Creating the Right Product Mix for Your Business

The right product mix can make or break your business. For example, having the right combination of cabinet lines to penetrate specific market segments can mean the difference between success and failure.

Having too many lines can be counterproductive because (a) there is so much to learn with each line that it leads to frequent ordering mistakes and (b) you can’t be important enough to any vendor that your business will command their ongoing attention and support.

Many dealers say it can take at least two years to learn a cabinet line thoroughly enough to write error-free orders. Conversely, having all your eggs in one basket can be disastrous if there is a top management change or fire in the factory.

In general, there are six different generic quality grades of cabinetry:

  • Local shop-built – in many markets, this is the “go to” cabinet product for local builders because it is inexpensive and can be produced quickly.
  • Production/Ready To Assemble (RTA) – another low cost builder-favorite with a better finish, in general, than what local shops can provide.
  • Semi-Custom – provides a greater variety of styling, finishes and accessories in a better made box than production grade…and still at a good price point.
  • Popular Custom – similar to semi-custom, except that more modifications to the box are possible; also, more interior features.
  • Furniture Custom – expands on popular custom grade, with most vendors capable of matching special finish requests, offering better consumer literature and having a broader variety of SKUs for cabinetry applications in other rooms of the house.
  • Luxury – state-of-the art, premium construction quality with brands that often advertise on the pages of leading consumer shelter magazines.

The trick is to match up your target customers’ needs with the diverse quality grades available. For example, taking the “good-better-best” approach would be sound if your target audience was 80% remodeling to consumers and 20% builders. In this case, offering cabinetry in semi-custom, popular and furniture grades would be desirable. However, it doesn’t always have to take three separate cabinet brands to accomplish this mix. Some brands have product models that fill two or more quality grades.

If you were targeting builders only using a “showroom” business model, you might only offer production and semi-custom quality grade cabinetry. On the other hand, as an experienced CKD targeting high-end consumers and using a “studio” business model, you might only offer furniture custom grade cabinetry. This cabinetry may also be “privately labeled” under your name to underscore your capabilities as an exceptional designer, build the value of your business brand and discourage consumer comparison-shopping for a lower price.

Selling Appliances

Many dealer-owners have shied away from selling appliances because they believe they can’t earn more than 10-15% gross profit. They reason that cabinetry is a bigger ticket item with much higher gross margins. Additionally, they feel that appliance service issues could be overwhelming and detract from their focus on bringing in new business.

However, there are just as many – or more – good reasons to display and handle appliances:

Sales/designers need to know appliance models and specifications to intelligently plan cabinetry in the kitchen.

  • By controlling the appliance sale, you are assured of having the correct front panel sizes ordered to fit those models that take them.
  • By furnishing the appliances yourself, you are assured of protecting your cabinet/countertop installations from damage when they are set in place.
  • Research has shown that the number one reason for kitchen remodeling comes from an appliance failure; if you have appliances displayed, you are more likely to generate business in a downturn when consumers may do more cosmetic, partial remodeling.
  • Consumers will travel great distances to see unique appliances – like built-in refrigerators or professional ranges – giving you the opportunity to sell a “whole house” cabinet package.

Even unbundling the price of appliances from the total project, most dealer-owners who belong to buying groups and sell appliances report earning a 18-25% gross margin, the profit of which can help pay for overhead. On top of that is a 2-3% rebate.

Buying groups have a wide range of appliance vendors that offer attractive display discounts. The larger brands have sales support services and distribution locations around the country, making it easy to get the products in a relatively short time.

One-Stop Shopping

Once a client has trust in a sales/designer, it would be a major convenience for them to purchase all of their materials from that person. To have the continuity in both design advice and material selections not only assures them of a successful end result, but saves them time, delays, confusion, possible errors and even money.

The sales/designer becomes the common conduit of communication between what is planned, ordered and installed. Fixing these responsibilities with a trusted source also delivers a tranquil peace of mind for the client on what experts agree is the most complex and expensive remodeling job in a home.

From the dealer’s perspective, being able to provide virtually all of the products that go into a kitchen project has enormous advantages as well. First, it’s a whole lot less costly – and easier – to add more product into a sale than it is to go out and find another client. Second, gadgetry such as built-in coffee-brewing machines, refrigerated drawers and electric mats for warmed tile floors hold considerable consumer appeal, which may augment your firm as a kitchen source. Third, the gross margins on lighting, bar stools, sinks/faucets, etc can be as high as cabinetry. Fourth, the effort it takes to sell these add-on products is minimal when you have already won the client’s trust.

There are several ways to display ancillary products. One is to obviously show them in your complete room environments and purposeful cabinetry, which helps to make the overall presentations more realistic and appealing. Another is to group like products in a corner of the showroom. Yet another might be to place a “revolving, four-sided tower display” of faucets or cabinet hardware in your sample selection area.

Regardless of the display venue, one-stop shopping is good for both the consumer and the kitchen design firm.