Fish rot from the head

Builders' merchants have traditionally regarded themselves as 'traders' - companies that buy and sell. The better they do it the more money they make - it's simple! Both are both important. But for ambitious nationals and big regional merchants aiming for accelerated growth, buying became more important. With greater buying power came economies of scale and higher profits that were channelled back into even more acquisition. And so it went on - a self-reinforcing positive feedback cycle that drove their growth.

Unfortunately, the effects weren't all positive. Over the last 25 years, merchants' preoccupation has been at the expense of investment in market growth and development. Why did growing merchants need to invest in marketing when suppliers could be relied upon to do it for them as well as providing regular marketing support money?

Actually, this supplier support money was regularly diverted into other things - boosting profits, supporting merchants' share prices and funding more acquisition. Often, the money didn't get down to the branches to do the job it was intended for. Robbing Peter to finance Paul may be okay occasionally, but make it a habit over the years and you're headed for trouble. The Chinese have a proverb about fish rotting from the head. It means that a lack of organic, like-for-like sales growth is a top-down problem, a problem with strategy and priorities, not a problem with the branches and the troops who suffer the consequences. The branches don't necessarily enjoy the benefits of increasing buying advantage - but do have to live with the neglect of sales and marketing. And no amount of practical support and business generation by suppliers can replace it.

The nationals, and to a great extent the larger regional merchants, may be purchasing heavyweights. But when it comes to marketing they are just 8-stone weaklings getting sand kicked in their faces by DIY sheds that, hungry, determined and ambitious have fine-tuned their marketing until they got it right.

But it's not too late for merchants to restore the balance between buying and selling and embrace the responsibility of marketing. Actually, it's imperative.

If a good marketing model is needed, merchants need look no further than B&Q. They're traders (and good at it) who believe in and understand marketing (and they're very good at that). In B&Q's business model, strong buying plus strong marketing earns strong growth. And their figures prove it.

If the sheds can do it then so can merchants - it's never too late for merchants to focus on marketing for a sustainable and profitable future.