Modeling the Market: The Importance of Market Sizing for Your Product Line Review

When you’re preparing for a Product Line Review (PLR) in the home improvement category, one of the most important things you need to do is perform a thorough market-sizing analysis. Your merchant is going to require you to submit a variety of information in this regard — they want to know what the size of the market is and what your brand’s share of the market.

Merchants know their data and how they compare to competitors, but they don’t have a fully accurate view. While categories like grocery can rely on third parties to track and aggregate point-of-sale (POS) data, Nielsen doesn’t track the home improvement category at large stores, so the merchants need to see this data to make a strategic decision to move forward with your products.

Unfortunately, a lot of PLR participants just copy and paste from their previous PLR and move on. That’s not the way we do things at Sales Factory — this portion of the PLR process is an opportunity to establish yourself as a trustworthy partner. So let’s lay out the steps you need to take to model your market.

Step 1: Research and analyze your POS data and industry reports.
The first step in constructing an accurate market-sizing report is to look at your own data, including going through DART reports, Askuity, etc. Really get into your POS numbers to acquire information like zero sales and stocking levels. Are you (or your competitors’) promotional activities impacting business in a way that will alter your market share?

In addition, you will want to look into third-party reports, such as eMarketer. These can give you a 30,000-ft. view of your category, but be cautious: two same-category reports can differ by $1 billion or more, depending on how the data was analyzed. Always examine multiple reports to see where they differ and where they align. Know your numbers, but examine them from the end user’s perspective and store experience.

Step 2: Walk stores in multiple markets, with and without the merchant.
While walking five stores in five markets is great, walking ten stores in ten markets is even better. Get away from your hometown and see how things are working in as many different areas as possible. It’s important to note that what works in one part of the country might not in another. A southeastern state may have patio furniture out on the floor, while colder regions don’t. Use your findings to build up inputs that will help you build your models, and look for places where your product can fix retailer problems.

We also recommend you invite the merchant to tag along. Many people avoid this because merchants are extremely busy, but this is a chance to talk to them away from the PLR to understand what makes them tick, learn about what’s moving and what isn’t, inquire about what they think their share is, and discover where the competition might be beating them. These valuable, first-person inputs will help you figure out what the market looks like.

Step 3: Don’t forget about the online retail channel. Start scraping websites.
Don’t just rely on the brick-and-mortar environment for your market-sizing information. It’s also necessary to scrape websites and mine for data that can help you discern online sales volume and revenue for your category, both for the merchant’s store and their competition. You’ll be able to see movement data, pricing information, what consumers are reacting to, what competitors are advertising, and more. This can be a time-consuming process, but the valuable information you take away is worth the effort.

Step 4: Use the inputs you’ve gleaned to model the market.
Here’s where all that hard work starts to pay off. Take your POS data and third-party reports, your experience walking the stores and scraped information to model the market. Add your personal expertise to those inputs — you know this category inside and out, so once you have your model on paper, trust your gut to make sure everything makes sense in the real world. Remember: the more data you pull in, the more robust your data inputs are. This leads to a better story to tell as you expertly discuss what’s happening in the market with the merchant.

Step 5: Identify and track notable shifts in market dynamics.
A lot can change in a year or less, so consider how recent, sizable shifts are affecting the market now, and look for accurate predictions about where the market will be. For example, COVID has drastically changed the way home improvement customers behave and what projects they choose, so never rely on old data to tell a current story. By observing these changes, you can understand how they factor into the story you’re going to tell, as well as help you paint a holistic view of what the category looks like now and where it’s going next.

This isn’t information the merchant asked for, but they’ll appreciate it in spades. It shows them you’re doing more than market sizing — you’re leveraging your data in a way that will generate real impact for the retailer.

Put your best foot forward: Do the legwork, and use it to your advantage.
Modeling your market may not be the most exciting part of the PLR journey, but doing it right is the best way to ensure you can build out a set that is going to be a win. If you’d like to talk about how our team at Sales Factory can help you put together a powerful market-sizing analysis, reach out.

Check out the next part in our series, where we explain the importance of knowing your end user