Staying the Course

Many kitchen and bath dealers seem to be turning a deaf ear to reports of a sluggish building sector, and for good reason: 2007 was a robust year, and despite the current challenges, many are optimistic about 2008, predicting increases in everything from number of jobs planned to showroom size.

Indeed, while few can deny the rocky economic climate, only a relatively small minority of dealers seem to be contemplating cuts in staff, showroom size or costs. Rather, most are planning to stay the course, while focusing on refining their business strategies by rethinking their product mix, enhancing their marketing efforts and strengthening partnerships with allied professionals to help grow their business while focusing on their core competencies.

That’s according to a recent survey of kitchen and bath dealers and designers, the majority of whom expressed a surprising optimism for the year ahead.

The newest Kitchen & Bath Design News survey, which polled more than 235 dealers and designers from across the country, examined business practices, planned changes in overall business strategies and budget concerns for 2008.

While those surveyed agreed that the market has become increasingly competitive, most were focused on creative growth opportunities. Marketing, creating profitable partnerships and upselling individual jobs were key components of many dealers’ 2008 business plans, and while streamlining operations remains a priority for many, the focus seems to be on growth, not cuts.

Changes

As so many jobs start off in the showroom, it seems a natural place to begin making changes for the new year. And here, again, the biggest change planned was growth oriented, with more than 30% of survey respondents saying they plan to expand their showroom space in 2008 (see Graph 1).

Even those who aren’t planning to expand their showroom itself say they are likely to expand the displays in their existing space, with nearly 60% reporting plans to expand the number of displays in their showroom in the year ahead (see Graph 2).
Product diversity is always important, and in an increasingly competitive market, this becomes even more critical. For that reason, many dealers feel that cutting back on product lines is counterintuitive, even during more challenging times. Perhaps that’s why 41% of those surveyed expect to make no changes to the number of product lines they carry, while another 22% say they are planning to add to and change their products lines (see Graph 3).

Of course, while some adopt an “if it’s not broken, don’t fix it” attitude, others are using this time as an opportunity to rethink their entire product mix, with more than a quarter of respondents reporting that they will change their product mix in the coming year to shake up their current showrooms and attract new business (see Graph 4).

“This is the time to use change to light a fire under those who are on the fence about remodeling,” says a Texas-based dealer respondent. “Changing out the vignettes or the appliances or some of the cabinets has gotten us renewed interest in the past.”
Costs were, as always, among the principle concerns cited by those surveyed, and streamlining business is clearly a priority for many dealers.

“We’re reining in our overhead this year,” reports a Minnesota dealer, who noted that trimming the fat is always a good strategy, and particularly smart after a long period of growth, during which it can be easy to end up with some wasteful habits that were missed in the past because business was just too busy.

Another dealer in Georgia agrees: “We’re trimming our expected profit margins due to the softening economy, so the first thing we have to take care of is the cost of our overhead expenses.”

But despite concerns about the economy, only 38% of those surveyed responded that they would seek to reduce costs in 2008, while 32% were not going to change their spending habits at all, and another 30% say they’re opting to “wait and see” how the events of the year will play out for them before pledging to make a move on costs (see Graph 5).