KBBG managing director Bill Miller

INTERVIEW: Der Kreis

‘Buying groups have a big role to play’


KBBG managing director Bill Miller talks to us about his plans for the KBBG, why he believes it has shown that buying groups have something to offer in the UK, and why it chooses to work with suppliers who take the independent channel seriously

 

Q: Are your member numbers up or down?
A: This year, we’re on target to double our membership.

In September, we recruited a new member of staff to cover the North of England and he’s hit the ground running. We’re bringing in around two or three members a week.

There is a growing understanding about what we do and it’s certainly gaining interest.

Q: Why do you think this is?
A: Through the amount of communication we’ve been doing. We’ve been doing quite a bit on LinkedIn. We’ve done kbb Birmingham twice now and we’re doing it again this year. We’ve been working hard to spread the word.

It’s a combination of tools, services and our team. We have had to refine our offer and make it more UK-friendly. This includes building in some companies, such as The Used Kitchen Exchange, for example. We’re the only Der Kreis company that works with companies like Helen [Lord]’s, and this really helps to make us a global package and be more relevant and interesting to retailers.

Q: Why do retailers need buying groups, such as the KBBG, if they already have good relationships with suppliers?
A: It’s the most common question that we get asked by dealers – what’s in it for them? We offer a whole range of benefits, but there are three critical ones.

One is the company itself has over 40 years’ experience in the independent kitchen channel supporting dealers internationally. That experience is invaluable to help independent kitchen and bathroom retailers in the UK meet the challenges that today’s market throws at them. The market is changing rapidly. It’s probably changing quicker now than it has in the past 20-odd years. And from an independent’s point of view, it begs the question, where can you go to get real quality advice? Because we represent over 30 different brands, we can give some real quality assistance and help. Not all of our members want that, a lot of our dealers are experienced and know exactly where they want to go with their business. For those that do want suggestions on how they can improve their business, then we can really help. One of the things we’ve done is set up a mentoring scheme with long-standing and new retailers.

The second thing is, because we work with such a wide range of brands, we can link up the right retailers with the right brands.

The third thing we do, and probably the most fundamental, is we offer members the opportunity to get improved buying terms. Because Der Kreis turns over more than €3 billion a year, that gives us terrific buying power with all of the brands that we work with. We can share whatever advantages we negotiate with the members. When a retailer sits in front of a supplier, they can only negotiate on behalf of their individual business. When we sit in front of a supplier, we’re negotiating on behalf of 3,000 to 4,000 retailers all over Europe.

Q: Do you think the German buying group system could ever be fully recreated in the UK?
A: The German market is very different from the UK. The fundamental difference is that buying groups have been around in Germany for 40 years or more.

A statistic I heard is that 98% of German KBB retailers source their products through a buying group. So you can see how they dominate the market.

In the UK market, we are the longest-established kitchen and bathroom buying group working with independents and we only started at the end of 2013. We’re still very new to the market. If we go 40 years on, whether we’ll have 98% of dealers, it’s impossible to say. I think there’s a chance. When independents understand what we do and the benefits we give them, it’s an easy decision for them to make.

I think it’s unlikely that buying groups would ever get the market dominance they have in Germany, but they can have a big role to play in the independent market moving forward over the next 20 years.

There’s confusion sometimes with retailers thinking of us as a distributor.

The main difference is when a dealer works with us, they’re buying the product direct from our suppliers. They’re not buying it from a central warehouse and we’re not delivering the product, our suppliers deal with that because they’re the best people to do it. They’re the experts.

There’s still a lot of work to do in the UK in terms of advertising and gaining awareness of what we do and the benefits for UK retailers.

Q: What do you want to achieve with the KBBG?
A: It’s all about supporting the independents.

The majority of our members are on a high street location, most have been trading for a number of years. They’re under huge pressure, probably more than they’ve ever been in terms of rising rates and rents.

We’re looking at a way that we can enhance the group and make the KBBG even better by adding more brands and services. All of it is focusing on one thing – helping the retailer be the best they can be in terms of best service, best product, best price.

Q: Do you have a certain number of retail members you want to reach?
A: There’s an awful lot more we can do.

When we first launched in the UK, certain people said to me, ‘It will never work’, ‘Independent retailers in the UK will never sign up to this’. I think we’ve proved that buying groups can work in this channel. They work successfully in other channels, so there’s no reason a buying group can’t be successful in the independent kitchen and bathroom channel.

For us now, it’s about continuously building the membership and also the suppliers and services that we offer.

With the number of new members we’re signing up, we’re gaining some real credibility and momentum. I see no reason for that to slow down. I’m hopeful that we will recruit more on-the-road staff, give more service and support to the dealers and keep growing.

I don’t actually have a number in mind. It’s like anything in a business, there is no stopping point – we just continue to grow and develop and become as successful as we can.

Q: Why do you think people were so closed off from the idea of a buying group in the UK?
A: Perhaps a lack of understanding of what buying groups are and how they operate. It had been tried before on a very small scale, but with no great long-term commitment, as I understand it.

When Der Kreis came to the UK, they had a 10-year plan, and that’s what attracted me to them – they saw it as a long-term project.

I made it clear to Der Kreis that if they wanted me to head up the UK operation, this was not going to be an overnight thing. We couldn’t just come into the UK and within six months expect to have the job done. It was always going to be a slow build and that’s exactly how it has proved to be. There are a few naysayers in the market, but then again there always are.

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Those people who said that have actually now admitted it does work. There was bound to be scepticism, because it had never been tried on the scale that Der Kreis wanted to do it, and it could have failed.

When I looked at what I was able to offer dealers, I was very confident it would work. But there was always that slight worry that, no matter how good it was, they might still say no. But it is a proven route to market now and I want to continue growing, polishing and improving it.

Q: Are you seeing more suppliers starting to sell direct and undercut retailers?
A: I think some are getting a little impatient with the independents and have decided to look at other ways – some are doing it officially and some unofficially.

We’re trying to be very careful about who we work with. We’re in a lucky position, because we can pick and choose our suppliers. There have been suppliers that have approached us that we don’t want to work with, because we believe their route to market and policies are not suited to independents. I want to work with brands that take independents seriously and see them as the forefront of their business and are able to support them.

The brand that was very keen to work with us, in my view didn’t have the right infrastructure to look after dealers in terms of management, training and giving them good after-sales service. If we’re going to present that brand to independents then we’ve got to be confident that what we’re presenting is a really good offer – that it isn’t just about a good price and product, but also that the brand can be fully supportive.

It’s something that retailers should be mindful about. It sometimes surprises me that they’re not so mindful of the brands that they work with. They get a little bit too fixated on price. Whereas, they might be better looking at a supplier that can offer them a much higher level of service, because ultimately with independents that’s really what it comes down to. Prices are, of course, an important aspect, but surely the reason a consumer goes to an independent is to receive that perceived higher level of service. If they don’t get that, then they would probably wish they had gone to a national retailer rather than an independent. Sometimes you need to underline to independents that the service that they get from a brand is equally, if not, more important than purely the price.

Q: Do you think that’s how KBB specialists can compete with online and brands that sell direct?
A: I get frustrated because independents have a lot to offer the end user. Part of the issue in our market is trying to make independents visible to consumers. I think a lot of consumers probably don’t even think of going to an independent to buy a kitchen and bathroom, which is really disappointing and worrying for the market. This is the challenge that we all have in the marketplace. How do you make a well-established family business more visible to the end user?

The person that meets and greets the customer when they walk in to that showroom will be the person that is with them throughout the whole process. You don’t get that service from the internet or a national retail chain.

To a lot of end users, that connection is really important. I think sometimes independents forget the great things that they can offer in terms of service, product and experience.

The independents are definitely the best channel to go to, they can spend time and do research, and ultimately source the right product that is going to meet the consumer’s need.

Q: Do you avoid working with suppliers that sell direct?
A: It’s difficult. We try to have a mix, so that dealers have got a good choice of brands to work with. We have brands on board that take independents and their business seriously.

If retailers said to us they were becoming concerned because one of the brands we’re working with is doing something they thought was detrimental to their business, then we would certainly investigate it. If it was shown that that was the case, we might have an open and honest discussion with that supplier. But ultimately, if we don’t believe that a supplier is going to support the independent then we’ll cease working with them. We’ve actually done that with a brand. They wanted to go in a different direction and dramatically reduce the support they gave to independents in favour of doing more business online. I have no issue with that strategy, but it doesn’t really work for our business model. By mutual agreement, we decided that it was better for them and us if we didn’t work with them anymore.

Q: Are suppliers using Brexit as an excuse to increase prices?
A: I think they would fully understand that price rises can have a detrimental effect on business. My gut feeling is that the vast majority of price increases are genuine.

All brands know that although dealers may accept price increases, they are certainly not welcome and may make the dealer think of looking around for a new supplier. And that’s the last thing they want. There’s no great benefit to the supplier in unfairly increasing prices. I would be greatly disappointed if that was the case.

When our suppliers put up prices, and we’ve asked for the reasoning behind it, they have given us proof of where it is justified.

There are also examples of suppliers that haven’t put prices up and have taken a hit in order to continue to offer the best prices they can to customers. So it’s a mixed picture. I’m not sure how many brands are putting up prices more than they need to. That would be quite a dangerous situation and if any retailer thought that was the case, they are better off looking for another supplier.

We’ve been through a long period where prices have been very stable. I remember when we were in a similar situation, when prices were volatile and were going up regularly.

We’ve had 10 years or more where some brands haven’t moved prices at all. Now we’re back into a period of price volatility. A lot of dealers either can’t remember that period or weren’t trading then. So to them, it’s come as a real shock when prices suddenly start to move.

Unfortunately, whether you’re an internet dealer, a national retailer or an independent, you’re all under price pressures. It is what it is and we’ve all got to deal with it.

There’s a huge amount of uncertainty and nobody knows where it’s all going.

We’re a resilient trading country and we’ll find a solution. It may mean that it’s slightly harder to buy things, but the KBB market has proven over the years that it’s mentally resilient and can just deal with it and move on. And if we’ve got to pay a little bit more for a product, or we’ve got to fill out an extra form to get it through customs, I’m sure dealers will do what they always do – complain about it, but get on and do it.

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