Was the decision to avoid the home-center channel a good one? Explain. What are the benefits of sticking with it? What are the concerns?
The decision to avoid the home-center channel was an appropriate decision for Stihl Incorporated (Stihl). Stihl’s product line consists of a high quality line of outdoor power equipment: chain saws, edgers, string trimmers, brush cutters, blowers, vacuums, mulchers, and sprayers. In order to differentiate Stihl’s high quality products from its competitors (satisfying buyer requirements), the selected intermediary or channel representative needed to provide the appropriate education on proper product operation, maintenance, and overall performance compared to competitive brands (information). As a quality orientated manufacturer, Stihl requires that it’s products be sold with the appropriate buying support, and after sales support. A customer that purchases a Stihl product from a retailer should be able to have that product maintained, serviced, and repaired by that retailer (channel representative). By sticking with independently owned specialty dealers and hardware stores, Stihl was able to fulfill it’s own requirements to assure buyer satisfaction.
The benefits of using independently owned specialty dealers and hardware stores is that the dealer has specific knowledge of certain products and carried only certain products. They are considered experts based on their reputation as an outdoor equipment dealer, and can therefore provide the end customer with the knowledge necessary to make the appropriate purchase. In Stihl’s case this becomes critical in the sale of its product line. Since Stihl never compromises on quality, its prices are generally higher than a majority of their competitors. The sales staff can effectively educate the consumer on knowledge of the product, when to use them, when to choose an alternative, which sizes and features were better suited for which application, and how a product might fit with other products the customer already owns. Utilizing this selective channel is mutually beneficial. The typical specialty dealer was a lawn and garden specialist, and therefore adding Stihl’s line of products would create prestige, increase the annual sales per square foot (due to high price of item), higher profit margins, and a residual stream of after-sale maintenance or repairs. The amount of growth opportunity is still very high in the dealer channel. The case estimates that there are 15,000 relevant dealers in this channel, and since Stihl is only supplying 8000 dealers with only 55% representing Stihl exclusively, there is room to grow. Attaining new dealers and converting the non-exclusive dealers to exclusive dealers would increase sales and revenue.
Home improvement centers (big box stores) are almost the complete opposite of independently owned specialty dealers. The vast size and complexity of their stores make it difficult for their customers to even find the products they are looking for let alone get any expert advice on the products they are buying. The floor staff are overwhelmed by customers requests for information, guidance, and personal attention. From a quality orientated manufacturers view point, after sales technical support at most home improvement centers was non existent. Another factor would be the potential conflict due to the economic power that home improvement centers have. A store like Home Depot can place strict and difficult demands on a suppliers/manufacturers price, and by focusing on price Stihl fears that quality may be sacrificed and that is simply not an option. When looking at the negatives of avoiding home improvement centers, you must consider that big box distributors have the ability to purchase large quantities from suppliers and can make a significant impact on the bottom line. They also have the capability of reaching a larger demographic than the specialty dealers due to their convenience (one stop shopping...
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