Sound Strategies in the Downturn

Things are tough out there in many markets – there’s no doubt about it. The U.S. economy is either in the midst of a recession, or will be soon, leading economists contend. Inflation worries abound. Consumer confidence is shaky. The residential construction industry continues to languish in the face of steep declines in housing starts, home sales and prices. Even the stellar remodeling sector, including the kitchen and bath niche, is more sluggish than in years.

And yet…

Overwhelmingly, kitchen/bath dealers and designers are expressing a prevailing sense of optimism about the next 12 months.

And yet…

The vast majority of dealers are seemingly turning a deaf ear to reports about the troubled housing market, focusing on investments in their businesses, enhancements to their marketing, up-selling jobs and launching other initiatives to meet the demands of a competitive market.

And yet…

Most dealers remain extremely bullish about their product-purchasing plans, their showroom expansion goals and their willingness to refine their business approach to improve their competitive position and sustain recent growth and profitability.

What’s going on here? Are dealers simply burying their heads in the sand, refusing to accept the market’s cold realities? Or are they reacting exactly how they should be to the downturn – based on a well-founded belief that the kitchen/bath industry remains fundamentally sound and that the housing market, as it has done throughout its history, will rebound soon?

The latter, in all likelihood, seems to be the case.

And that, given the current market scenario, may be the best possible news anyone can hear.

The enlightened approach that most dealers are apparently taking to the current market was revealed in two recent KBDN surveys – both of which found that while dealers generally acknowledge a rocky economic climate, only a minority say they’re contemplating cuts in staff, showroom size or costs. In contrast, most dealers report they’re focused far more squarely on creative growth opportunities – including new marketing initiatives, partnerships with allied professionals and the up-selling of jobs – than they are on streamlining costs (see Buying Habits, and in March, Survey Says).

Especially encouraging are the following findings:

  • Nearly two-thirds of surveyed dealers report that they plan to add or change an average of seven separate product lines during the next 12 months.
  • More than 30% of those surveyed say they plan to expand their showroom space in 2008. Even those who aren’t planning a showroom expansion note that they’re likely to expand the number of displays in their space.
  • While streamlining is clearly a sound business strategy in today’s softer market, only 38% of those surveyed say they’ll be reducing operational costs in 2008, while 32% report they’re not going to change their spending habits at all, and another 30% say they’re opting to “wait and see” how events play out.
  • Nearly one-third of surveyed dealers report plans to spend more on marketing in 2008, while only 12% say they’re planning to cut marketing expenditures this year. One common trend appears to be the “re-imagining” of how dealerships market themselves, with an emphasis on increasing visibility and showroom traffic through participation in designer showhouses, community activities, hosting classes for homeowners and/or the trade, conducting charity benefits and similar activities.

All this should be sweet music to industry suppliers, many of whom have been struggling themselves in the face of a sluggish residential construction sector.

It’s encouraging, indeed, to discover that kitchen and bath dealers are willing to invest in their showrooms, try new products and implement well-conceived business strategies rather than merely whine about business conditions. It’s reassuring to hear that they’re apparently not panicking from everything they read about housing, and that they have faith in the continued strength and long-term resiliency of the kitchen and bath sector. And it’s downright inspiring to hear they have faith in their ability to withstand the current downturn and come out the other end more vibrant and better positioned than ever, simply by playing their cards right now.