Market Sizing for Home Improvement Brands (What Your Retailer Wishes You Knew)

I spent nine years as the VP of Marketing for one of the largest home improvement retailers in North America. In my time spent looking at brands through the eyes of the retailer, I’ve seen the good, the bad and the ugly.

Based on this experience, one of the most critical takeaways I can offer retail brands is this: Product line reviews (PLRs) are won and lost by accurate market sizing data.

The objective of a product line review is to determine the optimal product assortment to meet customers’ needs. Coming to the table with the most complete view of the marketplace is critical in the formation of PLR strategies and recommendations. It’s also critical to becoming a trusted data resource for your merchant.

This is where accurate market sizing information comes into play. Merchants will ask you to come prepared with your estimate of the size of the market and your market share. My experience on the retailer side of the table has shown me that companies with the best market data were the ones most likely to come with the most thoughtful recommendations, and therefore, most likely to earn my trust. They demonstrated category leadership, and as a result, I was more likely to treat them like an advisor and partner, not just a vendor.

Market sizing in the home improvement category is easy, right?

Anyone who has ever collected market data in the home improvement sector can tell you: No, not particularly.

Nielsen provides the broadest view of U.S. retail sales for grocery, drug, mass merchandiser and convenience stores. For a price, they can provide information on market share, competitive sales and insights into pricing, merchandising and promotion. For consumer packaged goods (CPG) brands, IRI provides valuable market data.

Unfortunately, neither Nielsen nor IRI service the home improvement segment, which means that you’re on your own to develop answers to these critical questions.

Market sizing for home improvement brands is an arduous and complex task. You can’t just rely on the tribal knowledge of your organization and there is no magic button to push to get all of the necessary information. It’s up to you to gather all of the inputs, analyze them, and develop an accurate market sizing estimate for your category and brand.

How to do market sizing for home improvement brands

How you go about the process of identifying the market size can be greatly influenced by customer dynamics. What percent of the category volume comes from DIYers versus Pros or MROs? Market sizing for a category that is heavily driven by Pros can be more convoluted and time-consuming to model than a DIY-oriented category, but equally necessary.

Here are some essential steps to help you initiate a market sizing study in the complex world of home improvement.

Find your data.

The best place to start is an analysis of point-of-sale (POS) data and secondary industry reports. One word of caution on secondary industry reports – the data can sometimes differ greatly from one report to the next (in one case we saw two very reputable reports that had a difference of $1 billion), which can make it challenging to draw solid conclusions.

Don’t overlook the mountains of data collected by the U.S. Bureau of Labor Statistics and the Census Bureau – their reports can help validate the assumptions used in your market sizing analysis.

Get boots on the ground.

Another important but often overlooked step is walking the stores. The best way to truly understand your brand in the context of the competition at Lowe’s, Home Depot or Menards is to visit.

I recommend walking multiple stores in multiple markets to help you understand the regional and seasonal differences that could impact overall market size estimates. In addition, adding photos from your store walks into your presentation sends a clear message to your merchant – you did your homework, and you know what’s going on at the store level.

Do an Amazon audit.

You can also learn a lot through an analysis of ecommerce channels, especially Amazon. Sales by SKU on Amazon can be a good proxy for retail sales, and with the growth in online shopping, it is important to show that you have not overlooked this important channel.

Taking a comprehensive inventory of your ecommerce category can be a complicated undertaking, so it’s well worth the investment to partner with a consumer research company that can design and execute an Amazon audit.

It can take up to ten weeks to conduct a comprehensive market sizing analysis, so plan accordingly.

So, why is accurate market sizing so important?

Simply put – without data, there is no trust.

Companies that come in with broad estimates of the market are less trustworthy than those that come to the table with dialed-in numbers, including market shares and category opportunities. When you can paint a more detailed picture of the landscape, including a view of the future based on your recommendations, you will earn a sense of confidence from the merchants.

Since the goal of a PLR is to meet customers’ needs, conducting proprietary customer research will provide you with unique insights and support for your recommendations. Your research can help identify potential challenges and trends that could impact the overall size of the market as well as market share for you and your competition.

Does your research indicate that the category is likely to grow or shrink? Are there new product opportunities? Are there competitive threats? In what ways will the shift to online shopping impact the size of the market by channel?

A word of caution: make sure you completely understand the data that you are presenting. Ensure that it passes the smell test and that you aren’t misrepresenting the facts. I once sat in on a meeting where a company presented recommendations based on an incorrect use and interpretation of some data. We listened politely, but the consensus of the team was that the presentation was a “spurious load of crap” – a term that lived on in infamy in the organization. You don’t want to be that company.

When in doubt, invest in consumer research through an agency that can gather accurate data and clearly interpret its findings. You don’t get a second chance at a first impression with your merchant, so don’t falter on the numbers.

Accurate market sizing will earn the trust of your merchant and arm you with the information you need to make the best strategic plan for your business. Set the table for your recommendations to be taken seriously, and you’ll be one step closer to a win.