For many companies, the lure of partnering with a mega-retailer is irresistible: Giants like Wal-Mart Stores Inc. and Home Depot Inc. can put products in front of hundreds of millions of customers — and potentially bring in huge gains in sales and market share.

But behind those high hopes may be a faulty premise — one that can lead to disaster for many companies. Whether out of naiveté, arrogance or greed, manufacturers expect that the big retailers will care about the success of their products as much as they do.

What companies forget — or ignore — is that the retailers’ business model depends on mass marketing, low price and volume. Naturally, the retailers use their tremendous leverage to dictate tough terms to manufacturers. They insist on ever-greater price reductions and force companies to redesign products to better suit their needs.

And in the end, many companies discover that all the blood, sweat, tears and money they’ve poured into their products has been wasted: Their hard-won creations have been turned into commodities with razor-thin profit margins.

Lost in the Crowd

This is particularly damaging for companies with innovative products. In a mega-store, shelves are packed with competing products from multiple manufacturers. An innovative product loses its luster when it’s surrounded by a slew of potential substitutes, many of which are cheap knockoffs. Numerous companies even agree to make copies of their own brands for the retailer. Compounding the problem: Clerks at the store often receive little or no training on the specifics of the products on display. Employees may know only where a product is located, not what makes it stand out.

Having created the process and product, and invested time and money, why would companies turn the final stage of the operation over to a third party? To avoid this outcome, companies must control their own distribution. This may mean selling directly to customers online or through company-owned