Ten years on from the recession, Glasgow-based bathroom retailer Derek Miller reflects on the havoc it wreaked and the benefits it has ultimately helped to deliver
July 1, 2008: a date forever etched on my memory. A date that, even now, can wake me up during the night and bring me out in hives. The first day of the second half of the year 2008, was the precise date when the lights went out for house builders across the UK, and left supply chain partners floundering in the dark in search of solutions.
The banking crisis had killed, stone dead, the capital required for developers to acquire land and build houses. It also made it virtually impossible for individuals to secure mortgages or borrowings. The banks were skint and were happier winding companies up than supporting them through troubled times.
Money started to haemorrhage and the nice man who had pushed the £100k overdraft in 2006 became Freddie Kruger in 2008 and demanded it all back by the end of the week. I have never trusted bankers since and, even now, don’t listen to anything they have to offer. Developers managed to build out units until the half-year, but then simply shut up shop, laid people off, and attempted to sell what they could to cash purchasers, at knock-down prices.
To be a successful bathroom contract merchant, it is necessary to buy stock at the correct price and work on lower margins, based on volume sales. With house builders struggling to push out one unit per month, it was almost impossible to get the right balance of stock and cash flow. To compound things, suppliers also got nervous and started to draw in credit levels. Some contract merchants were desperately unlucky: their customers sniffed blood and held back payments. It was a perfect storm of misery.
Such was the state of play when Scope entered its 10th year in business in 2008. Now that we are looking over the horizon towards our 20th, we can pause to reflect on the past decade and how the bathroom sector has changed in that period. It is impossible to judge the effects of 2008 and the resulting four-year recession in isolation when looking at how the bathroom industry has changed. There have been a number of factors that have served to change the KBB sector from what we knew pre-2008, to what we have today.
For example, the years 2009/10 coincided with the real advent of global trading in our sector. Chinese manufacturers had begun to make their presence felt in the UK prior to recession, but, with consumer pockets being hit, and house owners staying put, the economic climate was tailor-made for the cheaper prices of Far East products. More and more suppliers caught on to the potential of Chinese production and the new ranges obtained a proper foothold in the market.
This has changed our sector for all time, and introduced a multitude of new brands, retail chains, and online giants. Without the crash, Chinese products would still have broken into the market, but possibly not to the level that they have.
In the past couple of years, I have detected a return to form of some for our sector’s long-established brands. It probably took the invasion of cheap replica products to challenge the complacency of the European giants, but now that they have got their act together, the improvements are there for all to see. It is surely no accident that the high-end of our sector is buoyant once again. One or two haven’t learnt the lessons and need to understand that brand alone will no longer secure the sale, but those branded manufacturers with strong capitalisation have started to bring innovative, high-quality ranges to the market. Their aim is to launch products which are harder to replicate at lower price points.
Another outcome of the collapse and subsequent revival is the increasing importance of contract specification. Faced with stagnant retail growth and increased competition, our big brands had no option but to diversify. Most big bathroom brands now have dedicated teams focusing on house-builder and hotel specs, whereas pre-2008 this was the domain only of firms such as Ideal Standard, Twyfords, Shires, Mira , Roca and the like. I think this will be a permanent change.
Painful though it was at the time, our sector has ultimately benefited from the 2008 crash. KBB companies now work harder to achieve market share and success, and they run better operations as a result. The industry is more professional than it once was and a whole lot sexier. There are more products at different price points and consumers have greater choice. Current market conditions are pretty decent in spite of a world of political instability. The hugely important London market has slowed down somewhat, but the rest of the UK hasn’t been affected, and opportunities for growth are certainly available to those who remain hungry and focused.
The biggest lesson we have all learnt from the downturn years is to avoid complacency; it is simply foolish to rest on laurels and assume that we, as operators, can sit back and chill out. We have also learnt to avoid a top-heavy approach to overheads and spending.