Expanding Your Showroom During a Recession

The natural response to a recession may be to avoid risk at all costs. Many kitchen and bath firm owners, facing financial uncertainty, are more likely to cut expenses and spend conservatively.

That strategy can be seen in hiring freezes and layoffs, advertising buys – and definitely in capital projects like showroom expansions. But a weak economy just might be the ideal time to expand your showroom.

Howard and Wayne Miller, owners of Hartville Hardware, a family-owned retailer in Hartville, OH, think so. In 2010, the brothers broke ground on a 280,000 sq.-ft. store that will include an expanded kitchen and bath design center. The new facility is scheduled to open in March, 2012.

No Time Like a Recession

Howard Miller knows the decision to embark on such a large project during the worst economy since the Great Depression goes against conventional wisdom. But he also knows that, with reduced costs of building materials and labor and, maybe most significantly, interest rates, there may be no time like a recession to upgrade his facilities.

Miller is one of a handful of kitchen and bath dealers who recently shared their reasons for pushing ahead with new showroom projects during scary economic times.

Another such dealership, the Ed Hines Company, a kitchen and bath specialist in Nixa, MO, is also making a change. Located in an industrial area, the company had always focused on serving building contractors and didn’t want retail business, according to owner John Hines. But with the tanking economy and the resulting trend away from using home contractors in favor of DIY projects, the firm rethought that strategy and is now building a retail showroom in Springfield, MO.

In Florida, PGT Cabinets, which operates a 39-year-old kitchen and bath showroom in Tampa, last year opened a second showroom just off of I-75 in Wesley Chapel. The project began in July, 2008 – just as the economy was tumbling. But it was an opportunity the company couldn’t pass up, president Gary LeStrange says.

“We were facing a very bad economy when we started to plan this store,” he explains. “But if we didn’t grab this location, another dealer would have. The showroom is in a brand new retail plaza in a very attractive residential area. It has convenient access to a lot of wealthier neighborhoods.”

LeStrange said he doesn’t expect an instant windfall on the new showroom. He figures on struggling until the economy improves.

These companies all share an outlook that extends beyond the short term. While immersed in a difficult time, they are positioning themselves for success.

The building of their massive new Hartville Hardware facility isn’t the first time the Millers took advantage of a weak economy. Their present store was built in 1973, during another recession.

“Back then, we saved money on labor and materials,” Howard recalls. “We had local builders come in; anybody who wanted to work. Two years later, the recession was over. That’s what we think will happen this time, too.”

Unlike many retailers, NJ-based General Plumbing Supply has had strong sales throughout the recession, says Ron Augustine. The company, with five kitchen/bath and plumbing supply locations, opened its new 3,700-sq.-ft. kitchen and bath showroom in Bergenfield in December, 2010.

“We feel that this is a great time to expand, says Augustine. “We are fortunate to have been busy throughout this recession and the new showroom is a way to stay ahead of the competition.”

Despite the recession, PGT Cabinets was determined to take advantage of its new opportunity. Like its original location, its new showroom location is in a retail plaza anchored by major stores and restaurants that generate high traffic.

“We didn’t plan to make a lot of money in the store during the first year,” LeStrange admits. “But we looked to the future and knew that eventually it would come around.”

Adjusting Product to Market

The recession did impact PGT’s product selection. Gary learned that the high-end products PGT had featured in its showrooms weren’t selling well when people were downsizing.

“At this point, people want value, quality and utility at a good price. So we’re concentrating on what sells.”

Hines agrees with that strategy. “We have a reputation for selling high-end, quality products,” he says. “We expanded to accommodate additional price points relevant to today’s economy.”

Along with adjusting its product line, Ed Hines Company adjusted its customer base. “Previously we felt that we didn’t need a retail presence,” John Hines explains. “The economy changed that. We saw that the market trend was beginning to shift toward DIY projects, and that a retail store was important to sell directly to the consumer. In our industrial location, we were only reaching two percent of the retail market, so we decided to get a place right off the freeway, where 50,000 cars are going by.”

Of course, the company still works with contractors. In fact, Hines’ new showroom is located in a retail center built and owned by one of its contractors. Partnering offers strategic and financial benefits.

“It’s a tough economy,” Hines states. “Don’t do it alone.”

Relationships Matter

Without financing, expansion or renovation projects aren’t possible in any economy. For that reason, having a good relationship with your bank and maintaining a solid reputation are essential.

“It’s a matter of trust,” Howard says. “We’ve been in the community for a long time. We pay our bills. We have a history of solid sales numbers that give the lender confidence in our ability to continue our success.”

Howard says that as a full service hardware and home improvement store carrying more than 60,000 products, Hartville Hardware’s diversity gives it an advantage over a specialized kitchen and bath showroom when it comes to riding out the recession. But the concept is similar: Leverage the advantages of a weak economy to position your business to hit the ground running when things improve.

The Millers have put a significant emphasis on the kitchen and bath sector for the future of their business. Playing off the popularity of mini model homes at home and garden shows, Howard wanted his new 40,000-sq.-ft. kitchen and bath design center to feature three conceptual homes that customers could walk through. The rest of the management team convinced him that more open kitchen and bath vignettes would be more practical, providing more room and a view of the cabinets, counters and other features from all around the design center.

The three kitchen and three bath vignettes will be organized to display three price levels.

Hartville will staff its new Design Center with three kitchen designers, three bath designers and a project manager who will coordinate installation. An open design area will be conspicuously located among the display vignettes. Adjacent to the vignettes, Hartville will feature traditional retail aisles of cabinets, vanities, sinks, countertops and the like. The new Design Center also will include seminar rooms and work areas where the store will hold workshops.