Slow Growth

While business conditions in the kitchen and bath market have run the gamut from challenging to downright awful over the past few years, things finally seem to be looking up – at least a little.

Although no one seems to be projecting huge increases, kitchen and bath dealers do seem to be seeing greater traffic in their showrooms, with the majority expecting to be doing more kitchen and bath projects in 2011 as compared to 2010. Additionally, some dealers are already seeing significant improvements in business conditions, with the majority expecting to see continued improvement in the latter part of 2011 and beyond.

These were the findings of a recent survey that looked at dealers’ market outlook on the kitchen and bath industry, as well as business conditions and projections for future growth over the next few years. The survey, which polled more than 400 kitchen and bath dealers from across the U.S. and Canada, suggested a sense of cautious optimism, as many dealers expressed the sentiment that things are finally on the upswing in the kitchen and bath industry. The feeling seems to be that consumers are once again beginning to loosen the purse strings and invest in their homes.

But while survey respondents expressed positive feelings about the future, many still expressed concerns about the ability to close sales, or compete on profit margins. Equally important, the survey shows consumers spending less money on projects than in years past, while looking for more “bang for the buck.”

Market Improvement

Ultimately, market conditions remain the driving force in the changes in the kitchen and bath industry, and the good news is that conditions do seem to be showing some modest improvement. In fact, when asked to rate business conditions in the kitchen and bath industry as compared to conditions in 2010, nearly 60% rated 2011 as “significantly better” or “somewhat better” than 2010 (see Graph 1). Roughly a quarter of those polled (27.93%) rated business conditions as “about the same as last year,“ while only 11.36% rated them as “somewhat worse” and a mere 1.68% rated them as “a lot worse” than last year.

Likewise, when asked how they expect business at their own kitchen and bath firm to be over the next 12 months, the majority (56.64%) said they expect it to improve a little, 16.82% expect it to improve a lot, 18.5% expect it to remain about the same, and 5.23% expect it to decline a little (see Graph 2). Less than one percent said they expect business to decline significantly, while 2.24% said they don’t know what to expect over the next 12 months.

Dealers surveyed were also asked when, specifically, they expect to see “significant improvement” in market conditions. Some 28.79% said they’re already seeing significant improvements, while 15.89% say they expect to see significant improvements later this year (see Graph 3). Another 16.07% expect to see things get notably better in early 2012, 19.81% expect significant improvements in late 2012, 11.03% expect it to take until 2013 for significant improvements, and another 8.41% don’t foresee notable market condition improvements until 2014 or beyond.

Jobs and Pricing

While kitchen and bath dealers have been talking about increased showroom traffic for a while now, up until recently there was some question about whether the added traffic was actually translating into sales. Most dealers agree that closing a sale takes a lot longer than it used to, as consumers do more price shopping, and take more time to come to a decision. Additionally, 2010 saw many consumers hiring design professionals for smaller jobs (countertop replacements, appliance upgrades, hardware or faucet and fitting change outs), rather than complete kitchen or bath remodeling projects.

Perhaps as a result of this trend, price points for kitchens and baths seems to have fallen over the last few years, with only about 39% saying their average price point for completed kitchen was more than $35K in 2010 (see Graph 4). Some 27.52% of those polled said their average price point for a kitchen was between 20K and 35K, while more than a fifth (20.39%) said that their 2010 average price point for a kitchen was between 10K and 19K, and another 13.27% said they saw kitchen project prices averaging under 10K for 2010.

Interestingly, price points for baths seemed to be somewhat less hard hit by the recession, if the survey is any indication, with nearly a third of respondents saying they were seeing an average price point of more than 20K for the 2010 bath projects they completed (see Graph 5). Another 26.92% said they saw an average price point of 10K-19K, while 38.94% said their average bath price for 2010 was less than 10K.

The good news, however, is that dealers expect to be doing more jobs in 2011 compared to last year. Those polled expected to do an average of 24 complete kitchen remodel projects in 2011 (see Graph 7), compared to an average of 19 in 2010 (see Graph 6). For baths, the difference was less notable: Dealers expect to do an average of 15 complete bath remodel projects in 2011 (see Graph 9) compared to an average of 14 in 2010 (see Graph 8).

Another obvious result of the recession has been the shift from new construction to remodeling, with many dealers either abandoning the new construction business entirely, or focusing a smaller percentage of their efforts on this market. In fact, of those polled, more than 80% said less than 20% of their business comes from new construction – clear proof that the new home market isn’t coming back as quickly as hoped for (see Graph 10).

Help Needed

Although there are many signs that business is coming back – slowly but surely – there’s no question that it’s far more competitive out there than in years past, and dealers are increasingly looking for new tools to help them survive, and thrive, moving forward. Most dealers agree that growing a kitchen or bath firm is a multifaceted process that relies on strong partnerships, and they need support not only from customers, but from suppliers as well.
To that end, kitchen and bath dealers surveyed noted a number of areas where they rely on suppliers to help them continue to grow.

Chief among these was help with advertising and marketing issues, which more than 22% of those polled saw as one of their top three needs from suppliers (see Graph 11). Help with sales issues was cited by 20.78% of those surveyed as a top need, while help with profit issues and help to do a better job generating sales leads were each mentioned by nearly a fifth (19.29% and 19.12% respectively) of surveyed dealers as on their top three list of things they’d like from their suppliers.

Less frequently cited were help with business issues (8.06%), help with social media (6.98%) and help in networking with other kitchen and bath dealers (3.74%).