Web Watch

Despite the past decade's rise and fall of the dotcoms, many companies that do business on the Web are still going strong. This is especially true in the kitchen and bath industry, where Web sites are an integral part of many dealerships. However, a growing trend in "virtual" or exclusively-Web-based businesses has made some kitchen and bath dealers sit up and notice.

Those companies that survived the fall-out of the dotcom bust are stronger, leaner and smarter than their predecessors, and those that supply high-end kitchen and bath products are now competing on a whole new level, providing 24/7 access and a seemingly endless selection of products, among other amenities.

Web-based kitchen/bath product suppliers are reporting significant revenue growth, some claiming double-digit increases month to month. "Our growth has been meteoric," says Ken Schreffler, v.p. of the online appliance retailer cuttingedgekitchens.com.

Homeclick.com, a leading Internet seller of competitively priced luxury brands for the home, is projecting total revenues of $28 million in 2003 and $45 million in 2004. Though the site also features lighting, tableware and outdoor items, the company reports that kitchen and bath products have been its most significant categories, accounting for approximately $19 million in revenues this year.

Just who is shopping for kitchen and bath products online, and for what items? According to industry insiders, customers range from those trying to buy one specialty item to consumers furnishing whole rooms.

Meanwhile, Brian Okin, CEO, Home Center.com, notes that while most of its customers currently order one to three items, "we've seen an increasing trend toward purchasing a lot more."

However, while this could serve as a signal to dealers to increase their Web presence, some dealers are taking it in stride, seeing little incentive to do so (see related story, Page 64), as they believe "virtual" will never replace the in-person experience and once they get customers in their showroom, they'll be less inclined to buy elsewhere, regardless of price.

Internet Advantage

The Internet does have a certain appeal for those customers desiring a broad product selection, or who live in a part of the country where showroom access is limited, say industry experts.

"We deal with many people who don't have [access to] a varied product selection, and in many cases, varied selections can only be obtained through Internet browsing," comments Ken Berke, president of Action Supply Co. and its subsidiary, The Global Supply Network, which operates the company's three Web sites www.designerplumbing.com, www.steamsauna.net and www.plumbingwhole saler.com. "Sometimes I'm really amazed at how [even] consumers in large metropolitan areas just don't get [access to] this kind of selection."

While some buyers will also use the Internet as a means to price shop, information gathering is the most common reason for surfing the Web for kitchen and bath products, industry players say.

"Customers are better informed than they were several years ago," stresses Rosita Gilsenan, CKD, president of Gilsenan Designs, Inc. in Warwick, NY. "They look up things before and during the entire [design] process."

"The Internet is so great for allowing people to [do] research," agrees Jeremy Dalnes, marketing manage for Homeclick.com. He adds that Homeclick.com has extensive product information for each product it sells, as well as spec sheets for easy reference.

In addition to product spec sheets, HomeCenter.com posts buyers guides, diagrams, warranty information and more. "We feel that the more information a customer has, the more comfortable they will feel about making their purchase with us," says Okin.

Because many items for the kitchen and bath are "considered purchases," which are purchases that the customer thinks about before buying, information is a critical element in the sale, and the Internet speaks to this aspect.

"People are going to shop multiple retailers when it's a considered purchase," adds Homeclick CEO Michael Golden.

Interestingly, with regard to price, none of the major Internet retailers seem to be offering deep discounts, despite the lack of overhead. Still, there are some cost benefits. "We're not trying to undercut the market, but we do have some ability [with price] because we don't have a lot of inventory, and we don't have a really extensive showroom," Dalnes explains.

Purchases online are also tax-free, depending on the area, and almost all of the vendors offer free shipping as an incentive.

WEB VS. showroom

With many extolling the virtues of ordering kitchen and bath products online, are traditional showrooms feeling the heat?

"Well, the traditional thought was that people would shop online, find what they want and then go to the showroom and purchase it. But, what we're finding is that the reverse is true," comments Dalnes. "Consumers are actually going to showrooms, finding the products they want and getting quotes from contractors. Then, being savvy enough to know that the Internet can provide them with a means to do some pricing research, they search the Web for the product."

"More often, consumers are reviewing products online, and then going to a dealer if they require additional services such as design, or if they are not comfortable purchasing online," offers Okin. "Research has shown that for every sale made online, there are about two that are made at local places that have been generated from the customer researching online."

"We convert about 3% of the customers that come to our Web site," adds Golden. "Where are the other people that we've convinced to buy this high-end product buying it from? For lots of reasons, probably their local showroom."

Indeed, many Web companies believe that their sites are actually building demand and brand awareness for some of the higher-priced, luxury kitchen and bath items "the things that you won't find at Lowe's and Home Depot," stresses Dalnes. "It's an ancillary benefit, and it's one of the ways that it works as a complementary device."

"Business is actually generated for showrooms because we're building awareness for the products that they sell, products that many customers who previously shopped the low end of the market didn't even know existed," agrees Golden.

While Internet companies believe they have certain advantages over traditional showrooms on some level, "at the end of the day, consumers still have to know what a thing looks and feels like. So, there's always going to be value in having a showroom," reports Dalnes.

Indeed, Homeclick.com was born out of a showroom based in New Jersey. "For people who are local, they can come out here and touch and feel a lot of the products that we sell," he remarks. "We just found that, for us, the business opportunity lies more in having the Internet as a catalog and a virtual showroom."

"I do feel pretty strongly about Internet players also having a showroom base to complement online business, because product lines like these cannot be properly supported by boiler-room operations," reports Berke. In fact, wholesale distributor Action Supply Co. has its showroom base in Florida.

Dalnes notes that some showrooms actually use Homeclick.- com to sell products that they may or may not have available to them. "We have about 50,000 different products," he notes. "Since there is no way a showroom or warehouse can have that kind of inventory, some showrooms actually go ahead and use our Web site. If somebody is looking at a specific model, but wants the next best thing, we're there to educate them about that."

Still, there are some important downs to buying on the Web, especially for those who don't have a full understanding of design and product.

One of the problems with ordering products online, Gilsenan notes, is that "customers want to see the product, and [with cabinetry] they want to see the finish."

"The problem with ordering online is getting what you want," says DeWitt Talmadge Beall, principal of DeWitt Design Kitchens, in Studio City, CA. "A designer is going to have been down the road before and know how something is going to work more than someone who is trying to get into this for the first time. That person may miss a couple of basic details.

"There are also functional details about the ways things work," Beall continues. "All of those things have to be factored in. The consumer may expect the installer to know these details, and if he doesn't and it doesn't work, it makes things hard."

In addition, there are potential dangers with using a company that has no "real" address, says Susan Serra, president of Kitchen bathpros.com, in Northport, NY. ""You never know what type of site it is. [Often], you are going in blind and giving your credit card to a company you have no knowledge of."

Luring Dealers

While most of the customers visiting Internet retailers are everyday consumers, many builders and kitchen and bath dealers are also doing business on these sites. Some of these online retailers even have special programs to attract dealers and designers.

Dalnes notes that Homeclick.com offers the Professional Partner Program, which provides professionals with 10% off an entire kitchen purchase. It has a few hundred contractors right now, and "it's certainly a segment of the market that we want to go after very aggressively," adds Dalnes.

The Global Supply Network's www.plumbingwhole saler.com was designed to address the needs of the professional contractor. "On the wholesaler side, customized pricing can be offered for online purchasing," offers Berke.

Okin encourages kitchen and bath dealers to consider the benefits of partnering with e-commerce companies. "We offer them specially negotiated lower prices, or, if they prefer to recommend customers to us, they can receive a lifetime commission on those customers," he notes.

The company will be launching SupplyHouse.com early next year, "which will offer our catalog of products, as well as Web services especially for kitchen and bath dealers and other resellers," adds Okin.

While Golden does believe that online companies are taking some business away from showrooms, he believes that showrooms are also taking business from them, as well. "I think that all of us combined, including EXPO Design Center, are really making this a much more competitive industry."

In the end, however, Schreffler doesn't believe his Web site or any other online retailer is having a significant impact in terms of taking away business from kitchen and bath showrooms. "I think everybody gets the business that they work for," he concludes. KBDN.

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