Distribution Partners for New Building Products

Every so often I am asked the question - “Who is the best partner to launch a new residential building product with?”  Most of the people that ask this question are startups that bringing a new (i.e disruptive) product to the building products industry or are an established company in another industry looking to use their core competencies to solve a latent problem in building products.

Usually the inquirers have done some preliminary research and have a good understanding of how the building products supply chain works.  But they are not certain as to which supply chain partner offers the best chance for success.  There are many options available – Wholesaler (2-step distributor), Specialty Distributor (1-step supplier) and Big Box retailers are all viable options.  But when it comes down to the sizable effort of bringing a new product to market, it’s the 2-step distributor that is best suited to develop and grow a new product.  Consider just a few of the 2-steppers core strengths:

2-Stepper Strengths:

1.  Industry Connections:  The 2-steppers have been around for a long time.  They have brought countless number of new products to the industry and have great industry connections, both upstream and downstream in the supply chain.  Their top notch procurement teams and well informed sales forces educate vendors and customers on industry trends and market shifts to which they are uniquely aware. 

2.  In-house Expertise:  Most 2-steppers have done new product development in their past and are experts in recognizing products that solve latent needs.  Many of the mainstream products used in home construction today stem from efforts of the 2-steppers (vinyl siding, OSB, engineered lumber, etc).  They have the skill and wherewithal to create markets for any product they deem worthy.

3. Break Bulk:  Without question, their biggest value-add in the marketplace is their ability to take large quantities of product and break them down into smaller, job-sized lots.  When you are ready to go to market, the most cost efficient way to ship your product is in large quantities (trucks/railcars).  The 2-steppers are set up to facilitate these sized shipments. 

4.  Market Proximity:  Most 2-steppers are in major big building market areas and some of the leaders in 2-step distribution have multiple facilities in multiple markets.  This allows the manufacturer to place products closer to the market where they will eventually be sold.  This reduces or eliminates deal breaking lead-times and freight charges from distant, centralized storage locations for job-sized lots.

Other Options

One-Stepper:  So why can’t the specialty distributor jump in and champion new product’s market development?  Two reasons - time and risk.  The 1-steppers have done an incredible job of growing their business model by providing their customers with a narrow but deep product offering.  Most of their sales and marketing efforts promote established products and solve problems with existing and proven solutions.  New products in the 1-stepper realm are improvements upon existing products that are tried and true.  Their appetite for (real) new product risk is small. 

Big Box Retailers:  Unless you’ve got an “in” with one of the Big Boxes it’s unlikely that you will break through and get your product on their shelves.  You could spend an incredible amount of time and effort only to have the gatekeepers at the Big Boxes defer you.  Truth is the Big Boxes like to engage with products that have been introduced in the marketplace and are starting to gain traction.  The Big Boxes take such products to the next level of success.  They won’t spend priceless shelf space on introducing unproven products - the opportunity cost is too great.

Others:  Direct to contractor and on-line sales options are non-starters.  Contractors can’t buy in sufficient quantities to make it cost effective and are notoriously risk averse regarding new products.  The on-line sales option is still developing for building materials.  Contractors, the real customers for a new building product, tend to be relationship people.  They just haven’t warmed up to internet buying because when unanticipated problems occur on job-sites it’s best to have a good relationship with a local supply house to solve the issue. 

So the 2-stepper is in a unique space to take the risks associated with new product introductions and market development.  But don’t expect the 2-stepper to do all of the heavy lifting!  If the manufacturer and one of the hundreds of 2-step distributors located in the US market can iron out the details of a program, it will be incumbent on the manufacturer to focus their marketing efforts on creating demand for their product while the 2-stepper utilizes their sales force to work on the push-through sales effort with their existing customer base.  This 2 pronged effort will be critical to developing awareness of the new product in the industry and its acceptance in the marketplace.