How to Compete with an Online Cabinet Company and the Impact of Tariffs on Chinese Imports
By Thad Whittenburg
The last blog we posted about competing with online cabinet companies had the highest readership of any of our blogs to date. I’m glad people are taking online cabinet sales seriously and not discounting it as something that won’t have an impact on their business.
Combining these two topics made sense to me since they are tightly related to each other. I believe import products will take the forefront when it comes to online sales for 3 reasons:
- The price point, limited door styles and SKU’s make the online selling process more predictable compared to ones that would involve semi-custom or custom cabinets.
- Domestic brands will not want to upset the apple cart when it comes to any of their well-established dealer base by opening up their product to the online sales companies (i.e. Amazon, CliqStudios, Cabinets.com, WayFair etc.). They would have to steer toward a private label to make that option work. (With stagnant sales that they are experiencing these days, don’t be surprised if one of the “Bigs” dips their toes into that channel)
- The market continues to get flooded with new import products and some of these players are struggling to grow their sales through a dealer network. They will most likely decide to go towards a market strategy of solely pushing their sales through online models to grow more quickly.
Now let’s take a look at the 10% tariff that just went into effect on Chinese imports.
Here’s a breakdown of how the tariffs could impact the overall price of the import product:
About 5-10% of the product cost is freight.
Another 10-20% is assembly and packaging of the cabinets.
Dealers could be looking at a price increase of anywhere between 6-10% in the near future. Some of this will depend on whether the product being purchased is flat packed or assembled. The import cabinet distributors may already be experiencing increases in other areas. Another thing to take into consideration is the last time they had a price increase. The bottom line is that the import cabinets will be at a higher price and that will reduce the gap between their product and U.S. manufactured product.
The last thing I want to talk about is related to the steady amount of feedback I’ve received from dealers that feel the internet will never replace the value that they can bring to customers. I agree with them to a certain extent, but online sales are here to stay, and they will grow at a faster rate than the showroom models. They may be a smaller percentage of the overall market but that will all depend on how the dealers evolve in the future when it comes to providing a new level of customer experience, along with their ability to embrace technology to help advance their business. If they fail to do this, then all bets are off.
Next week’s blog will focus more on the online cabinet models and the traditional showrooms going hybrid.
As always, I would love to hear your feedback. Thanks so much for reading this blog and don’t forget to sign up for our October 17th webinar “Competing with Online Cabinet Companies”. It’s going to be an informative and interactive webinar!