight,
no add-ons. This unknown direct marketer did exactly what was
promised and did it well. What I discovered through this round-about
transaction was that the direct marketing industry is perfectly
positioned to capture an ever-increasing share of the retail
market through enthusiasm and service, two ingredients lacking
dismally in the big-box retail world.
Endless Opportunity
Here's
what you can do to create a multi-million dollar consumer or
business-to-business direct marketing company. Spend a week
inside Home Depot, Lowe's, Menard's, or any other
big-box home improvement and products company. Examine every
large ticket product like portable heaters, paint sprayers,
gas grills, air compressors, closet shelving systems, water
purification equipment, almost anything that comes in a box
and needs to be installed. Next, find all the optional accessories
that the manufacturers make for those products and which the
big-box stores don't stock and aren't interested in
special ordering. Now, go directly to the manufacturers and
become an alternative direct distributor for those products.
Establish a multi-channel, internal referral process at the
manufacturer that lists your company as the after-market supplier
of choice with a direct link to your web site. Set up a separate,
linked web site for each manufacturer, develop relations with
20 or 30 manufacturers, and start taking capturing market share.
The
only secret to this strategy is positioning your business so
that the service-deprived retail consumer can find you quickly.
You have to have the manufacturer on your side and that is done
by showing them how you will provide add-on sales of accessories
that they won't get from the big-box retail distributors.
The manufacturers have to promote your business for you and
you have to create top-notch web positioning for each manufacturer's
accessory products. Plus, being added to the manufacturer's
in-box literature as the after-market source of accessories
would be a simple but important tactic. Remember, whenever a
stock clerk in a big-box store tells you, "Gee, I dunno;
maybe we could get one of those, but it would probably take
three or four weeks," this is a business you can steal
and grow!
The Magic of Holes
My
first marketing mentor, Bill Smith at Duplex Products (Streamliners
catalog; Watts Business Forms catalog; The Tax Forms Catalog),
told me to always look for holes in the everyday course of business
and then figure out how to profitably fill those holes. This
was sage advice from a marketing giant. There are actually more
holes than there are solid surfaces in all of marketing. If
you look carefully and thoughtfully at your niche space, you
will find a landscape Swiss-cheesed with holes of all different
varieties and sizes. The retail big-box experience above is
an example of a small hole in the sales process that can be
used to create significant opportunity. The point: There
are holes everywhere; the world's full of them! We
have a huge supply of holes. What we are lacking is the entrepreneurial
vision to find and see the holes. That is what separates the
direct marketing genius from the average marketer.
Here
is another exercise similar to walking the aisles of Home Depot.
Go to the web and do a Google search for, say, light bulbs.
Begin with any of the top 200 entries and start to make notes
about what you can't find or buy. Similarly, make
a list of what you can't have shipped or delivered
immediately. At the end of three hours of research, you will
have uncovered several large holes in the light bulb universe.
From there, it is only a few steps to determining if there is
a universe to fill the holes, if there is sufficient margin,
if there are sufficient sales to sustain a business and whether
the risk to reward is reasonable. If not, go back to Google
and enter, say, "transformers" and see where that
takes you, or "bone grinders," or "vulcanization."
The second point: Great holes require creative exploration.
You can't find holes if you are looking for smooth surfaces;
holes have to defined by the absence of substance, and that
is a very different way of looking at things.
As
a CEO, it is essential to have a desk drawer full of identified
holes that you can unleash on the marketing department whenever
they need a challenge. The Hole Hierarchy is, of course, the
Largest and Most Profitable Holes Essentially Related to Your
Existing Business come first, followed by the Holes That Seem
to Be a Good Idea and, at the end, the Weird Holes.
As
I look at the catalog world--especially business-to-business--it
is clear that some of the biggest and most successful catalogs
and direct marketers do nothing except fill a clear and obvious
hole. The shipping boxes and supplies catalogs offer immediate
boxes to companies who are temporarily out of their custom designed
and printed boxes; they are a back up source for emergency shipping
supplies, and that hole alone is a billion dollar catalog universe.
The "200 checks for $8" check printers who sell from
free standing inserts in the Sunday newspapers are filling a
hole made by the millions of customers who don't want to
pay their bank $60 for checks supplied by the dominant check
printers in the U.S. The Labor Law poster direct marketers fill
a hole created by the hundreds of thousands of businesses who
don't want to expend the enormous energy and hassle factor
to obtain free posters from the Federal government. There are
product holes, distribution and logistic holes (plus reverse
distribution and logistic holes), selection holes, accessory
holes, customization holes, application holes, services holes,
process holes, and financial holes. If one looks at a single
niche from all of those positions (the Multi-Hole View), more
times than not an opportunity will jump out and bite you.
Thank
you Home Depot for helping me figure out a way to limit your
spread. Now, for Wal-Mart!
