MHK Retailer Roundtable

What are the real challenges facing retailers today?

Running a retail business can be fraught with issues. But you are not alone. We’ve brought together MHK buying group retailers to talk about the day-to-day matters affecting their businesses and get some practical tips and advice on how to deal with them

TORBEN SCHMID : Owner, Torben Schmid Kitchens, Truro -  A small, family-owned kitchen showroom selling around 40 kitchens a year. Launched two-and-a half years ago, the business is retail focused, but does work with small, high-end developers. The husband-and-wife team employs one part-time designer and three subcontracted teams of fitters.

PATRICK MCGRATH: Managing director, McNally Living/Kube Interiors, Ireland and UK - A larger operation, Kube Kitchens employs 85  people and has nine studios in the UK and Ireland – two operate under the McNally Living brand. It does around 2,000 kitchens a year with a 60% retail and 40% contract split.

JOHN MCNEIL: Owner, Haus 12, Newcastle - Launched 15 years ago, this is a small, family business operating out of a converted railway viaduct in Newcastle city centre, specialising in premium German kitchens. Haus 12 is predominantly retail-driven, but it does work with developers on small-scale schemes.

Question 1: To get the lie of the land, let’s kick off with how’s business at the moment?

Torben Schmid: The customer has changed slightly, so what we’re finding is that we have to do a lot of additional work to help get the sale over the line at the moment. But generally, we’re still busy. We’re looking at four weeks on design; we’ve still got customers chasing us on pricing and design queries, so we’ve got loads going, but it has changed. I’d say that queries and business are back to pre- Covid levels.

The pressures on supply that we experienced over the past two years have eased but one pressure has been replaced with another. We’re now dealing with clients that have smaller budgets against higher prices, so the onus is on us to try and be cleverer with the design process so that we can still deliver the kitchen they want but within their price bracket.

John McNeil: We’re seeing a very similar picture. We now use six German kitchen suppliers because our customers are much more geared towards finding the best possible quality and style that they can, at the price they can afford. So, we’re trying to service that as best we can. What I find reassuring about the challenges today is that everyone seems to be in a very similar position – both in the UK and Europe.

Patrick McGrath: We’re experiencing a little of what the guys have described too. We measure footfall across all of our showrooms in the UK and Ireland and it’s around 2% down overall on last year for the first five months. Which is quite good given what consumers are reading and hearing about inflation and all the other bad news that’s in the press about the cost of living. We measure conversion levels across the business too and that figure is also slightly down overall. We are having to work a lot harder to get customers’ deposits.

Question 2: How are you adapting to this change in consumer behaviour?

PM: To tackle this change in consumer behaviour and conversion rates we’re doing a lot of work with our designers around back to basics. What we’re doing is trying to encourage our designers not to ‘over-design’. By that I mean, getting them to really understand the customer’s budget and design to that figure with the must-haves rather than over-design with all the nice-to-haves and disappoint them with a kitchen they can’t afford. The challenge there is that we are having to temper enthusiasm among our designers.

JM: Customers are led by social media so much these days too. They’re seeing all these fantastic, innovative products and design ideas but, because they either haven’t bought a kitchen before or not bought one for a while, they just have no idea where they sit in the marketplace. Whether it’s a vented hob, or a boiling water tap or tap that delivers chilled or sparkling water, they want it all. The challenge is not just fitting that into a space, it’s fitting it all into budgets.

TS: The requirements are the same, the expectations are the same, but the budget is now very stretched, and this is the sticking point. We’re having to deliver a kitchen package that is now costing 10% to 20% more than it was two years ago, but for a customer that is now tighter on cash than they were two years ago as well, there’s a real adjustment required on what we’re having to do as designers.

JM: What we’re finding too – and what’s making it so difficult to navigate – is that with squeezed budgets, there’s very little room for compromise from the customer. It’s like playing a game of Tetris. They want it all so for us the challenge is which area of the kitchen takes the squeeze? That’s why we’ve got so many different brands and price points to try and accommodate that. If they really want all these innovative appliances or a specific worktop, what we’re doing is educating them that maybe it’s the brand that changes? We’re giving the options that allow them to consider going down from say Bentley to Mercedes. That’s how we’re tackling it.

Question 3: How open to compromise are the customers in this scenario?

TS: The conversations we’re having at least, show that our customers understand that prices have gone up but actually they are open to compromise, so we can guide them to alternatives that offer quality but at a different price point. We’ve got options out there, but the challenge is that even last year there wasn’t such a squeeze.

PM: Because we have multiple showrooms, we have to develop standards. So now, as a standard, we give three quotations – a good, better and best option based around their budget. We’ve also created good, better and best packages across all of our product categories to make it as easy as possible for our designers to address the budget squeeze and still enable them to meet the needs of the customer.

JM: As a small business, we just don’t have the luxury of designing kitchens all day long. The reality of running a small business is that design is just one aspect of the day-to-day. We’re also involved in project management, the accounts, entertaining customers, etc. There are lots of challenges for a small family-run business.

Question 4: Considering this squeeze on budgets and the changing consumer, how much competition are the multiples to your business right now?

TS: There is plenty of competition in our area and everyone does a great job – they’ve all got an offering that suits their market. We’re not like London in the sense that we have showrooms every 10 metres – our closest showroom is probably about 15 miles away – but people tend to travel more in this part of the country. There are other independents offering German kitchens like us, then there are independents with a more British kitchen offering and the national chains as well. The key is service. People will come to us if we’re delivering fantastic products with a level of service the customers expect and appreciate.

PM: Our main competition is with the national chains and independents but also a lot of independent fitters doing kitchens as well. But I agree with Torben, it’s about understanding the level of service that you have to offer to appeal to your target clients.

JM: The competition in Newcastle is important. There are a lot of nice showrooms out there – some of them bigger than us, some smaller – and they all do different things. I welcome it because I think by shopping around, the clients will understand that we are a German kitchen specialist. That’s what we are good at.

Question 5: There’s been a lot of talk recently about digitalisation and how businesses need to embrace it to succeed. Where are you at on that journey?

TS: We do a bit of social media. We’re finding that a lot of our customers are coming to us through recommendation, and we don’t need – or aren’t looking for – that many to keep the business ticking over. Fifty kitchens is a really busy year for us. That said, we understand the need to embrace it and we see a value in it. We’re getting our reviews online and we’re on Instagram.

PM: Digitalisation is something we are investing a lot of time and money on. Our website is currently being redesigned to make it much more of a fitting front window for the business and we do a lot of work on social media. We’re working towards a much more structured social media approach now as consistency is very important – currently we’re posting four times a week on Instagram. What works really well for us is before-and-after project pictures.

These are just using photography taken on the fitter’s phone, so it’s really achievable. We employ a part-time marketing person who manages the social media as well. We look at reach, engagement likes and saves to assess what types of posts work and the results help to determine the content for the following week. Aside from the social media and website aspect of digitalisation, we’re also using it to look at streamlining processes through automation to improve efficiencies across the business.

MHK Roundtable

JM: We jumped into social media around 15 years ago – so we were early adopters. What we found quite quickly was that the key to the success of each post was down to the quality of photography. So, we employ a photographer to take pictures of every kitchen we fit. Because we became active in social media and because our pages took off, it soon created a level of additional tasks that my wife and I couldn’t manage. So, we use a social media management company through our MHK membership. They keep our social media rolling and we just add to it as and when.

PM: Regardless of the size of the business, the reality is that the customer is online. So, I’d say it’s a matter of deciding what digitalisation means to you as a business owner. Finding out what platforms your customers use regularly and where they gather their information online from, for instance, is key. There’s no point posting on Facebook if the majority of your customers only look at Instagram. You should also use that to determine what kind of content you post.

Also, for you digitalisation might not – and doesn’t have to – mean employing someone to manage your marketing. What’s key is acknowledging what’s right for your business. Things are changing and it’s up to us in our own, individual businesses to recognise what that change looks like and what do we need to do in our own businesses to take advantage of the change and to not get left behind.

Question 6: What is the biggest challenge you’re facing at the moment?

TS: Personally, for us it’s time. Having enough time to do everything to the standard you want to do it to. I’m sure that goes for everyone running a business to be honest. Aside from that, the need to adapt is a big challenge.

JM: Keeping the plates spinning without letting standards drop is the biggest challenge.

PM: For me, it’s about making sure that the standardisation in terms of processes doesn’t get in the way of building that personal relationship between the designer and the customers.

Question 7: Considering the uncertainty coupled with the changes – digitalisation, consumer behaviour, squeeze on budgets etc – how confident are you in the longterm success of your business?

TS: Confident to be honest. We’ve had a really strong first two years. Obviously, under exceptional circumstances, but we’re still really busy. We have a good, strong pipeline of orders coming through – a good level of enquiries. At least until the end of this year we’re solid. Let’s see what next year brings, but we’re ready to face any challenges.

PM: We’re optimistic about the future as well. On the contract side we’re already working on 2024/2025 projects so that’s looking very positive. There’s a housing crisis in the Irish market – we need thousands of new houses – so we’re confident there’s a market there. The challenge for us is to adapt to the market changes.

Retail-wise, certainly in Ireland, the consumer is uncertain, but we’re confident that we’re doing the right thing as a business to make sure we get our share of the pie when they do spend. I also think it’s about not panicking, even when you have periods where the traffic through the showroom isn’t great. Stick to your guns, be true to your strategy and keep believing in your proposition.

JM: From my standpoint, I’ve seen the business through the financial crash of 2008. Covid’s come and gone. We’ve had a dip followed by two boom years. For Haus 12, everything stays different. Don’t hold on too tight, be willing to adapt and make changes when necessary.

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