Derek Miller from Scope Bathrooms in Glasgow discusses the pro's and con's of branded and unbranded products...

Over the past decade, the shape and structure of the UK bathroom industry has changed beyond all recognition. The advent of the internet (with its discount implications); the involvement of multi-national corporations; the opening up of China as a manufacturing economy; and the economic downturn in the UK and beyond, have combined to fundamentally alter the way our industry operates and how its supply chains are structured. 

As sales fall and margins are squeezed, many retailers have already gone to the wall, and countless others teeter on the brink of insolvency. One of the dilemmas facing surviving retailers (healthy or otherwise) is exactly what to display in the showroom, and what strategy to employ with regard to brand partnerships. Are bathroom retailers still better off getting behind well known brands or are their interests best served by going for unbranded suites, brassware, enclosures, and furniture?

What do we mean by branded?
The dictionary defines ‘brand’ as ‘a trademark or distinctive name identifying a product or manufacturer’. Some bathroom manufacturers (eg Laufen, Hansgrohe, and many others) make this easy for us by placing a brand logo on their actual products as well as on their packaging. However, other suppliers, who would lay claim to having a strong brand presence, do not actually burn logos into their products.

Typically these companies do not manufacture products in-house, preferring to outsource ranges from elsewhere, under licence. Such is the strength of their marketing message however that, in most cases, retailers would still class these as branded products and would sell them as such from the showroom. For example, although it doesn’t display logos on its products, it would be hard not to describe Crosswater as a brand.

A third type of supplier may well feature its lines in a brochure, but neither badges its products nor invests significantly in brand building (eg. Phoenix). Although such suppliers may disagree with my assessment, I believe that their products can be classified as unbranded. Other larger retailers also import their own unbranded lines, by the container load, from China, India and other developing manufacturing economies.

Pros and cons
To my mind, the pros of branded ranges are obvious: the traceability of badged products greatly increases the manufacturer’s accountability and gives the purchaser a relationship with the actual producer of the range. At the higher end of the market, an image-savvy customer will also relate to the lifestyle benefits portrayed by major bathroom brands and the famous designers linked to certain manufacturers. I’m certain that many a dinner party host or hostess has taken a great deal of pride – quiet or not so quiet- when their guests use the Alessi or Philippe Starck guest facilities.

Outside the retail world, brand associations are also highly desirable in the contract sector. It is never difficult to sell the qualities of Laufen, V&B, Duravit, or Hansgrohe to the aspirational housebuilder. My housebuilder clients for example always list their chosen bathroom brands in sales literature, knowing that this will add credibility, saleability, and perceived value to their properties.

The case in favour of brands is therefore fairly strong, but what of the disadvantages to the retailer? The 3 major problems associated with being brand dependent are 1- internet discounting, 2- internet discounting, and 3- internet discounting. Make no mistake, online trading is having an enormous, detrimental effect on bathroom retailers, as it is clearly far easier to lose a sale on a branded item, which is named, defined, and priced on a multitude of discount websites.

To support this theory, I checked discount levels on offer from a major online bathroom retailer that is owned by a multinational corporation. Here is a snapshot of my findings: Ideal Standard 28%; Kohler 25%; Laufen 20%; Duravit 25%; TC 36%; Bauhaus 20%; Roca 21%; Bristan 40%; Vado 20%; Crosswater 20%; Grohe 35%; Hansgrohe/Axor 25%; Hudson Reed 25%; Vitra 33%; Kaldewei 30%; Kudos 20%; Lakes 50%; Phoenix 30%; Novellini 30%; Roper Rhodes 26%; Simpsons 20%; Matki 20%; Mira 29%; Merlyn 30%; Showerlux 30%. Admittedly, some of the above ranges have artificially high RRP points supported by large discount structures, but these discounts still present some serious challenges to already bruised and battered bathroom retailers, especially small independent operators.

Some brands have acted to ensure that online discounts are capped at 20%, and indeed a few brands (notably V&B, Ambiance Bain, Daryl, and Utopia) appear to have eliminated it altogether, or at least have arrived at a situation where the online retailer advises to ‘call for a price’. When pushed for an explanation, most manufacturers will plead innocence and that they are prevented in setting appropriate controls by price-fixing law.

However, if manufacturers genuinely value the role of the independent specialist in promoting and selling their USPs , then quite simply they must find a way of protecting display outlets. Unbadged products (even from named suppliers) can theoretically be sold under any identity by retailers, thereby providing the opportunity to control retained margin. This will undoubtedly suit many smaller-scale, supply and fit operators.

Conclusions
I am not convinced that consumers genuinely wish to place their bathroom purchases online. However, they absolutely use the information gleaned from the web to hammer down price over the counter, leaving the bedraggled retailer with a ‘take it or leave it’ choice. We are often told by customers: “I can get this item online £100 cheaper, but I’d rather deal with a human being”. Yes I’m sure you would!

As a businessman, I also remain unconvinced as to the suitability of supplying bathroom products to individuals without discussing the item’s fitness for purpose and suitability relating to available space, waste provision, water pressure etc. I am certain that the ‘Goods Returned’ bay in many online warehouses must be packed to the rafters with goods purchased in error or through naivety. I can only hope that manufacturers are as draconian in their returns policy with the online traders as they increasingly are with ourselves and other retailers.

In truth, the final decision as to what is best for any showroom must lie with the individual retailer, who is wily enough to know what is correct for his company. My business partner and I have tried different approaches over the years but generally speaking still believe that the advantages of getting behind brands slightly outweigh the disadvantages.

Branded, badged products are traceable and, as a general rule of thumb, tend to arrive in the warehouse within specification tolerance time after time. However the risks are clear. My company, like any other brand-oriented bathroom retailer, must be prepared to provide far better service than online dealers and must enhance the sales experience by actually selling the benefits of a product rather than just taking an order. We must also accept unfortunately that the days of achieving 40%+ margins on branded goods are behind us, almost certainly never to return.

In conclusion therefore, branded products possibly still have the edge – but only just.

What do you think? Email the editor: tim@kbbreview.com