Launch a Discount Cabinet Division to Increase Profits

While most kitchen/bath dealers can say 2012 is better than a couple of years ago, few can say that business is truly robust right now.

So what can be done about that? It’s true we can’t predict the future. But in Jim Collins’ latest book, Great by Choice, we learn that we can create the future. Collins views the post-World War II period of continued economic growth as the aberration, not the last decade. Rather he sees this last decade of terrorism, economic panic, severe recession, sluggish recovery and political upheaval as normal in the course of world history. This last decade is “when America awoke from its false sense of stability, safety and wealth entitlement.”

The premise behind this book is to answer one simple question: “Why do some companies thrive in uncertainty, even chaos, and others do not?” After nine years of research, studying the evolution of 75 publicly held companies, Collins discovered that business leaders who operated under chaotic conditions, yet substantially outperformed their competitors, displayed very different behaviors than leaders who operated in peaceful environments. One such behavior was a “fanatical discipline.”

Getting Business in Hard Times

Now you may wonder what a “fanatical discipline” has to do with kitchen/bath owners and creating your own future. The answer is: a lot!

The one common theme I hear today from kitchen/bath owners and designers is that they don’t have enough leads. The mistake most of them make is addressing this issue from the inside looking out, rather than from the outside looking in – the way prospects would.

During the boom times, many kitchen/bath dealers positioned themselves as high-quality, high-priced firms. But in the aftermath of the Great Recession, buyers are looking for a good value. And consumers typically – but erroneously – associate good value with low price.

So today, even affluent potential customers may see these high-quality dealers as too expensive to even stop in their showrooms when shopping for a new kitchen or bathroom. That’s probably why furniture-grade and luxury-grade cabinet manufacturers have seen their sales slump the most in recent years: too few prospects coming into the “designer showrooms” where their products are on display.

If what will draw leads is a low price amid this climate of economic upheaval, then why not give consumers what they want? Launch a Discount Cabinet Division that competes directly with the big boxes while also generating more prospects for your core design business.

In the 1950s, owners of a hamburger joint on a busy intersection witnessed a marketing phenomenon firsthand. When they learned a hot dog stand was opening up across the street, they worried about the loss of business to the new competition. Instead, more people were attracted to this intersection and business grew. They had the same worries a little later when a pizza parlor opened on a third corner. But again, their business just kept growing. The number of diners attracted to this intersection grew exponentially to the number and variety of restaurants located there.

Watch the Details

Designers in this industry have always been exceptional when planning someone’s kitchen or bath. They’ve often won the job because the consumer has seen the attention to detail that has gone into the design to reflect their needs, wants and lifestyle. That same “the devil is in the details” approach will be necessary when developing a successful Discount Cabinet Division for your business.

Indeed, a “fanatical discipline” with respect to these details will be an absolute necessity to ensure its success without cannibalizing your core custom design business. Yet, discipline is something that has been largely absent in a kitchen and bath industry driven by a preoccupation with design and fashionable products, not sound business practices. In my judgment, a lack of self-discipline has been a huge contributing factor to the depth of the sales decline during the Great Recession and the tepid sales rebound of the current recovery.

Simply put, most kitchen/bath design firm owners never disciplined themselves to become astute, well-rounded businesspeople. And enabling industry institutions and manufacturers never demanded that of them and filled the void with the necessary educational programs.

A successful Discount Cabinet Division venture that will draw lots of leads for both operations will require someone with a strong business orientation and a “fanatical discipline” to lead the effort.

On one hand, owners who have a custom design orientation may treat such a division as a foster child and not give it the attention it needs. On the other hand, there is a risk of too much focus on the sale of low-priced cabinetry to the extent that the core business’ reputation is tarnished – and the combined operation fails.

Executed and promoted properly, however, there is the genuine opportunity to educate the low-priced shopper about the value of better quality cabinetry, the services of a certified kitchen designer and having the project designed, furnished and installed by a single reliable source.

Each business needs to stand alone with clear, separate identities that just share the same address. Each business needs separate product offerings in different display venues. Each business needs different staff – with different skill sets – offering a different menu of services.

Such marketing segmentation will not be easy for the typical kitchen/bath design firm owner. But for those with sharp business acumen and a “fanatical discipline” for detail, launching a Discount Cabinet Division just might create a future of never-ending leads and exploding growth that far exceeds competitor performances and industry averages.

Anyone interested in investigating this business expansion concept may contact me directly at kpeterson@sendesign.com. Just request a “Cabinet Express” marketing outline that details the suggested differences between these two operating divisions. Anyone interested in learning more about the differentiating behaviors of the business leaders featured in Great by Choice might want to follow my blog at www.sendesigngroup.com.

 

Ken Peterson, CKD, LPBC, is president of the Chapel Hill, NC-based SEN Design Group and an instructor for the “Competing & Thriving In The New Economy: Best Business Strategies For 2012” seminar that is co-produced by KBDN. Peterson can be reached at 1-800-991-1711 or kpeterson@sendesign.com.

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