Kitchen and Bath Disruption Part VIII

A Wave of Consolidation Along with Emerging Models

We’re back in the saddle again headed for the Wild, Wild, West! Also known as the Future Kitchen and Bath Industry.

Before I go any further, I did want to ask one favor. Don’t shoot the messenger or write him hate mail. I already get enough of that from my family. 😊 True enough though, putting a layer of sugar coating over the reality of the situation isn’t going to help anyone!

So why is our Industry going to become the wild west you ask? Because everyone and their mother is going to try and figure out how to take the biggest bite out of this ripe for disruption golden apple. (It has to be golden for about 60 billion reasons and counting). This is a massive revenue industry and the bulk of it is sprinkled throughout 35,000 businesses plus.

I think we have well established how our industry looks and acts. Now that big money has recognized this too, let’s peek behind the curtains to see what’s happening.

Recently, the Artisan Design Group (ADG) acquired KB Kitchen & Bath Concepts based out of Mt. Pleasant, South Carolina. The reason I bring this up is that this acquisition of another 6 new locations just adds to the over 160 sites they already have in place. Yowzah! And that’s across 25 states. Another point to mention is that this is their fifteenth acquisition since they were purchased by the Sterling Group four years ago. It’s certainly becoming clear what their objective is. Buy and conquer!

The Ferguson Company has also been quite active with acquisitions along with opening more of their existing stores to cabinet sales. These are just two examples of a continued growth strategy by multi-location Kitchen and Bath businesses.

So, my estimate of consolidation over the next five years may be a little low.  I believe it will all depend on certain factors that will keep smaller Dealer’s viable and in a very competitive position. They include:

·       The owner/leadership being open to change and the ability to execute quickly on it.

·       Integrating processes and systems into the business so that they can start having visibility on how well every facet is performing.

·       A culture that is positive, high energy, team oriented and engaged. You will have a hard time winning without this one. With it, you can be unstoppable!

·       The talent – they are already becoming more demanding as they recognize their value. Great benefits and compensation are going to start varying more from company to company. Why? One word – productivity. Who can offer more? The company that is generating $150K in Gross margin per person or $250K. You can bet your bottom dollar that the talent is a lot more likely to move to another company that offers a better all-around package!

·       Resources – how do you compete with a big company that has marketing, training, and accounting departments? Join a buying group. Less than 5% of independent dealers belong to one. Peer groups, training, programs etc. should all be part of your plan. This is how the small can outmaneuver the big and win!

Just because companies are bigger doesn’t guarantee that they will be better.

Here is a little tidbit we need to keep an eye on. Some of the more adventurous Designers are breaking off on their own. The barrier to entry has gotten a lot lower.

·       Need a big showroom? Nope.

·       Will cabinet vendors sell to you if you have a small or no showroom? Yep.

·       Do you need a warehouse for delivery? Nah. Third party or the manufacturer can handle that.

I guess the point is that there will also be low-cost/high service models that will have the ability to be successful. That could include separate Designer businesses under one roof and sharing resources, a team of mobile showrooms that add convenience going to the customer’s home, or you name it. All bets will be off in this new world.  Technology will have a way of leveling the playing field when companies truly engage it.

That’s enough to chew on for now and give us all plenty to think about.

Don’t forget to sign up for our FREE upcoming webinar on “A Kitchen and Bath Dealers’ Guide Through the Numbers” on November 9th at Noon ET. If you are trying to get your CEU credits in for the year, this will qualify as one. It’s going to be awesome! 

Get serious about change!

Let’s do this! Thad