December 20, 2020
The KBSA’s corporate chair, Malcolm Scott, gives his predictions for the industry over the next 12 months, as we head into 2021 off the back of a global pandemic that brought with it lockdowns and product shortages.
We have moved from a crazy, unpredictable year to a year of hope. From a business perspective, 2020 actually turned out to be a good year for some but a bad year for many. Supermarkets and many online retailers achieved record sales last year, with consumers spending large amounts of time stuck at home with little to do other than eat and shop online.
The pandemic also forced those consumers who usually prefer face-to-face service to learn how to buy online. The long-term consequences of teaching every-one to buy online are likely to be as profound as the move from predominantly high-street retailing to out-of-town retail parks in the 1970s and the move to large shopping centre destination points of the 2000s.
For many types of retailer, things have changed forever. But the kitchen specialist has been remarkably resistant to this and other wider changes in retailing over the years – responding quickly to technology changes, but making little or no change to preferred store location. A kitchen – like a new car – is an occasional and considered purchase. Consumers don’t expect to find retailers of such items within the traditional cluster of retailers and are, therefore, willing to travel further afield in order to receive the product and service they require.
For a complex purchase like a kitchen, the internet simply does not allow the consumer to judge aesthetics and quality – showrooms, therefore, are still essential. However, kitchen retailers are not completely immune from wider retail sector changes and the rise in consumer awareness of online retailing will certainly further squeeze margins on appliances, sinks, taps and other easy to research products within the overall kitchen package.
Signs suggest that kitchen retailers are already moving towards brands and models that are not widely sold online and that they will continue to demand ever more channel exclusive models from manufacturers during 2021 to limit margin erosion.
Appliance manufacturers, like everyone else, suffered greatly during the first Europe-wide Covid-19 lockdown of 2020, with sales plummeting for several months. However, the massive increase in consumer spending right across Europe during the second half of 2020 allowed most brands to achieve considerable second-half growth. The driving force for this growth was clearly internet retailers, although house builders pushed hard to increase the number of homes built during the second half of the year and most retailers bounced back with very strong second-half kitchen completions.
So, what of 2021? Well it certainly looks like many businesses have restructured and made necessary changes to enable them to trade fully within the restrictive environment of the pandemic. Consumers understand the short-term issues of social distancing and the like and, for the most part, are sympathetic to those retailers experiencing genuine problems caused by the pandemic.
Most consumers know that supply chains are disrupted and that jobs may take considerably longer, with gaps in the kitchen that may need to be filled after the main fit is complete. The biggest issue for retailers here must surely be the extra cost of repeat visits and the likely delay in final payment – both extremely difficult issues, with little chance of passing on extra costs to any other party. The only consolation during this difficult period is that consumers seem willing to accept reasonable alternatives to get the job finished.
So, will 2021 be a better year for our industry and the wider economy? I am ever the optimist. Firstly, there is no doubt that the pandemic of 2020 caught everyone off-guard. It is probably fair to say that there was not a single business in the UK that was ready for disruption of this scale. After more than nine months to adjust, almost every business is more prepared for uncertainty than they were this time last year.
We have the Brexit issue to contend with this year, but the disruption to the whole of Europe during 2020 has left all parties needing a smooth transition. The European Economic Community (EEC) has not been immune to the impact of the 2020 lockdowns and my view is that the individual member states are not well placed to cut off a substantial consumer market that’s on their doorstep.
Equally, the UK Government has borrowed large amounts of money to finance furlough schemes to try to preserve economic activity, so needs to maintain links with overseas markets that are close to home. The huge economic disruption of the pandemic must surely give strength to the groups on both sides of the Brexit table who wish to preserve as much economic activity as possible even at the expense of a few precious principles.
Let me end by saying that I fully expect 2021 to be a better year.
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