Trade sales – the pros and cons
Consultant Paul Da Silva considers the benefits and downsides of dealing with trade sales and contract work and whether it would be suitable for you and your business
With the success of Howdens, Magnet, MKM and the many other trade kitchen outlets, a lot of independent retailers look at their success and wonder whether it should be an avenue they go down.
Firstly, you need to establish who your targets are. Do you want to sell to a number of small joinery businesses that buy one kitchen a week and are a regular customer to your business? Or do you want to sell kitchens in bulk for 10 or 20 plots at a time to one customer?
Let’s look at the first option, selling kitchens to local businesses who buy one kitchen at a time and also buy their silicone, tools and accessories from you.
This can be very lucrative and a regular source of business that could potentially guarantee you an extra three or four kitchens a month. But this business comes at a cost.
Let’s look at a scenario where the joinery company is working on one project every week. Due to an error, they work out that the 1,000 corner unit on the design will no longer fit, and they now need an 800. Their expectation would be that they would want to come down to the showroom, swap it over and take away their correct unit.
Could you service the customer that quickly? Let’s say your supplier will turn around units on a 10- to 14-day lead time.
That means the customer’s current project has to go on hold, and the project the fitter had planned in two weeks’ time will have to be interrupted for them to revisit the first job to finish installing the kitchen.
Finding the correct trade kitchen supplier is vital to this process. Ideally, if you are thinking of selling trade kitchens, your turnaround of stock needs to be 48 hours maximum.
Multi-plot sites can be a lot more attractive as they are only one order, but can mean tens or hundreds of kitchens. This itself comes with dangers.
If you miss a base end panel off one kitchen, it can be costly. If you miss a base end panel off one hundred kitchens, it can be fatal.
When dealing with large projects like this, orders need to be checked, double-checked and triple-checked. Plans need to be annotated within an inch of their lives and communication needs to be 110%.
There are, of course, other things to consider. Like should you have a separate trade counter for the contract work? I have previously managed mixed sites where I had retail and trade customers operating in the same space, and to be honest, I’m not sure either customer was that comfortable with it.
Tradespeople love the old-fashioned trade counter and retail customers like to feel like they are sitting in an exclusive space. Especially when the ticket value is high. So when the tradesperson comes in and drops a dust covered base end panel on the desk and starts talking about other issues there may be on site, it might not be a conversation you want your prospective customer to hear.
Also, when you are selling a retail kitchen, the chances are, you are also installing it. This means you are controlling the sale, the installation and project managing the whole deal.
When you sell to trade, there’s a good chance that the person you are dealing with isn’t the person who will be there installing it on the day. This is where questions, confusion and errors start to creep in. And who takes responsibility for this?
Both types of customer will also be used to working with credit terms, sometimes of up to 60 or 90 days, so that would also need to be addressed when assessing whether to deal with these buyers. I have seen many people having sleepless nights over the years waiting for six-figure invoices to be paid.
Could you handle such losses? Whether it be one kitchen or one hundred kitchens, there is always an element of risk with these sorts of transactions.
I guess it all comes down to time versus reward. One retail kitchen might earn you £10,000 profit. For that same profit, you might have to sell several kitchens to a developer.
The question you really have to ask yourself is, is it easier to sell one extra retail kitchen, or 20 extra trade kitchens?
I would say there is definitely profit to be had in selling to trade. But you need to make sure you have all your systems and procedures set up watertight, so everything runs like clockwork. It will take a lot of time, money and effort to get it right, have you got it to spare?