Pushing Forward

For those who dare to look into the crystal ball to see what is ahead for the kitchen and bath industry in 2012, the answer is the same as it has been the past few years: one giant question mark.

When pressed, most kitchen and bath dealers, designers and manufacturers are cautiously optimistic about 2012.

In fact, in a recent KBDN survey, which polled some 250 kitchen and bath designers and dealers with regard to their expectations for 2012, more than 67% said they believe sales this year will be better than in 2011.

While no one can truly predict what will happen in the next 12 months, a number of factors are expected to influence the market.

Not surprisingly, respondents to the survey cited economic uncertainty as their number one concern going into 2012, with 91 percent calling it one of the major driving issues affecting business. Consumer demand for lower prices came in second with 85% of respondents ranking it in their top five concerns, followed by concerns about the impact of this year’s presidential election and political activity at 54%. Increased consumer knowledge and demands followed at 52%, and competition from online suppliers and big-box retailers each came in at 44%.

 

Economic drivers

Economic concerns encompass so many different elements – from depressed housing values to unemployment to the stock market. All play a major role in the choke hold on the building and remodeling sector, and there are conflicting views as to when that hold will loosen.

“The key issues that will affect growth in 2012 are unfortunately the same issues the industry faced in 2011,” reports Stephen Smith, v.p. of marketing for Amerock, a div. of Newell Rubbermaid in Atlanta, GA. “The economic recovery continues to be slow, and the housing market – particularly new housing starts – is expected to remain relatively flat.”

“All indications are that there will not be a significant improvement in home values in 2012, which means continued financing challenges for remodeling projects, and a continued lack of ‘churn’ in the housing market – suppressing remodeling projects,” agrees David Tyler, v.p. of marketing for Top Knobs in Hillsborough, NJ.

“With consumers still cautiousabout spending and new construction enduring the long road to recovery, there is no denying that our industry is fragile,” adds Michael Werner, president & CEO, Globe Union Group, Inc./Danze Inc. & Gerber Plumbing Fixtures in Woodridge, IL.

But Jim Scott, managing director for the Kitchen and Bath Industry Show notes that industry players who look at housing and economic trends see gradual improvement in both housing starts and remodeling, with remodeling showing a little more strength going into 2012. “So, I think we will begin to feel at least a calm in the housing market, if not a slight breeze at our backs,” he states.

Paul Sova, v.p. and COO of Showplace Wood Products in Harrisburg, SD believes consumer spending is on the upswing, however, and that consumer confidence will drive sales for both the remodeling sector and new home construction. “There are positive things happening in agriculture and American manufacturing that we have not seen in the last three years,” he offers. “Consumer spending is gaining momentum, and housing prices have now retracted to the point where more Americans can afford to buy or build.”

What should help the industry, according to Werner, is that the “driving factor is that homes are cheap, and now is a great time to buy,” he stresses. “With an abundance of foreclosures, vacant properties and older homes on the market, homeowners with purchasing power will put remodeling and renovating at the top of the ‘to do’ list.”

Ken Fey, COO for Houzer, Inc. in New Brunswick, NJ believes that remodeling is on the upswing “and will likely remain in that direction during and beyond 2012 due to the aging housing stock in need of reconditioning for sale.”

“People are moving to get jobs and cannot unload their houses,” observes a dealer from Witchita Falls, TX. “Many need repairs or remodeling to sell, and my challenge is to price it right to win the work.”

 

Consumers and profit

Pricing and tighter profit margins are of great concern again this coming year, with customers looking for everything for next to nothing, according to dealers and designers.

“Customers expect business to be so bad that they can demand ridiculous pricing benefits,” reports Dorrit Ory, owner, Orygon Home Center in Florence, OR.

Alicia Schell, designer, Kitchens Etc., By Regency in Jacksonville, FL agrees, noting, “Clients expect the same quality and service but at a much lower cost.”

Adds another responder, “People have less money to spend but the same expectations as far as amenities and quality.”

Lou Rohl, COO/managing partner for ROHL in Irvine, CA notes that consumer confidence, especially among the affluent, is key to the recovery of the kitchen and bath industry. “Homeowners are continuing to view their homes as a worthy investment – not for reselling but for reconnecting,” he comments.

Connie Crawley, designer – sales manager, Floor to Ceiling Interior Design Center in Wayzata, MN, agrees: “Reminding clients that updating their homes still makes sense regardless of the home value market” will be key this year. “Updating their homes needs to be more about the enjoyment of the home meeting their needs instead of return on investment,” she notes.

“The recovery or lack of recovery of the economy – including the addition of jobs that contribute to a middle class lifestyle as well as recovery of the housing market – will help give homeowners the desire and confidence as well as financial resources to invest in their homes,” comments Susan Serra, CKD, president of Bornholm Kitchen in Huntington, NY. “It’s really all about consumer confidence.”

A survey responder in Palatine, IL believes that in 2012, the challenge will be to “find customers who can afford to remodel with the confidence that they can do so.”

 

The political scene

Also nodding directly to the economy is survey responders’ concern about the presidential election and what the pre-election inactivity will do to the economy and the mood of the nation.

One dealer’s sentiments that “change will only come after the current presidential administration is replaced” was echoed by many. “We need leaders who understand small business as the driving force in the economic recovery,” the responder notes.

“The poor leadership by the current administration produces an unproductive business atmosphere,” adds another survey responder.

Some manufacturers also believe the election is paramount.

“One of the key issues that will have an impact on 2012 is the election and concern of stagnation and gridlock with elected officials during the course of 2012 until the presidential election is completed,” comments Don Gamble, executive v.p. of Basco Shower Enclosures in Mason, OH. “This issue will drive no appreciable reduction of unemployment rates, which in turn continues to stifle growth in the housing sector.”

Tom Beyersdoerfer, CFO, Stone Statements Inc. in Cincinnati, OH, believes “the media and Congress need to stop painting a gloom and doom picture.”

“If the negative press continues to influence consumers to hold onto their money instead of spending, the year will be flat for big growth,” concurs Brian Borsch, sales manager, Capitol Group Kitchen & Bath, in St. Louis, MO. “When the press switches to an optimistic theme, pent-up demand will move the country out of the recession.”

Jeff Noll, president, and Jeff Carney, v.p., Steamist in East Rutherford, NJ note that Americans will only wait so long before they treat themselves to that new bathroom or kitchen. While the plans may not be quite as grand as they might have been five or six years ago, Noll believes consumers want to treat themselves to “affordable luxury.”

Politics can also impact environmental legislation, which in turn impacts the kitchen and bath market. For that reason, although kitchen and bath dealers and designers don’t see the green trend as having great importance, many manufacturers see green issues as a major concern going forward.

“The demand for green is there and growing,” comments Darryl Jones, national sales director for KWC America in Norcross, GA. “When the state of California decides to make a change in faucet performance standards, we all must invest in the new technology to deliver that performance.” He notes the latest example is the recently enacted California Green Building Code, or CALGreen, which requires a flow rate of 1.5 gallons per minute for bath faucets and 1.8 gpm for residential kitchen faucets.

“Introductions and changing legislation (i.e. AB1953, Vermont S152, CalGreen, Georgia Water Stewardship Act) will continue to affect our industry and our business,” adds Mike Bauer, president, U.S. Businesses, Moen Inc. in North Olmsted, OH.

Kitchen and bath designers note that their clients‘ interest in green products is primarily driven by a desire to cut energy costs.

“With growing concerns regarding water and energy conservation, and the need to lower household utility bills, eco-friendly products have quickly become the ‘cost of entry’ for many manufacturers,” comments Werner. He reports that although green plumbing products have proven to be steadfast, green products among other kitchen and bath product segments – such as tiling, surfacing, flooring, heating/cooling, etc. – will also show steady gains in 2012.

“However, green products trying to command a premium are facing the stiff headwind of the overall economy,” he adds.

“The growth segment will be green products, but only if they are priced reasonably,” agrees Marc Nover, president of Blanco, in Lumberton, NJ. “Consumers will only spend for what they perceive to be good value for their money.”

Indeed, Tim Hunt, president of Huntwood Custom Cabinets in Liberty Lake, WA notes, “The segment that will see the largest decline in growth will probably be the expensive ‘gimmick’ green products, ones that are ‘green’ but that have no tangible benefit of use.”

Value focus

As noted, kitchen and bath dealers and designers are concerned about their profit margins, and their concern about competition from big box stores and online retailers is still strong. Consumers want quality products but often for reduced prices, and will shop to find the best deal.

“One of my biggest challenges will remain getting people through the door,” comments Jonathan Wike, owner, Kitchen & Counter in Niles, OH. “I believe I can satisfy their needs if I can meet them. It’s amazing how many people go to the big box stores, and then comment that they didn’t know we did that type of work.”

Service and products at the right price will be key in 2012, but it is difficult to determine what the right price is.

“Consumers want more for less, and when it comes to the home, their purchases continue to be motivated by practicality,” offers Werner.

Consumers have come out of the recession more vigilant about finding products that will serve their design and performance needs for years to come, according to Nick Ord, president of Miele USA in Princeton, NJ. “More than just price, value exemplifies performance, flexibility and longevity. Also key, especially for kitchen improvements, is how these purchases will improve the quality of time spent in the home.”

“The high-end market is looking for value-added product,” agrees Bertrand Charest, president of ThinkGlass in Boisbriand, QC. “The market is swamped with standard products, and clients are asking for the new and rich product.”

“In 2012, value-add products that deliver style with substance and sustainability will take center stage,” believes Rob Kass, chief marketing officer at Elkay in Oak Brook, IL.

“High-performing and sustainable products with value-added properties will certainly be the most regarded by consumers in 2012,” agrees Lorenzo Marquez, v.p. of marketing, Cosentino North America in Stafford, TX.

“The growing presence of design and interest in convenience features will continue to impact the market in coming years,” believes Doug Beaudet, global director, Experience Design, Global Consumer Design, for Whirlpool Corp. in Benton Harbor, MI. “Focusing on ‘experience design,’ or emotional and sensorial aspects of the design, is key.”

“The trend toward better-quality product choices may not be hot, trendy or sexy, but it is consistently increasing its part in the overall consumer shift and will be a boost to our industry in 2012,” stresses Fey.

In the end, Scott thinks people are realizing that what we experienced early in the last decade was fun, but not sustainable. Now, we are coming back to our roots and values as an enterprising and entrepreneurial culture. I think this is a good thing for all of us.”

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