After two-plus years of attendance at the School of Hard Knocks, many kitchen and bath dealers apparently learned a painful lesson about the need to prepare for, and cope with, the kind of economic tsunami that's ravaged the industry.
It's hoped that they learned enough to finally change their ways.
Those are the key conclusions to be drawn from a survey conducted by Kitchen & Bath Design News in collaboration with the SEN Design Group - a survey which found that many dealers witnessed precipitous declines in revenue during the current economic downturn.
More alarming than merely the revenue decline, however, is the fact that the survey uncovered major weaknesses in the operations of kitchen/bath dealerships, suggesting that many are seriously undercapitalized and that owners are lacking in critical business-management skills.
- Most surveyed dealers reported they suffered a sales decline that would put many small operations out of business. Nearly one in five said revenue plunged more than 60% from 2007 to 2009, with most reporting a decline of 30%-40%.
- A surprising number of dealers admitted they do not adhere to prudent business-management practices, such as preparing an annual budget or a strategic business plan.
- Most dealers lack proper cash reserves, including a strong banking relationship or a liquid portfolio to help them weather an economic storm.
- Most do not receive regular advice from a trusted business advisor, board of directors or others.
In light of all this, one might think that most dealers would recognize how to address their operational shortcomings.
Sadly, however, that's apparently not the case.
For example, when asked to pinpoint what form of education would most effectively serve the purpose of improving their financial results, dealers' most frequent choices were "Design Training" and "Product Knowledge." Ironically, the choice least frequently selected was "Financial/Business Management."
It's time for this mindset to change. It's time for kitchen/bath dealers to get down to business. And it's time for their suppliers - the partners in their success - to assist them in that effort.
A series of reforms aimed at repairing the current "cracks and fissures" in the industry's foundation was urged last month during the Fall Conference of the SEN Design Group. At the conference, attended by several hundred dealers and suppliers, SEN President Ken Peterson called for "transformational changes" in the way the industry does business - specifically a shift away from the current, and overwhelming, emphasis on design to a focus on business education.
Peterson also called for "a paradigm shift" on the part of manufacturers: a move to a greater-than-ever focus on allocating resources to the business education of dealer-customers.
Without this new approach, Peterson asserted, more dealerships will fail - and more manufacturers will not assure the stability and prosperity resulting from viable, long-term customers. This, Peterson suggested, would be a colossal industry-wide blunder.
That's why we will assist SEN in its business-education initiatives by co-sponsoring four all-day, in-depth seminars - in Los Angeles, Philadelphia, Indianapolis and New York - in 2011.
Dealers and suppliers cannot afford to ignore a fundamental industry flaw, hidden by years of growth but unmasked by the recent fiscal crisis. The industry cannot afford to take a business-as-usual approach when the economy inevitably rebounds.
It's time to shift focus and seize the opportunity to make important changes. If not, the painful history of the past two years is likely to repeat itself.