DIY Equals ‘Deliver Increased Yields’!

Some hardware retailers choose to cater to a predominantly professional power and hand tools market, while others see greater value in a DIY-based business. JOHN POWER examines the potential benefits of a strong DIY clientele.

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Many years ago I asked a trade-based power and hand tools specialist retailer why he didn’t chase more DIY sales. His response, elegant in its raw simplicity, has stayed with me: ‘Amateurs are full of bull…t!’

Since then I have heard the same sentiment (if not those precise words!) expressed many times, invariably from knowledgeable old salts who prefer crusty technical chatter with professionals than casual banter with novices. While this attitude is perfectly understandable from an individual perspective, there are good broad-brush reasons why a strong DIY clientele is sensible in current and future markets.

In this article, I’ll be outlining how profit margins, client sector numbers, consumer buying habits, as well as changing retail environments, all contribute to the value of a healthy DIY customer base.

Trade is simple

Professional tradespeople know their products, provide professional feedback and respect the professionalism of their suppliers. Loyalty tends to be a strong factor in tradespeople’s business relationships, with many sticking to the same tool brands and favourite outlets throughout their careers. The problem is that when tradespeople buy a power tool, for instance, they are also buying a business tool. This means the retailer is oftentimes regarded as a second-order wholesaler, under constant pressure to squeeze margins, provide add-on products or services, or negotiate otherwise generous terms of sale with a fellow businessperson. This is only a generalization, of course, but it will certainly ring true with many readers.

The retailer’s return for offering a good deal to trade clients is (a) the likelihood of long-term custom, (b) the potential for positive referrals, (c) close alignments with no-nonsense distributors of top-end brands, (d) more high-price unit sales, (e) reduced need for ‘hard sell’ tactics, and (f) fewer returns or aftermarket queries.

The downsides, however, are equally clear. Apart from (a) pressure to offer ‘mates rates’ deals, retailers might suffer (b) immediate exposure to declines in local trade business activity, or (c) profound negative effects if a prominent brand incurs reputational or operational problems (which can happen very suddenly).

DIY complexity

So, what are the advantages of stocking decent ranges of DIY power tools?

As a rule of thumb, the retailer can expect (a) higher margins, (b) greater volumes of sales from varied channels, (c) increased potential for cross-selling, (d) opportunities for skilled salespeople to upsell, (e) the ability to reap direct rewards from quality manufacturers’ or distributors’ marketing initiatives.

Let’s consider each of these points separately.

Higher margins

In most cases, hardware retailers will declare that DIY tools carry higher gross margins than trade-focused units.

While the overall profitability of entry-level DIY tools may be problematic due to low initial pricing, or widely publicised discounting from opposition retailers, even low-cost items can be worthwhile if units are sold in respectable volumes or seen as sacrifices to win different higher-margin sales. Alternatively, retailers might capitalize on entry-level brands that are less well known in the market, and therefore less prone to local price comparison or competition. This last point may sound unrealistic – surely brand strength is half the battle in winning a sale – but a spate of international surveys of customer retail perceptions in recent years shows that brand names per se are losing prominence in buyers’ purchasing decisions. Instead, generally speaking, cynical customers assume most popular power tools, in particular, are all made in China anyway, presumably from the same handful of factories, so what’s the difference! The same perception acknowledges more uniform and higher levels of quality across all price points, hence the retailer’s capacity to introduce locally exclusive or lesser known models and brands (or self-branded models) at decent margins with greater confidence than might have been the case 10
years ago.

Greater Sales Volumes
– Varied Channels

DIY sales (by number) in generalist retail outlets invariably outnumber trade sales, based on obviously larger DIY customer bases.

Also, whereas specialist trade power tool sales tend to be made in one-to-one (or business-to-business) transactions, there is more flexibility in the manner of conducting DIY sales.

In larger stores, regardless of whether transactions take place with limited or heavy floor staff intervention, there is a diminished likelihood of haggling at the checkout. (‘I only work here…’)

Furthermore, DIY sales may be conducted in a variety of ways – from standard in-store sales to online sales (ignore this phenomenon at your peril!) or as components of project-based kits – which adds significant marketing depth to the retailer’s business.

Cross-Selling

DIY customers often feel motivated to purchase a specific type of tool when a particular household project arises. The best DIY retailers appreciate that few projects involve just one tool; an astute chat with the customer might allow the salesperson to identify a whole range of additional prospective sales. And there is no need to limit suggestions to drill bits, sandpaper and similar ‘power tool category’ items.

DIY needs frequently extend to other departments and even specialist contractor services. So, regardless of whether departmental specialists or storewide generalists staff the outlet, there are inevitably opportunities to snare additional DIY sales.

Upselling

It is not illegal for DIY customers to purchase professional-grade equipment. A new generation of sophisticated DIY handypersons is quite willing to pay a little more for quality. Once again, it is up to floor staff to identify the appropriate price point to match a client’s expertise and needs.

Use Manufacturers’ Marketing

High-class manufacturers are investing in increasingly sophisticated marketing initiatives aimed at DIY markets, and hardware storeowners are in a perfect position to take advantage of tools such as in-store instructional videos and flyers, Internet-based How To programs, competitions, email promotions, etc.

These kinds of promotional strategies add layers of credibility to a tool range, flagging strong customer bases, high public interest levels, product currency, and good quality. It makes sense for retailers to enjoy piggyback benefits from these kinds of campaigns.

DIY takes effort

Of course, a DIY-based power and hand tools department is not a bed of roses. Dealing with customer enquiries at point of sale can be tedious and require specialist training. Similarly, product returns or bothersome follow-up contact can be time-consuming and expensive, as can the burdens of higher levels of in-store security.

However, on balance, strong DIY tool sales are worth primary consideration in most hardware outlets – for the sake of diversity, flexibility, upselling and cross-selling opportunities, as well as higher margins.