Forging Ahead Toward Growth
Despite a challenging business environment, kitchen and bath dealers are aggressively forging ahead, increasing advertising, staff and product offerings, and branching out into new areas to keep their businesses growing strong.
By Janice Anne Costa
That was the result of a recent survey conducted by Kitchen & Bath Design News, which polled more than 225 kitchen and bath dealers throughout the U.S. about their business practices, plans for the future and major challenges facing the industry.
The results can be summed up by one dealer's comment: "If you want to be competitive, the bottom line is that you have to forge ahead toward growth."
To that end, kitchen and bath dealers surveyed seemed primed for growth, with many engaged in or planning definitive actions to increase business in the next 12 months. Plans ranged from adding a new showroom and establishing new specialty niches to joining a buying group.
The number one change dealers made in 2002 was to increase the number of product lines they carry, with some 41.1% of respondents stating they did this in 2002, and another 34.9% planning to increase their number of product lines in '03 (see Graph 4). Some 36.3% of respondents said they'd increased advertising in 2002, with 39.7% planning to do this in 2003.
Far fewer dealers were planning cut backs for 2003, with only 6.2% planning staff reductions, 5.5% cutting back on product lines carried, 3.4% planning to decrease the number of displays in their showroom and a mere 0.7% expecting to decrease the size of their showroom.
Providing essential services was also key to dealers' business practices, with 88.8% of survey respondents saying they provide installation services. As one dealer noted, "If I provide installation, I have more control over the job, and the customer's level of satisfaction. That means I can control the outcome and my ability to get referrals."
Some 58.9% of dealers reported that they handled installation with an in-house crew, 34.2% used a supervised, sub-contracted crew, and 6.9% said they would recommend a crew but not supervise the installation process (see Graph 6).
Availability, too, ties into the service theme, with 10.3% of
survey respondents planning to change store hours to make them more
convenient for customers.
What They Do
It's no surprise that most kitchen and bath dealers do the bulk of their work on kitchens (60.6%) and baths (21%). However, more and more dealers are finding extra work in other-room projects (13.1%), from home offices to entertainment rooms, laundry rooms and even garages, while another 5.1% of respondents' work comes from commercial jobs. As one dealer explained, "You have your specialty, but it doesn't hurt to diversify a bit."
Dealers surveyed said the lion's share of their jobs come in the form of remodels (66.8%), with that number expected to increase to 69.9% in '03.
Surprisingly, though, dealers reported an average cost of a kitchen project at only $27,021 in 2002 and the average cost of a bath project at only $8,979, suggesting that many are doing more small jobs than in the past.
However, as one dealer noted, "Part of our growth plan is to take on different kinds of projects. That may include home offices, wet bars, entertainment centers or master bedroom suites, or it may be a smaller job a kitchen where they just want a new countertop, but not a total overhaul."
As another dealer said, "Some people who normally do big jobs
are doing smaller 'quick fixes' right now because of the [economic]
uncertainty. We do these because we know when they're ready to do
the whole shebang, they'll come back to us for it."
Dealers surveyed reported that the most popular form of payment is cash (70.3%), while 11.4 percent said their customers took out a home improvement loan, 9.2% said their customers paid with home refinancing, and another 9.1% said their customers financed their kitchen through other methods such as credit cards (see Graph 1).
When it comes to buying products, most dealers used multiple sources. Some two thirds (66%) said they buy direct from the manufacturer, 54.9% buy from distributors, 20.9% buy from retailers, 7.2% buy from subcontractors, and another 1.3% said they buy from other sources (see Graph 3).
- More than a third (37.7%) of respondents said they charge a
design fee (see Graph 2), ranging from several hundred dollars to
several thousand dollars.
- Dealers surveyed said they carry an average of 9.1 different
kitchen product lines and 8.5 different bath product lines.
- Roughly half (49%) of those surveyed said they currently belong to an industry trade association, and of those, 81.1% believe that the association membership is valuable to their business. KBDN