Finding the Hidden Profits in Appliance Sales

I was very interested when I read the February 2005 issue of KBDN about obtaining appliance panels that match cabinetry. I saw the remarks made by kitchen dealers as to what they think their responsibility is when the client supplies his own appliance.

I cannot imagine waiting for an appliance to be delivered to the customer before getting the info and ordering the panels – especially since this would be after the original order for the cabinets has been delivered to the homeowner.

Of equal importance, members of the Bath and Kitchen Buying Group, of which we belong, also used to think that there was no reason for them to sell appliances. After all everyone knows that you cannot make any money at it.

The real issue here is the fact that most kitchen dealers do not understand the relationship between what they do and how it impacts their overall kitchen operation. In truth many members of the BKBG did not sell appliances before they joined, but because of the education they have received through the group, they are now very happy and profitable with appliances being offered as part of their whole kitchen package.

In speaking with dealers, I know that most are looking to make a 40% margin of profit selling appliances. Keeping that in mind, let's look at what really is at stake here.

Customer Challenges

When we sell kitchen cabinets, there are usually going to be appliance panels, cut out dimensions and space allocations that we need to know about in order to design and order the cabinets for any particular customer. That in itself means that we need to get the proper information about those appliances.

Whether or not you supply and sell the appliances, you are – in the eyes of the customer – responsible for all of the proper panel sizes and cutouts. If something is incorrect, we – the cabinet suppliers – are the ones who make it right.

I do not agree with the idea that, if we do not supply these appliances, we should still be responsible for the correct dimensions for cutouts and panel sizes. That should the responsibility of the seller of those appliances.

I think it is time for the kitchen dealers to take care of what they are getting paid to take care of. We all know that, with the many different styles and types of appliances out there today, it is very difficult to keep up. Why should we not be compensated for the work we do in providing appliances for our clients as part of the kitchen package?

I recall a time when a customer told me that she wanted to supply her own appliances. I agreed and told her what her responsibility was going to be. This was okay with her, as she trusted the company she selected for the purchase. The day that the solid surface countertop arrived, I received a call from our installer. The cooktop opening was too big for the cooktop. I checked my plans and info and called the customer and told her that the appliance company gave out the wrong cut-out dimensions for the cooktop. After the customer did some checking it appeared that the salesman had given out the wrong information. Since the top was a solid surface counter, we had the fabricator come out and add material to make the cut out the proper size for the cooktop. We charged this to the customer, and she paid it.

When I did my final walk through, the customer told me that, with the extra money she spent for the rework of the countertop and the inconvenience she experienced, she should have purchased the appliances from us. I am certain that if your customers had any idea of what really takes place with an appliance purchase, they, too, would gladly purchase them from you.

Cashing In

I have taken some information and put together a breakdown of an average appliance package that any kitchen dealer may sell at any given time. If you look at the package, you will see that, in fact, there is money to be made selling appliances. If you consider the little time it takes to sell them compared to creating a kitchen design and layout, as well as the control it affords you over the project to avoid outsider mistakes, you may very well make a better margin than you initially thought.

Consider the example in Figure 1. If you sell just 10 appliance packages in one year like the example shown in Figure 1, you will have a profit of $41,140 before the commission is paid to your salespeople.

A bonus here is that you generally don't have to touch the appliances and, if you do, they are so well packaged that there is not much of an issue to worry about. This is unlike situations with cabinets and the design that goes into a kitchen plan. The appliances are just another part of the overall package. You don't need to make a 40% profit to make it worthwhile.

If a customer still wants to supply his or her own appliances for a project, we have the client sign off on a sheet that explains all of the areas of responsibility that he or she will have. Figure 2 shows what each client in that situation is given.

Usually, after customers read this, they rethink why they would want to supply their own appliances. The fact is that they have never been told or do not understand all of the ramifications of trying to save a few dollars on an appliance package when there is so much more at risk for them.

Once we, as kitchen dealers, step up to the plate and start getting paid for what we are responsible for, then we will be considered more professional and we will be able to make more money for ourselves and our companies. We don't need a full mark up on everything we sell to stay profitable. What is needed is a 40% margin of profit on the entire package. How you do that is up to you, and that of course is a whole different topic.

As a kitchen and bath dealer you need to be in control of everything that is going into the project that you are designing.

Consider the package in Figure 1. See if you could use those dollars to help your bottom line.

Editor's Note: Members of the Bath & Kitchen Buying Group (BKBG) will be addressing business strategies for kitchen and bath dealers in a regular bi-monthly column, appearing exclusively in Kitchen & Bath Design News.