When it comes to new products, contractors want them all, and they want them now. But imagine a product so hot, so in demand, that your builders actually line up at the yard on a Saturday to place their orders, a product that requires virtually zero advertising and minimal manufacturing overhead, and gleans fat margins for vendor and dealer alike. As soon as you take delivery—swoosh, it's gone.
Since its introduction in 1982, Nike's Air Force 1 (AF1) has been doing just that, flying off the shelves and keeping its parent company—along with the retailers that hawk the sneaks—with profit aplenty. At the end of Nike's 2005 fiscal year on June 27, AF1 contributed approximately $1 billion to Nike's $13.7 billion take in gross sales, according to “All the Rage Since Reagan,” an article by Stanley Holmes in the July 25 issue of BusinessWeek magazine on how Nike has kept its basic, stock-line sneaker hot for 23 years.
Just how bad do consumers sweat getting their hands on a new set of AF1s? Consider this: Nike's sell-through rate—an industry metric indicating how fast a product moves off the shelf in the first week—is an aggregate 20 percent, already 10 points ahead of the norm. For the AF1, Nike hits 100 percent. That's right—this product never sits on a shelf for longer than one week without being purchased. Talk about inventory turns.
However, Nike's incredible brand power puts the company in the driver's seat when it comes to its relationship with retailers. For example, any store that is caught discounting AF1s rarely sees the product again. “Shoe sellers are more than happy to play ball,” Holmes writes, partly because the AF1 drives traffic to a location, but more importantly because it generates major profits.
We always seem to have our share of hot items in construction supply as well, and thankfully there are still opportunities to boost your own brand and reputation even when you've got a power product on your hands, says Hal Look, vice president of marketing and business development for Livermore, Calif.–based ORCO Construction Supply, a specialty dealer of tools, fasteners, and construction materials that did $282 million in 2004 gross sales from a product mix of more than 30,000 SKUs.
Look explains that there are two types of “hot” products among contractors: those that are exploding through sheer popularity and others driven by vendor penetration at the specification level. “You look at [DuPont] Tyvek and Simpson Strong-Tie, they both have done a really good job at the specification level maintaining their brand presence and driving sales back to the retailer,” Look says.
In the case of items driven by popularity with customers—such as a feature-laden new tool—Look explains that there are a lot more opportunities to drive incremental revenue through advertising, promotions, and straight sales. “Take the Hitachi NR83A, for example. It's a quality product and a very popular pneumatic nail gun that dominates [in our market],” Look says. “Here you can do things through advertising and promotional specials to drive incremental sales. The guy may not need the extra nail gun right now, but its popularity enables a more compelling argument to pick up [multiple items].”
On both types of items, Look says he positions himself to always advance the ORCO brand, too—to have the stock, have the price points, or otherwise make the compelling argument why the contractor should choose him over the competition.
With some powerful products and brands, you often might feel like merely a throughput to the builder. Even if there is little in the way of making a value-added argument on a roll of housewrap, each transaction still gives the pro supplier the chance to strengthen the customer service relationship. Hot product or not, there's plenty of room left for pro retailers to push their own brand. Just do it.
Chris Wood is senior editor for PROSALES. 415.552.4154 E-mail: [email protected]
