The Missing Middle

Once upon a time, there were many types of merchants offering a wide range of gift and home decor products at all price points — low, luxury, and moderate. The national chains, however, didn't carry well-designed or branded merchandise, and discounters offered only end runs from previous seasons or lower-quality products and even damaged merchandise.

Not many chains were offering an interesting, easy-to-shop environment. Nor were they marketing themselves in a manner that said, “Look at us! Aren't we fun and exciting?” They also weren't offering the type of customer service that the local retailer was.

Anyone been to Target lately? Or Steinmart or Kmart? Not only are they offering well-designed product at good pricing under their own labels, they're also offering branded, designer merchandise from Isaac Mizrahi, Michael Graves, and Martha Stewart.

Manufacturers are selling parts of their product range to these chains either by choice or because of the need to move product. It seems the middle market of moderately priced goods is vanishing.

Now take a look at your account base. How many new, independent retail accounts have you developed compared to the new chain stores that have opened? True, there may be more overall retail locations in the U.S., but there are fewer main entrances to get your product into. Worse yet, there are more competing manufacturers.

As the middle market — a big slice of the pie for most manufacturers and reps in our industry — is fading, the Internet has extended consumers' and retailers' ability to find product at better prices. Amazon and EBay have “rationalized” pricing, and chain retailers have learned to provide well-designed product in more inviting environments. Bath & Body Works has many of the best bath and body care brands in their flagship stores, and their staff is trained to sell.

The size and leverage of these accounts has pushed manufacturers to ever slimmer margins (some chains require margins of 70 to 75 percent), which affects their long-term survival ability. And the moment they achieve success with a new product, a competitor creates a copycat.

Over the past eight years I've consulted with 50 or so manufacturers in an effort to help them develop product and processes, sales and marketing strategies, and tactics for deepening account relationships, in order to address these issues. My clients are moving their products more upscale, more “down-market,” or both. All of them are learning to become more attractive to chain stores and big box retailers, and to build and survive those relationships. Here are some of the areas in which I direct them.

Market Knowledge: It's more important than ever to understand where to apply your resources. Know the trends and how to position the pricing of your products. Know your retailers, and your retailers' competitors, and know what drives the purchasing decisions of their consumers. This will guide your decisions in adjusting and/or introducing products that meet retailers' needs. And whether you reposition either to the higher or lower end of the market, develop a strategy to work with your suppliers and sales force to address both ends.

Product Innovation: The companies that succeed in difficult markets are those that innovate, taking risks in new categories and formats of product. Educate yourself on what the trends are, and what new materials and packaging are available.

Proprietary Product: By this I mean licensed product. If you're in a competitive market, you can differentiate yourself by securing licenses that resonate with consumers. Just make sure the license makes sense for your product.

Knock Yourself Off: Before someone else does. The clients I work with are learning to develop lower end product without undermining their up-market product and distribution.

Brand Awareness: There's nothing more powerful than a consumer asking for product they read about in their favorite magazine. In difficult markets, companies that are successful are those that have made an investment in consumer awareness. Every consumer publication has editors responsible for reviews and recommendations of consumer products. Contact them, or invest in a PR professional who can.

Customer Relationships: I've had manufacturers that reached a difficult place with their key accounts in terms of the sell-through of their products. What kept those retailers from abandoning them was a higher level of service and responsiveness, likeability and attitude, as well as their ability to help the retailer understand the needs of their consumers.

Loyalty Programs: Create programs that establish a relationship between consumer and brand. Sampling, in-store cooperative brand/retailer events, and store sales training all have a positive impact.

Process Improvement: The ability to evaluate and react quickly, to constantly improve your product, processes, and relationships is critical. Read up on programs such as Total Quality Management [TQM], Six Sigma, or other continuous improvement tools, and begin to implement their key elements.

The marketplace is a moving target. Put in systems for advanced warning, identification, assessment and reaction and you'll be better prepared to hit the bulls-eye — whether at the top, the middle, or the bottom of the market. —Barney Stacher