For this month’s debate, we catch up with the owners of our ‘adopted’ kitchen and bathroom showrooms and retail expert Bill Miller, managing director of the KBBG, to discuss the challenges of launching a new showroom, the issues facing the retail market and the future of the industry
Q: WHAT STAGE ARE YOU AT WITH YOUR NEW BUSINESS?
Manish: We’ve only been open for six months and have already hit £600,000 turnover. That puts us six months ahead of the target we set for our first year of trading, which is fantastic for a fledgling business. Admittedly, we had a slow start, but March was a really strong month for us and ever since then our results have just got stronger. Our average sale has been between £50,000 and £60,000, something I couldn’t have predicted. We’re open seven days a week, and the hard work is definitely paying off, but at the moment I’m actually finding it tough to deal with the level of enquiries we’re getting.
Ryan: We’re 18 months in now and I’m happy to say it’s been really positive for us as well. It certainly hasn’t been a case of just opening the door to a flood of customers looking to buy a bathroom. It’s taken a lot of hard work, but it’s getting better and better. Our first year accounts came through – we’re already in profit and margin held out well, which is great. We’re a different set-up to Moiety, we’re more mid-market retail, so our turnover figures are a lot lower than Manish’s, but we’re ahead of where we budgeted to be at this stage, so I’m very happy.
Q: WHAT WOULD YOU PUT THIS EARLY SUCCESS DOWN TO?
Manish: I’ve been in the industry for a while, so I’d like to think it has a lot to do with the fact that I’m pretty good at designing and selling mid-high-end kitchens. My strategy for the business was to invest heavily in creating a really strong, design-led showroom to attract attention from the local community and generate business – and that’s really worked well for us. The location has helped us too, to be honest, because I firmly believe it’s the second best street in London to be selling kitchens.
Ryan: My time as showroom manager for Ripples set me in pretty good stead, it gave me the confidence to set up my own showroom. You can’t expect a business to just be a success, you have to be prepared to put the hours and the effort in to make it so. It’s full-on, 24/7. Every day is a learning curve, but that’s what I love about it. There’s no fixed end – the sky’s the limit when you run your own business and that’s what’s really exciting.
Q: WHAT CHALLENGES HAVE YOU FACED?
Ryan: For us, the biggest issue was finding the right funding. We got a start-up business loan from the bank, which obviously helped, but we had to rely on personal savings and help from family to pull together the rest. When I left my role at Ripples, I had enough money to cover costs, outside launching the business, for two months, so I was under immense pressure to get the showroom up and running and to make the business work right from the start. I’ve also found that you can budget as much as you like, but there are always going to be hidden costs. There were a few unexpected challenges. Structurally, the showroom had issues we weren’t aware of from the start – a lot of the lighting had to be replaced and we also had to find a £2,500 security deposit just to get the electric switched on. These were all costs I hadn’t factored in.
Manish: I’d based my business plan around becoming a Leicht dealer, because I was familiar with the product, but as there was already a well-established studio in the area, I wasn’t able to partner with the brand in the location I’d already committed to. The rug was pulled from under my feet, but I had to go with my gut instinct that the location was perfect and find other brands that would be able to share my dream and vision. Getting the showroom open on time was a big challenge as well. The renovation of the property was a huge undertaking and we had to delay our opening six weeks. The delay was obviously a challenge, but one I was happy to experience in order to get it right.
Ryan: We’ve also encountered stock issues. It seems to be a trend at the moment that when we go to order something, it’s not there. One brochure says ‘we always have furniture in stock – guaranteed’, yet I called them for three codes and they were all out of stock. It’s so frustrating. All consumers care about is that we get their bathroom done when we say we will, so it’s a big issue if we can’t get hold of the products they want. We just have to make sure that, where possible, the work can continue while making allowances for the missing pieces, or source stock from a different supplier. It takes retailers time and money to sort these issues out and we don’t ever get that back.
Manish: As a Siemens dealer, the BSH stock issues have affected me massively. I have 17 live kitchen orders that include Siemens ovens and microwaves and I still don’t know when the appliances are going to arrive. Issues like this turn projects into logistical nightmares with lots of hidden costs. I’m having to swallow the costs and survive the storm. As independents, Ryan and I rely on service and reputation to build our businesses and problems like this can really affect that.
Q: HOW DID YOU OVERCOME THESE CHALLENGES?
Ryan: I had a lot of support and advice from new business mentor Gareth Morgan in all areas of starting up the company. Having a good relationship with our installers really helped too, as they supported me really well when it came to fitting out the showroom as quickly as possible.
Manish: Knowing our fitters was also a massive help, because we too wanted to get the showroom up and running as quickly as possible. They had to go above and beyond at times, so that we could open the showroom and start selling. Joining the KBBG was also a good move, in terms of the brands we have access to and the support and advice I get from Bill [Miller, MD].
Q: AS THE OWNER OF A NEW BUSINESS, DO YOU FEEL SUPPORTED ENOUGH BY BRANDS AND SUPPLIERS?
Ryan: Overall, I’m happy, but in some cases I’d definitely like more support from reps and sales managers in terms of knowing what the brand expects from us, and advice on how we can improve performance to achieve those targets.
Manish: Even with the problems at BSH, the support we’ve had from our brands has been fantastic. Deciding to set up a kitchen studio in this area, where there are already lots of very strong, well-established independent kitchen retailers, was never going to be easy, but I have no doubt that the support we’ve had from the KBBG and all of our brands has helped us get where we are.
Q: WHAT WAS MORE IMPORTANT FOR YOU WHEN CHOOSING YOUR BRAND PARTNERS? WELL-KNOWN NAMES THAT CONSUMERS MIGHT RECOGNISE OR THE LEVEL OF SUPPORT YOU’D RECEIVE FROM THE COMPANY?
Ryan: Without doubt, it was the relationships we could build and the support we would get as a partner, rather than the brand names themselves, that swayed our choice. Of course, we have some key brands in the showroom, but we’re a mid-range bathroom retailer and, while some clients are brand-aware, others aren’t. Our clients are buying into me, my showroom and the service I offer rather than the brands we sell.
Manish: Price-conscious consumers tend to be brand-aware, but what retailers like us want more of are the consumers that buy into the experience, knowledge and service you only get from an independent. I’d bet at least 50% of our clients don’t know what brand of kitchen they have. They’re buying into Moiety and the service we offer, so they’d probably say ‘we have a Moiety kitchen’.
Bill: My pitch to brands is take independent retailers seriously and do not underestimate the power they have over consumer buying decisions. Most [brands] assume that the brand is the deciding factor. And while that’s probably true in some cases, the majority of consumers are actually buying into the retailer and their proposition. I believe brands must strengthen the support they give to independent showrooms. If they do invest more in support, independents would support brands further.
Q: WHAT EFFECT DOES THE INTERNET HAVE ON YOUR BUSINESS?
Ryan: We often get people quoting internet prices and if we matched them we’d only make 15% margin – that’s just not possible for us as a showroom. There are one or two bathroom brands that seem to be controlling the internet situation better than others. Duravit, for example, is very protective of its brand and certain aspects of the Laufen brand are also well protected. Hopefully, more brands will take better control of where they’re sold in future, so that showrooms stand a better chance of tackling the issue.
Manish: Certain appliance brands have done quite a lot to help showrooms compete against internet discounting, with the introduction of partner schemes and exclusive product ranges for instance, but there are so many that still don’t understand, or appreciate, the power of showrooms.
Bill: Retailers want products that are easy to sell and that they make good money on. Brands are naïve if they think that showrooms will always sell products, even if they’re heavily discounted online. There are few brands in this industry that a good retailer couldn’t just switch from and thrive without. Once a brand gets its head around that, it can work out how to give retailers more support in terms of training, marketing and giving them the best products at the best price. Don’t short-change showrooms by selling exactly the same product to an internet dealer who takes the rear end out of it and then wonder why dealers like Ryan and Manish complain.
Q: HAVE THERE BEEN ANY POSITIVE EFFECTS OF THE INTERNET ON YOUR BUSINESS?
Manish: We spent a lot of money on our website and have already had two leads from it, but we’re at the stage where it needs revamping. We’re updating it so that it includes a portfolio of our work and eventually it becomes an online extension of the showroom. Having a presence on social media is huge and we’re really active on Twitter and Facebook and it’s helping to drive the sales directly and indirectly through to the showroom. The thing with social media is that your presence has to be regular.
Ryan: Your website is essential. These days it’s the face of your business before people even see the showroom, so it’s got to be right. It’s got to make people sure they want to do business with you before they even get to the showroom.
Ryan: A website is key, but we see a lot of benefit from social media. We have a Facebook page and that’s worked brilliantly for us. Not only has it helped raise our profile in the local area and feed leads through the showroom, I’ve developed a fantastic relationship with a local fitter through it as well.
Manish: As I said earlier, to make social media work for your business you have to ensure you have a regular presence on each platform and be able to interact with followers. As a small independent that can be difficult, especially if, as the owner, your main role is selling.
Bill: All dealers understand the importance of having a good website and while some are getting more and more active on social media, it remains a mystery to most retailers. This kind of communication platform is an evolving science and a lot of KBB businesses are still struggling to understand the benefits and make it work for them.
Q: HOW’S THE MARKET LOOKING IN GENERAL?
Manish: In our experience, the market is very good at the moment. I’ve never seen so many cranes and so much renovation work going on since 2008, so it’s definitely moving in the right direction. The overall spend on projects is also rising.
Bill: The market is definitely moving in a good, strong fashion. What’s driving it is this trend for ‘improving and not moving’ and also the changes to pensions regulations. The quality of product available is also making for better showrooms and that’s having a positive effect on the market. The problem with an upturn, however, is being able to cope with demand. Lots of dealers I speak to need more staff, particularly designers, to cope with enquiries, but they can’t find the right ones.
Q: ARE YOU BENEFITING IN ANY WAY FROM THE GROWTH OF THE CONTRACT SECTOR?
Manish: I’m actually doing two kitchen projects for a small property developer at the moment. I recently got offered a contract to do 180 units as part of a much larger development, but had to turn it down because we just don’t have the infrastructure in place for that kind of contract work. The big difference between contract work and retail jobs is that I could, potentially, earn as much money from three or four large retail projects as I could from 180 units in a big development
Q: WHAT’S THE FUTURE FOR KBB RETAILING?
Bill: The days of having a traditional, static showroom and putting adverts in the local paper are long gone. People can buy through so many channels now that retailers have to give them a really strong reason to make them visit a showroom and buy from them. Time, of course, is money, so it’s obviously easier said than done, but hosting regular events is a really good way to make your showroom really stand out.
Ryan: In time, we want to host events like spa days, for instance. But, at the moment, finding the time to do that is hard, as our main aim is to increase cash flow. Once we’re more bedded in, these things will come organically.
Q: WHAT’S NEXT FOR YOUR BUSINESS?
Manish: We’ve done fantastically well so far, but there’s still a long way to go. So for us, the next stage is all about continuing the momentum. Moving forward, we will be looking to constantly improve ourselves as a business. We’re doing well, but we’re not about to rest on our laurels, so it’s about being proactive not reactive. I’ve already taken on a designer to free up a bit more of my time, so I can really concentrate on being front-of-house. As my business grows, I want to build a strong infrastructure of specialist, skilled salesmen and project managers. If I can get good, solid, key personnel in place, then we can really take this business to where I want it to be.
Ryan: It’s early days, but I’m really pleased with how things have progressed so far. We’re going to keep doing what we’re doing because it is working for us, which is great. That said, I’m actively looking to build key relationships in the industry, as I believe that is key for our future. I have no desire to move into kitchens myself, but I’m seriously looking to partner with local kitchen specialists in the hope that we can work together on projects. Expanding the showroom is also on the to-do list and we’re looking to recruit staff next year.
Bill: My advice to any retailer would just be not to get too complacent. Even if you’re winning jobs off the back of recommendations, you have to keep updating your showroom and website and get active on social media. If you sit back and rely on recommendations, you run the risk of letting your business stagnate. Both of these businesses are fit for the purpose now, but the market changes all of the time and your business has got to be fit enough to cope, so always be one step ahead. Never lose sight that you are the most important asset to your business.