Condition:Critical

by WOHe

Condition:Critical

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


When you ask kitchen and bath dealers what their most critical
business issues are, you might expect a lengthy dissertation on
fears about home center or e-commerce competition, concerns about a
projected softening economy or worries about keeping up with new
technology.

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.”


“Finding good employees, particularly those with knowledge and
skills in drawing, is no easy task,” another dealer agreed, noting
that the dearth of skilled personnel underscores the need for more
and better training. 

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
Finding quality leads is always a challenge, and remains a concern
among kitchen and bath dealers, with nearly 40% listing it as “the
one single business concern” that “keeps them awake at
night.” 

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.”


Supplier services 
Quality of supplier services was also noted as a key concern among
kitchen dealers, with three quarters of all dealer respondents
rating supplier services as worse than (36.1%) or merely the same
as (39%) five years ago. Less than a quarter (24.6%) believe that
supplier services have improved over the past five years. 

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

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