Kitchen and bath dealers cite lead generation, the need to increase profit margins and training issues atop their list of most critical business issues, a new K&BDN survey reports.

by Janice Anne Costa

You might expect thisbut you'd be wrong. Home centers are apparently far down on the list of kitchen and bath dealers' concerns (home centers came in 10th out of 10 on dealers' list of biggest concerns impacting their businesses), according to a recent survey by Kitchen & Bath Design News. Additionally, only a meager 1% cited the economy as their single biggest business concern. Instead, kitchen and bath dealers are losing sleep over issues relating to key personnel (finding, training and retaining), lead generation and improving overall profit margins, the survey reports. 

"Improving profit, either by changing our client base, lowering overhead or increasing productivity, is key," noted one kitchen and bath dealer, whose concerns were echoed by a large number of survey respondents. In fact, when asked to rate the impact of 10 key concerns on their businesses, improving profit margins was ranked number one on the list (see Graph 2).

Good help

2. 'Critical Issues' Impacting Dealers' Businesses

(in order of importance)
1. Improving Profit Margins
2. Training of Staff
3. Retaining Key Personnel
4. Finding New Customers
5. Keeping Up With New Products
6. Dealing With Client Base
7. Personnel Shortages
8. Finding Unique Products
9. Developing New Services
10. Home Center Competition

Good help may be hard to find, but it's even harder to keep, dealers report. And even when they do manage to find good employees, employee training represents yet another major challenge for today's kitchen and bath dealers, according to survey results. 

In fact, when rating the factors that most seriously affect their business, kitchen and bath dealers ranked "training of staff" and "retaining key personnel" as numbers two and three respectively on their top 10 list of key factors impacting their business.

"Finding qualified personnel" was a frequently cited problem by numerous dealers, with good installers heading the list of hard-to-find employees. Plumbing installations and sub-contractors were also noted as areas where a shortage of high-quality personnel was evident, with good salespeople also cited as in short supply. 

Likewise, recruiting CKDs and CBDs has been particularly difficult, with several dealers reporting that, "Certified professionals of any kind are especially scarce."

Likewise, employee retention was frequently cited by dealers as a serious issue. "One of the most important concerns we have is being able to maintain our quality level day in and day out," noted one dealer. "We have to be able to keep our employees loyal, and prevent as many employees from leaving as possible. There needs to be more affordable and feasible employment benefits, i.e. hospitalization, retirement, etc. We are a $2 million plus company, we have 28 employees, we cannot get much larger unless we have affordable benefit packages to retain current employees and attract new employees."

"Keeping top professional designers with competitive salaries and perks" was also a frequent refrain among designers, when asked what their single biggest business concern was.

Training issues were also noted by many dealers as an area of concern, with education seen as playing an important role in helping dealers to enhance their own and their staff's skills and deal with issues affecting their businesses and the industry at large. 

Additionally, dealers seek help, both formally and informally, from a variety of sources. When asked who they typically go to with industry concerns, a whopping 86% said manufacturers' reps (see Graph 4). Other top information sources included other allied professionals (44%), personal networking (43%) trade associations (40%), the trade press (32%), the Internet (22%) and buying groups (9%).

Lead generation

For businesses that have beefed up on staff in the fat cat economy of recent years, lead generation can become even more of a challenge. "Generating a consistent lead source with 13 salespeople [is tough]" one dealer reported. "It takes a considerable amount of leads [to keep them all busy]. It seems that we are spending more on advertising but receiving fewer leads."

Indeed, figuring out how to generate leads without the kind of advertising budgets the big-box chains have is a major concern for many kitchen and bath dealers. Even those who don't view home centers as a competitive threat find themselves envying their budgets, and wondering how to get the kind of visibility that many name chains take for granted. As one dealer noted, "Finding the best ways to increase business without overspending for the size of our business is something we struggle with."

Another concurred: "Our biggest challenge right now is figuring out how small businesses can make the public aware of their businesses and services without spending an arm and a leg."

What slowdown?
Despite nationwide talk of a softer economy, a surprising number of kitchen and bath dealers seemed less than impressed by the negative buzz, expressing positive views about both their current business and their expectations for the future.

In fact, a whopping 84% rate their current profit margins as either about the same as (51.2%) or improving over (32.8%) last year's profits, with only 16% reporting declining profit margins as compared to last year's numbers (see Graph 1). 

Additionally, a mere 4.2% of respondents said they viewed current business conditions as representing "a serious threat," and nearly 17% (16.8%) stated that current business conditions are "no threat at all" (see Graph 3).

As one dealer noted, "[The biggest problem we're facing right now] is trying to deal with people that want to make everyone think the economy is soft. If you refuse to participate in a soft economy, then there is no soft economy."

And, in fact, several dealers' cited as their biggest concern "trying to keep up with growth."
While the majority of respondents (79%) classified current business conditions as representing "a modest threat," a mere 1% cited this as "the single biggest business issue" that keeps them "awake at night." 

Rather, dealers seemed far more concerned with finding, training and retaining skilled personnel (especially good installers), and further improving profit margins. As one dealer noted, "We sell a whole lot, but our profit margins still aren't where they should be. We need to figure out why our [strong] sales aren't translating into bottom line profits."

Additionally, less than half of all dealer respondents (47.1%) noted that their orders were generally received both complete and error free, while 10.1% complained that orders were generally not received complete and error free, and another 35.3% said it varied by product and supplier (see Graph 5).

When asked to rate the timeliness of orders, suppliers fared better, with 60.5% of respondents saying they received orders in a timely fashion. A mere 4.2% claimed that orders did not generally arrive on time, while 35.3% said it varied widely by supplier and product.

Likewise, several dealers complained about products not meeting quality standards, or causing problems due to installation issues. One dealer, for example, when asked about the single greatest business issue that keeps him awake at night, emphatically pointed to appliance specs. "They're horrible. I complained to [a certain appliance company] about its appliance panel specs being wrong and poorly designed. When I confront them, they tell me I am the only guy having problems, yet when I attend seminars, the main topic of discussion is the crummy specs for dishwashers. Then you have the refrigerators [that because of the specs] often hit adjacent cabinets. Why not simply include doorstops on every one? They are free. Instead, I have to replace door panels and install door stops on a call back."

While home center competition was not seen as a major issue for the majority of dealers surveyed, some still addressed their impact on independent kitchen and bath firms, particularly in terms of competition over product selection. As one kitchen and bath dealer noted, "Finding products such as sinks, faucets, knobs, etc., that don't end up being sold at the home centers [can be a real challenge]. I try to have unique products to go with my cabinets that can't be shopped at [the big-box chains]."

Customer needs
While finding new customers was a key concern for many dealers, others were more concerned about dealing with challenges pertaining to their existing customers. For those whose businesses have been growing steadily, customer service can become one more burden on an already overburdened staff. As one dealer stated, "Maintaining a speedy and accurate response time per customer while running the rest of the show can be a real challenge."

Another dealer believes that a lot of the industry's problems stem from changes in consumers' quality standards. "[It's all about] the cheapening of America," he stated. "Customers do not consider standard of work when putting in bids anymore. Putting $3,000 kitchens in $750,000 homes doesn't make sense, but as long as the exterior of the cabinet looks good, no concern is given about construction or durability."

Agreed another dealer, "My second biggest issue right now is the frustration of dealing with customers who don't care about quality, only bottom line pricing."

Communication problems were frequently cited as causing customer relations problems, with several dealers noting "salesmen and designer communication to clients" as being a common problem area. "This issue becomes a chain reaction of problems, causing discontent between installer and salespeople, leading to overall customer dissatisfaction." This, in turn, leads to "escalating costs to complete the project, which causes a drain on company resources, as receivables end up being long overdue waiting for the completion of a job," the dealer explained, noting that customer dissatisfaction can delay payments even further, as disputes are resolved, tying up still more of the company's resources.

With the Internet providing opportunities for nearly endless research, customers may spend so much time exploring all the options, they end up overloaded in information, and become unwilling or unable to make a commitment to anything. "Not knowing if or when the customer will finally make a commitment with a deposit, and/or okay to order can be a real problem," one dealer noted. 

Part of the problem is the customers themselves, dealers believe, with many believing that today's consumers are demanding "unrealistic levels of service." A more sophisticated, knowledgeable customer can be more "buy-ready," they say, but sometimes customers have too much knowledge, and not enough understanding of the business itself, which leads to impossible-to-meet expectations. 

As one dealer concluded, "The consumer is demanding more of the business to be at their beck and call. We must re-educate them to understand the whole construction process." KBDN