Getting a true feel for the state of the KBB market isn't easy when everyone is telling you something different. Walking round the stands at the KBB Show recently it's clear that we're facing a slowdown. But inevitably it will affect some more than others. It's all very well for the top-end people to say business is still booming, but try telling that to the mass market suppliers and the mid-market studios facing lower footfall and increased competition as the credit crunch begins to really bite.

For some the slowdown is seen as a welcome correction, a reality check after several years of heady growth. But for others - those prepared to admit it rather than claim they're bucking the trend - the outlook seems decidedly gloomy. Really, it all depends on what you specialise in, and which sector of the market you're targeting.

Without bombarding you with figures, it's hard to dispute that times are tough, and likely to get tougher for most. House prices slumped by an average £158 a day in March. That amounts to a 2.5% per cent drop - the biggest monthly fall since September 1992 when the UK was deep in recession. Although interest rates are currently on a downward trend, the economic climate isn't exactly conducive to splashing out on 'big ticket' items. Especially if rate cuts aren't actually being passed down by the banks and building societies. Unfortunately, the credit crunch has made it more difficult for lenders themselves to borrow, so they're more likely to raise rates and withdraw products. If anybody fancies a new kitchen or bathroom right now, or a new house, they could probably be forgiven for putting it on hold for a while.

The latest quarterly outlook from the Confederation of British Industry (CBI) is also less than optimistic.
Apparently the UK economy will grow at a slower than predicted rate of 1.8% this year, and by 1.7% in 2009. A CBI spokesman admitted the UK is experiencing "uncertain times", and a quick straw poll of the some of the key players in the KBB industry tends to mirror that suggestion.

Having said all that, screaming tabloid headlines about slumping property prices can be deceptive -
although they do sell papers, which is the main thing. It's more likely that the price of your house isn't dramatically falling, just growing more slowly. That kind of stuff doesn't make headlines though. It's worth remembering that in some places house prices are still going up. Most would also agree that the economy is in a far better state now than during the last recession. Things are slowing down, but maybe that was bound to happen. Maybe we're talking ourselves into a recession?

Good news isn't that hard to find. Flick through a few recent copies of kbbreview and you'll find favourable indicators as well as bad ones. New research from Market and Business Development, for example, reveals that the bathroom equipment market increased by 7% to £2.6bn last year. However, perhaps more tellingly, MBD has revised downwards its forecast for 2008-2012. 'Moderate growth' is predicted in 2008, this blamed on the anticipated decline in consumer confidence.

Rich pickings

On the retail side, as you might expect, it's the top-end showrooms that have remained largely unaffected. After all, as we're often told, those with the money will always have it, regardless of the economic climate. According to research from JKMR, almost 4.3% of UK sales last year had premium-to-luxury spend levels. This compares to 1998 when only 2.5% of sales were defined as premium/luxury.

In the specialist sector, average consumer spend on appliances by premium/luxury consumers is calculated to have risen by almost 20% in the past year.

On the corporate side, the message is mixed. On the one hand you have kitchen specialist Omega announcing a record 27% leap in profits during 2007. On the other you have appliance giants like Electrolux admitting disappointing results, along with the closure of its Spennymoor factory.

Distributor Waterline has also recently warned of 'significantly lower' profits than expected, blaming trading conditions, low confidence and the state of the economy. And on the bathroom side, the vultures are circling for Qualceram Shires after it announced operating profit fell by three quarters in 2007. The company's chairman, Peter Addison, summed up the problems many manufacturers are facing when he admitted that over recent years "intensive competition from Asia, direct outsourcing by major merchants, increasing energy costs and deteriorating markets" has meant the industry is facing an increasingly challenging environment.

But ultimately, surviving troubled times is all about how you react. It pays to have a plan of action - to be flexible enough to refine your strategy. For a manufacturer it means continuing to innovate and to improve your service levels. For a retailer, it means reviewing your showroom strategy and improving your product offering to stay ahead of the game.

Richard Walker, sales and marketing director, De Dietrich

The appliance market was down last year in unit terms by between one and two percent, so not as bad as people thought. We changed our range and moved away from entry level, which on the freestanding side is getting murdered at the moment. We finished last year 14% up.

Consumers are getting more sensitive about money, it depends on the housing market and there's a level of uncertainty there. I think the appliance market will go backwards again in 2008, probably even more so on the freestanding side. People are seeing that and trying to move into built-in, but not with the right tools in place. They tend to fight only on price.

On the high street, some retailers are 15%-20% down year on year, even on the built-in side. People are having a tough time and cutting back on jobs but we're not. We're geared up for a good year; we've had a cracking January and February.

Graham Jones, trade sales and marketing director, Hepplewhite

As an industry, we're very good at talking ourselves into a recession and a lot of that went on at the KBB show, but if you provide someone with a compelling reason to invest in a fitted kitchen or bedroom they'll do it regardless.
We found the show very good and retailers are very positive. The numbers would suggest the bedroom market is about a fifth of the size of the kitchen market. Our market is definitely growing, and the nice thing is, if consumers are pulling in the purse strings, a bedroom can be as little as £2000 so it's a more attractive proposition. It's a rapidly expanding market.

Jeff Mueller, md, Mira

The shower market tightened 3-4% last year, depending on the sub category. It's bottomed out and is starting to come up in a number of areas, but not fast enough. We'll come up a couple of percent from where we were in 2007 but we won't get to the 2006 level where everyone was 10% up.

My projection for 2008 is that as soon as the builders and landowners have sold off what they consider to be their excess stock we'll recover. If you want a leading indicator of when the market will recover, look at the inventories that people have of land and whether or not they're using it for building. That's the measure. Also look at the percentage of failures of consumer contracts.

David Gannon, sales and marketing director, Kudos

We grew another 12% in 2007 so we're up to a turnover of just over £13m, but there are people out there struggling. In general, the shower market is feeling it. It's certainly under attack from copycat manufactures from the Far East.
The marketplace is huge but manufacturers who are focused, bring in good quality products and provide good back up have a good chance of maintaining market share and combating the cheaper imports. If you buy for £100 and sell for £200 there's not much margin in it and you end up being busy fools.

We're cautiously optimistic, but we're not wearing blinkers. Three of the top five winners on the latest rally on the FTSE were building-associated companies. We were concerned about the North East because of the Northern Rock crisis, but our best retailer, with the best sales, is from the North East. He aims at a discerning customer. If you aim at the top third of the market it's not where the Far East are aiming. We hope Kudos should weather it better than most because of our market position.

James Cadman, md, Aqualux

We're expecting a tough year for the industry but we've had a reasonable start. House prices are showing a decline, rates are coming down but costs are going up and particularly the oil price is having an impact. The end of the year was was unusually quiet for many.

January also started quiet, but we picked up towards the back end. Potentially some of the high street will be shaken out. Certainly in the supply end that's happening. But the danger is that you over call it, you have to be careful. For us, it's about getting new products into new markets. If you don't, you just watch things decline. You have to be organised and structured and drive it forward.

Chris Smith, sales director, Abacus

For some, the hardening market is a problem but for emerging companies like Abacus it represents an opportunity. Retailers when trading successfully are less likely to change anything. Why would you? When business is tough to come by, ensuring your offer reflects some of the current trends is key, often that means Investing when you least want to. A quieter market gives retailers a chance to step back and assess their offer. We feel what they see is a changing market, one that's about packages of product and an alliance to Installation, that's where we're strong. Trading in today's bathroom market is about making yourself relevant, we're all having to work that bit harder to do that.

Anna Buckley, sales and marketing director, J Rotherham

Business has been a bit up and down. People don't have as much money in their pocket. But our average order value is going up. Retailers I talk to say they're not selling the lower value kitchens in quite the same quantity but they're getting more of the £25,000 plus clients. It's people staying put but improving their homes. That's why we're trying to show things that are bit different and even more so bespoke. The top end doesn't get affected in the same way. The market is slowing down but the media are talking us into it. People are expecting it to be worse than it actually is. We're all going to wake up and find the world is still turning and everybody is still buying kitchens and bathrooms. Yes, it will slow down, that's inevitable but I'm not expecting the catastrophe that everyone is forewarning. It will be a correction. We operate in the middle to top end and I think our customers are still out there and will continue to spend.

Simon Spridgeon, head of product management, Geberit

From our point of view it hasn't affected sales at all. I think there are concerns but there hasn't been a downturn yet. It probably won't come. House prices are going to level off or possibly drop slightly, but if people are less likely to move they're more likely to do their bathroom up where they are. If they move they'll change their bathroom too, so I always struggle slightly with the concept. The market will hold up OK, the top segment seems to be recession proof and our contract market is very strong. This year may be a little less but then we've got the Olympic project starting. We're still expecting a big year and big growth.

The people who aren't doing a good job are the people who are pushing the same old products and competing on price. It's a fool's game because you can always get something made cheaper in China.