By Leslie Hart
That's the finding of a recent survey by Kitchen & Bath Design News, which painted a picture of a rapidly changing market in which distributors and whotailers need to be redefining their role and offering increased levels of service in order to remain competitive.
The survey, which polled more than 135 distributors and whotailers from across the country, looked at kitchen and bath distributors' and whotailers' business practices, services offered and greatest challenges.
They cited their primary customers as builders, who account for 31% of their sales, kitchen and bath dealers, designers and remodelers, who account for 22.1% of their sales, consumers, who make up 21% of their sales, and general contractors, who account for 18.7% of their sales (see Graph 3). Home centers and building supply dealers made up the remaining 7.2% of their sales.
Survey respondents had an average of 2.8 locations, with more than a third (39.8% planning to open up more locations in the future. Additionally, more than two thirds 68.2% said they have a complete kitchen showroom, and more than half (56.5%) have a complete bathroom showroom (see Graph 5).
They are also growing distributors and whotailers surveyed
reported an average sales volume of $22.1 million in 2004, and
projected that number would increase to $25.7 million in 2005. But,
despite their expectations for significant gains in 2005, many
still reported feeling "squeezed." That's because they face
competition from almost every avenue, including home centers, the
Internet, manufacturers selling direct, buying groups and even
consumers themselves, many of whom have watched enough home shows
to believe they really can "do it themselves" without the help of
And, these challenges continue to force changes in the way these distributors and whotailers do business.
Part of the answer is diversification, survey respondents indicated. For instance, more than a third of those surveyed (34.9%) said they also fabricate and sell countertops (see Graph 4). "The more services you provide, the more likely you are to hold your own in this market," said a West Coast distributor who recently started offering fabrication services as well as installation.
Explained another distributor, "We as an industry have had to move from just being suppliers of products to becoming true one-stop resources. Nowadays everyone expects more, and we have to offer more. That's just how things have evolved. Besides, if all you have is product, you're forced to compete on price, and we can't always do that with the home centers and people shopping online."
In addition to offering more services, some distributors are looking to expand into the retail arena in order to increase their profit potential. In fact, while 28.6% of those surveyed said they did not currently sell through retail channels, 8.7% said they expected to in the future. The reason one distributor gave was simple: "We're in a changing market, and the traditional role of distributors is shrinking. So we have to expand what we offer and who we offer it to in order to be competitive."
However, selling to multiple markets also means being careful not to step on toes. As a Midwest whotailer explained, "We take exclusivity very seriously with our kitchen and bath dealers [in their territories], because we know that they are essential to our success."
This is particularly the case with their kitchen and bath dealer and designer customers, since most believe that these partnerships are vital to their future survival.
To that end, distributors and whotailers surveyed said they offer a wide variety of services to kitchen and bath dealers and designers, with promotional materials and showroom display discounts being the most commonly offered services. Both were cited as being offered by 63.9% of respondents (see Graph 6).
As one distributor noted, "I know we're in a service business,
and I take that seriously. So, I'll listen to any marketing or
promotional idea [that my dealer customers have], and I'll get
behind it if it makes sense. After all, we're in this
Said another, "We want to make [our customers'] lives easier. So, we offer specifications on appliance selections to add into a kitchen design, so they don't have to worry about not being up to date on that."
Other distributors and whotailers noted that they offer plumbers, electricians and remodeling contractors "basically, anyone they don't have on staff, we can provide to make the job go more smoothly."
Several distributors and whotailers also noted the importance of having readily available inventory. As one said, "people are less willing to tolerate delays. So having what they need in stock makes everyone's job easier."
However, there was some debate as to how much inventory is enough. Of those surveyed, 29.3% said their current inventory represents 7-9 weeks of sales; 25.5% said their inventory represents 4-6 weeks of sales; 24.4% said their inventory represents 1-3 weeks of sales and 20.7% said their inventory consists of 10 or more weeks of sales (see Graph 7).
"Inventory is a tricky business," said a distributor from the Southeast. "Because of technology, products are changing almost faster than we can keep track of. And you can get everything faster now, so you don't need to keep as much stock. But you also don't want to be the guy who doesn't have [what your customers] need. There's no faster turn off than telling people they have to wait for weeks when they know they can go to a home center and get it right now. It's becoming more of a 'right now' business, so you have to keep that in mind when you do your ordering."
"The fast-changing technology of the appliance and plumbing
business makes it a real challenge to keep current with stock,"
concurred another. "It's a challenge just to keep up with all the
catalog updates from the manufacturers.
But no one category will strongly outweigh the others, survey respondents suggested. As one said, "Some people say you have to have a single niche. But we did that before, setting ourselves up as the middle man who got the product. But that role is all but obsolete. Between the home centers and the Internet and buying groups, we kept getting pushed out. So now we have to think in broader terms and service the entire market, not just be a supplier of product.
While some distributors believe doing a greater volume of retail business may be the answer, others are wary about the relying on consumers. In fact, many whotailers believe that consumers themselves have created a challenge, thanks to the increased interest in home remodeling and the explosion of home shows geared for the do-it-yourselfer.
As one distributor explained it, "An educated consumer is a good thing, but the problem we get is that many consumers watch these shows, and it looks so easy and fast and cheap on TV, they then think they can perform tasks themselves that really require licensed contractors. Even worse, they have no idea of real prices or time lines because on TV, it all gets done in minutes. That hurts our business."
Buying groups, too, were cited as a competitive challenge by several distributors who worried that these would cut into their profits. As one distributor from the West Coast stated, "They can buy direct from the manufacturer, they get bulk buying [discounts], and where does that leave us? Between the buying groups and the Internet and the home centers, there just isn't as much of a role for the middle man as there used to be. So we have to really redefine ourselves and what we do in order to stay relevant to this industry."
A number of distributors and whotailers cited capable personnel as an essential part of their future growth. As one said, "More than anything else, you have to get and keep good salespeople. The best way to compete with home centers is to have a knowledgeable sales staff. People don't just buy products, they buy knowledge and people. Offering that, and great service, is how you grow."
"The lack of skilled, conscientious help is definitely a problem," agreed another whotailer. "We're saying we have to be more service-oriented, but without the right staff, that won't happen."
Staying current and up-to-date was also cited by several distributors as important to their future growth. As one distributor stated, "We need to offer updated, current showrooms, merchandised to promote 'what if.' We need to sell creative possibilities."
"Exclusivity is key," believes another distributor, who noted that loyalty is essential to creating successful, long-term partnerships.
"Some people think loyalty is dead in the business world, but that doesn't have to be true. Partnerships do work as long as both parties are committed to the same goals and respect each other.
Yet another dealer cited "value-added service and joint marketing agreements" as offerings distributors can provide to create lasting partnerships with kitchen and bath dealers. He concluded, "In the end, those partnerships are what will make you successful. Now, more than ever, no one does it alone in this business. Working together is how everyone grows." KBDN