Derek Miller of Scope Bathrooms in Glasgow considers whether a bloated KBB industry that grew to its current size during the boom years is still fit for the purpose in the post-recession new world order?

 

At the risk of upsetting any readers, I would like to start this month's article with a controversial statistic, namely: the bathroom industry is bloated with supply outstripping demand by a factor of at least 30%.

 

I must add at this point that such a bold statement is based upon gut instinct rather than specific research findings or industry analysis. I remain convinced however that our sector has yet to fully adjust to the new world order of recession and economic collapse.

 

The size and structure of the UK bathroom industry grew to its current level during the economic boom and has not shrunk to match the reality.

 

Quite simply, there are too many suppliers offering too many products to too many retail outlets and internet dealers.

 

If this bleak view of the situation is accurate, where does it leave the industry's traditional middlemen, the bathroom distributors? If retailers are feeling the pressure, then logic would surely dictate that distributors must be on their knees, begging for a way out of the maze of misery.

 

Yet there have been surprisingly few distributor casualties, certainly nowhere near the level that I have anticipated for some time. Why is this the case, and more importantly, what does the future hold for distributors? There has been an increasing level of criticism within the kitchen sector of the role of distribution, so does this also apply within the turbulent world of bathrooms?

 

The nationals

When we think 'distributor', we tend to think of the multi-branch, multi-range company that will deliver products to our warehouse doors on a 24 to 48-hour turnaround.

 

These guys have the largest stock profiles and on main ranges can normally respond to our last-minute emergency calls for the shower we forgot to order or the suite sale that has suddenly presented itself, as long as we can get it before the client's plumber arrives the day after tomorrow.

 

During the boom, companies such as Ideal Bathrooms and BCG became attractive takeover propositions for multinational corporations. In one fell swoop, the prowling multinationals made a capital purchase that gave instant access to thousands of new trading accounts and increased their purchasing power on famous brands.

 

Although revenues must have fallen considerably for such distributors in recent years, a massive parent company is perhaps rather more benevolent than the nasty man from Lloyds or RBS, so perhaps the takeovers came at a good time for the businesses?

 

However as we all know, multinationals eventually lose patience with poorly performing subsidiaries, so the next few years will make for interesting observation.

 

The regionals

Many retailers feel more comfortable dealing with a good solid regional distributor than a national one, especially when the latter is owned by a corporation that possibly competes directly with the retailer through a different subsidiary.

 

Regional distribution companies are usually independent traders. Traditionally, they have held similar ranges to the nationals, but many are now radically altering their portfolio in response to market needs. A good example of this is Barwick of Bradford, which, over the past few years, has complemented its branded portfolio with a range of own-line products, aimed at volume selling to their existing and new accounts.

 

It now offers ranges of enclosures, frames, furniture and heated rails from its own collections, which allows it to set prices and control margins. Branded products, such as Burlington and Clearwater, have also been added, which are available only from similar regional distributors within strictly defined market areas, thus again protecting their position against the big boys.

 

Such products won't appeal to every retailer, but they must help the distributor to at least be in charge of their own destiny to a greater extent. There are also a number of specialist regional distributors dotted around the country, such as RO Arnolds of Doncaster, which have a smaller portfolio of specialist products and which serve the needs of higher-end retailers on limited-distribution brands.

 

Clearly, the regional distributors have had to adapt most radically to changes in the industry, but the survival instinct comes naturally to the sort of canny, self-made operator who owns such a company.

 

Any company in any industry that depends on its ability to fund stock, especially in a ridiculously unpredictable market, must be blessed with a back-to-basics wisdom, and I am sure that it is this gutsy approach that has helped the stronger regionals to survive the harshest economic climate of our lifetime.

 

The biggest single requirement of any distributor is its ability to supply what you want, when you want it. As the discounting culture has taken hold of our industry, many retailers have looked to source ranges directly with better discounts than the standard 35 to 40% on offer from most distributors on branded ranges.

 

However, even the most battle-hardened retailer still uses distribution to plug the many gaps that appear in his supply chain.

 

In reality, most distributors are now in a position to offer their client base a range of discount structures that have increased their appeal in recent years.

 

There is also significant evidence that some large-scale retailers that have previously sourced in quantity, ex-factory, to sell from stock, are taking the pressure off their bruised cash flows by purchasing at competitive pre-agreed rates from local distributors.

 

Scale

Where many larger distributors undoubtedly struggle, however, is when they take on high-end international brands with countless thousands of complex variants.

 

Some ranges are very difficult to distribute ex-stock, simply because of the sheer amount of options available to the customer. The economic slowdown has not helped.

 

In better times, manufacturers would have made more deliveries into their UK distributors, thus ensuring that a four to five-week lead time on a special item was delivered within the four to five-week time frame.

 

In recent years, however, many four to five-week lead times have been pushed to eight weeks, which undoubtedly becomes a problem for the retailer awaiting final payment from a frustrated client.

 

In my opinion, when a distributor takes eight weeks to supply something, they are not really acting as a distributor. Where high-end ranges cannot be supplied on a direct basis, I would argue that the smaller regional specialist distributors have the technical know-how and wherewithal to serve the retailer better.

 

Are large distribution companies able to make a proper return from such complex ranges? Time will tell, but I have my doubts.

 

While my own supply chain model is not particularly reliant upon distributors, we do source from them when required and are usually happy with the service.

 

While they may not be as central to the industry as they once were, distributors still provide an important service to retailers. The best ones have developed new strategies and have adapted to the needs of a very turbulent market-place.

 

However, larger distributors must be honest with themselves about where they are strongest and take more charge of their own destinies.

 

Going back to my opening gambit, however, any industry where supply outstrips demand, such as ours, must face reality and suffer the consequences.

 

I fear at some point that distributor casualties will be inevitable, although I hope I am wrong. When that sad day arrives, retailers may just have a pang of nostalgia for the good old days.