Richard Hibbert, KBSA national chair, explores product and service diversification as a way of combating a challenging economy, highlighting the elements retailers must consider before jumping in.
With a challenging year ahead it may be tempting for retailers to consider diversifying into other KBB markets to balance out any shortfall in income.
Expanding a portfolio can pay dividends, but it does require planning and is not always the best solution, especially if it is a knee-jerk reaction to a situation rather than a planned rollout.
There is also a lot of logic in adding similar product categories, one of the main benefits being that, as a specialist in one interiors field, you already have a database of customers to sell to.
Adding a new offering will require investment at some level, so maybe it is a strategy that is best deployed when there is profit in the business to invest. It can be risky taking on new products, without the proper preparation and there is also the danger that efforts could be diverted away from the core business.
A plan to consider these key questions is always a good place to start. A typical plan should cover: What products will work best? How will you display and store them? Do you need extra space? What will be your target market? It could be tricky to sell luxury bathrooms to your customers if your kitchens are more mid-market. How will you market the new offering? What will the financial return be? Will you need more staff to sell, design and install?
It may be prudent to start small and build slowly. As a kitchen retailer, for example, it may be possible to sell bedrooms. It can be an easier addition as they are similar to kitchens without the complication of working with water and electrics. Bedrooms have a quicker turnaround of projects and profit and the option of multiple rooms in one property.
Adding bathrooms is a very different proposition as the installation of a bathroom can be much more complex than a kitchen. Having a good installation team that understands the issues is essential.
Other options can be considered, maybe adding a contract or trade side to a consumer-only business. Commercial contracts work differently from domestic, so it would certainly pay to take some advice from others who are already established in this market. Contracts and payment terms may well not fit with your current business model. Opening a trade counter poses fewer risks and if space is available this a great way to generate additional income with minimal investment.
Whichever route a retailer considers, careful planning and seeking professional advice to help consider the pros and cons is likely to prove worthwhile, and could save money.