Economic Clouds Seen Lifting for 2013

After struggling through some of the worst economic years on record, things are finally looking up. That’s the consensus of kitchen and bath dealers, designers and manufacturers, who say the economic clouds are finally lifting a bit, with 2013 showing real promise for the kitchen and bath industry.

In fact, according to a recent Kitchen & Bath Design News survey of kitchen and bath dealers and designers, 69.8% believe sales will increase in 2013, in contrast to only 3.1% who see it decreasing – a show of optimism that hasn’t been seen since the economic decline began several years ago (see Graph 1).

Steve Regele, v.p. of sales and marketing for Blum, Inc. in Stanley, NC notes that the improvements in housing starts are helping to fuel the positive news, “and at the same time, remodeling continues to increase,” he reports.

David Krakoff, senior v.p. – Americas, Sales Division – TOTO USA in Morrow, GA, comments that the housing industry recovery is accelerating, and construction is on the rise – up 42% year over year in October, according to the Trulia Housing Barometer as reported in Forbes magazine. Existing-home sales continue to show gains, and foreclosure rates have dropped to a post-economic-crisis low. The barometer notes that the combined delinquency and foreclosure rate is at its lowest level in four years.

Steve Bissell, marketing v.p., Kohler in Kohler, WI, notes that quarterly earnings reports for Wall Street show that banks are “getting back to making money the traditional way, through mortgages and traditional loans, so money is circulating back into the economy.”

In addition, the National Association of the Remodeling Industry reported that the remodeling industry doubled its growth in 2012.

“We believe that trend will continue in 2013, and homeowners will begin remodeling projects they may have previously put on hold,” states Ann Rottinghaus, marketing communication director, Elkay in Oak Brook, IL.

The state of the economy and the housing crisis has led to the pent-up demand that everyone has been waiting for, industry insiders believe.

That pent-up demand is “fueling a slow and steady growth in the remodeling segment,” says Tim Maicher, director of marketing for Blanco in Lumberton, NJ. He believes that, as long as consumers remain positive and confident, the upward trend should continue into 2013.

And Kevin McJoynt, v.p./marketing for Danze, Inc. and Gerber Plumbing Fixtures in Woodridge, IL believes consumer confidence is experiencing a nice rebound in recent months. “People feel their jobs are a bit more stable, home values are stable or rising, etc.,” he comments. “Thanks to continued low interest rates, new buys will continue to emerge and new construction should keep growing,” he adds.

Consumers’ perceptions of their home values is key, states Sam Straub, v.p., Trade Segment Development, Delta Faucet Co. in Indianapolis, IN. “After the declines of the last few years, the value of homes rose in 2012, and that has good momentum going into 2013,” he notes. “People are willing to invest in their homes if they feel the investment will help them in the long-term.”

There is still a great deal of caution, however, and Russ Wheeler, president of Alpharetta, GA-based Hansgrohe North America, believes 2013 will continue to be challenging economically speaking, as there are still “governmental challenges, economic headwinds and challenges in Europe.”

Kitchen and bath dealers and designers agree: While there’s a prevailing sense of optimism, according to KBDN’s survey results, dealers and designers still view price-sensitive consumers and the struggling economy as their top two challenges for 2013 (see Graph 2). Dealing with more savvy and demanding clients followed closely behind, as did issues with profit margins.

Less frequently cited concerns from the survey included competition from online suppliers, changing tax laws and competition from big box stores.

FOCUS AREAS

The survey also showed good news about growth areas for 2013, with 78% of those polled expecting to see increases in kitchen projects and 73.2% expecting to see increases in bath projects in 2013 (see Graph 3). Strong demand was also expected for partial remodels (61%), as some homeowners begin to tackle smaller projects such as countertop replacements or appliance upgrades, rather than doing full-scale remodels.

“In today’s economy, homeowners are focusing less on large remodeling projects and more on single-room remodels or refresh endeavors to their kitchens or bathrooms,” states David Randich, president of MasterBrand Cabinets, Inc. in Jasper, IN.

While kitchens and baths are expected to be the hottest focal points, dealers and designers surveyed also expected to see smaller growth in such ancillary spaces as laundry rooms (22.8%), entertainment spaces (19.5%), home offices (17.1%) and mud rooms (15.4%).

According to recently released articles from Moen’s Market Research and Insights Group, five areas of home improvements will top the trends for 2013. The trends Moen identified include: Digital Dwellings (the insurgence of technology into homes; Reinventing Aging (the growth of Boomers and the generational differences between Leading Boomers and Trailing Boomers; Cents and Sustainability (the new consumer mentality that green must be convenient, affordable and can’t sacrifice performance; Channel Surfing 2.0 (how hands-on digital media tools have permanently altered the path to purchase), and Urban Uprising (the living small concept is getting bigger as revitalized urban centers draw more transplants).

TECHNOLOGY WITH A TWIST

For the kitchen and bath industry, technology in the home can mean anything from touchless faucets and programmable showers to appliances that can be controlled from a remote location.

“Consumer electronics have invaded our homes…and they’re not going away,” stresses Kevin Campbell, senior director of marketing-Wholesale for Moen in North Olmsted, OH. “The digital world may be constantly evolving and changing, but one thing is certain: As technology continues to infiltrate virtually every aspect of our lives, and every nook and cranny of our homes, manufacturers will be challenged to develop solutions that make the tech invasion as seamless – and stylish – as possible.

To that end, Krakoff believes “we will see the greatest gains in products that show serious leadership or performance advantages in resource conservation.”

While American Standard wants to bring electronic products into the home, “we also want to make sure that these products are very purposeful, that they’re not gimmicky, that they’re not something that doesn’t improve life for the consumers,” notes Michele Hudec, v.p. of channel marketing for the Piscataway, NJ company.

DESIGN FOR ALL AGES

The aging population will likely continue to garner attention in 2013, with most manufacturers in the kitchen and bath market acknowledging the importance of reaching the Baby Boomer generation – and their much-touted disposable income.

“Products geared to Boomers will continue to grow – especially since this segment represents 44 percent of the U.S. population,” stresses Campbell. “Boomers don’t consider ‘aging in place,’ but rather ‘living in place.’ And, as they do, they’ll continue to invest in their homes to ensure a safe, comfortable and stylish living place,” he adds.

“The baby boomer population is the largest segment of the population, and people are aging in their homes and staying alive longer,” agrees Hudec, “so aging in place is going to be one of the single most important forces in home building and in remodeling going forward for at least the next 10 years.”

Rottinghaus believes that homeowners are looking to simplify their homes in style and function and ultimately prepare for the future. “Universal Design products create an atmosphere of comfort for the entire family, and this trend will only increase in the new year,” she offers.

NEW SUSTAINABILITY

Moen’s Market Research and Insights shows that many consumers are no longer interested in sustainable products just for the sake of being green, notes Campbell “Today, they demand sustainable products that not only perform, but also make it easy to be green. If a green product has a cost or functional benefit over conventional products, only then does it makes sense,” he comments.

Indeed, industry leaders acknowledge that, during these tough economic times, consumers have not been willing to pay a premium for green. And, in fact, while there remains a lot of emphasis on sustainability, Wheeler notes, “Regulation is currently driving sustainability.”

Nowhere is that more apparent currently than with regard to water conservation.

“We know the water-saving trend will continue into the future,” reports Hudec. “For example, there are currently five states that demand that water-conserving toilets be installed in new construction. We only see that only increasing.”

“With regard to water-saving products – that attribute must be part of a larger story, such as new design, high function, technology, etc.,” believes McJoynt. “Industry professionals and homeowners are coming to expect that water-saving features are part of the overall package.”

DIGITAL AND SOCIAL MEDIA INFLUENCES

As the industry emerges from the multi-year slump it has experienced, many aspects of reaching and selling to customers has changed – both from the manufacturer standpoint and the kitchen and bath dealer point of view.

Though the Internet was already becoming an alternative sales and marketing tool prior to the economic crash, its importance in today’s market – as well as that of social media – is unmistakable.

While respondents to the recent kitchen and bath survey are split as to whether they will add more dollars to their marketing budgets in 2013, they are embracing the Internet and social media in a big way to market their businesses. Those responding to the survey placed the use of social media at the top of their strategy lists for 2013, with 61.8 percent saying that they planned updates to their Web sites and another 46.3 percent planning to market their firms through social media (see Graph 4).

And, according to the Smart Kitchen study released earlier this year by the Research Institute for Cooking & Kitchen Intelligence (RICKI), 44% of consumers who remodeled or made improvements to their kitchens in the past year turned to the Web, social media and specialty apps for more info.

“This approach to researching projects is transforming how we market and sell products,” confirms Rottinghaus. “We are being challenged to interact with customers in more places, which is driven by the new ways they are shopping and acquiring information.”

‘RIGHTSIZING’

With the continued trend toward clean, uncluttered looks and the growth of the Baby Boomer segment, “small” and “sustainable” are expected to be hot buzzwords in 2013.

“With people right-sizing their living quarters, downsizing to condos and town homes and the continued growth of urban living, smaller-scale products have high appeal,” offers McJoynt. “These types of products have high design, fit in smaller spaces and improve the overall experience.”

“Many indications that the post-2008 new homes may be smaller, more sustainable and more value-focused present manufacturers with opportunities to present new options (and sometimes tried-and-true solutions) to homeowners who have re-prioritized their wants and needs,” reports Tammy Weadock, marketing communications manager, Wilsonart in Temple, TX. “This doesn’t mean consumers are going to be willing to ‘settle’ – they’re simply going to be looking for products that deliver high value while maintaining the sense of beauty and wonder they’ve gotten used to.”

“Value added is key for 2013,” adds Lorenzo Marquez, marketing v.p., Cosentino North America in Stafford, TX. “This extends from design, sustainability and reusability of the products.”

“Many of us will focus on sensible, ‘smart’ choices that add value to our surrounds,” concludes Weadock. “And value can be interpreted not only as low cost, but more importantly, extra features: beauty, functionality, sustainability and access.”

Loading