What’s the point of selling appliances?
It’s a common refrain among kitchen retailers that they don’t make any money from selling appliances – is this really true? And if it is, why do they still do it and do suppliers really understand these motivations properly?
The appliance market in the UK is, of course, massive and in that huge sector one channel outsells all the others when it comes to integrated models – kitchen specialists.
In fact, according to JKMR, the independents are not just the biggest channel in value terms, but the proportion of a total kitchen budget attributed to appliances has done nothing but grow in the last 20 years.
So, given all this, how come many kitchen retailers complain that they don’t really make any money from selling them? And if the margin is significantly lower than other parts of the kitchen, why do they bother selling them at all?
The underlying cause of low margins will not come as a surprise – according to Euromonitor, online sales are anticipated to contribute 57% of total revenue in the total household appliances market in 2024. Easy comparison drives prices down and the debate over terms given to online stores versus physical showrooms is one we’ve all been familiar with for years.
Find the products that you can at least make a little more margin on rather than trying to sell products readily available online where it’s nigh on impossible to get anything out of it
Matt Lawson, Lima KitchensThis price pressure results in tight margins for everyone involved – from manufacturer to distributor to retailer – and we’re left with a significant focus of the kitchen for the consumer being an insignificant part of the sale for the retailer, as far as income is concerned anyway.
“We make a little on appliances but not a lot,” explains Jon Stewart from Vegas Kitchens in Folkstone. “We actually make more on rebates and incentives than sales. We probably only sell them because we have to as most customers want a one stop shop.”
This lament is a familiar one from many kitchen retailers, Matt Lawson from Lima Kitchens in Milton Keynes, for example, describes their appliance margins as ‘very tight’. “If you look at gross profit it probably looks alright but by the time you’ve got to net profit there’s very little in it.
“Companies doing cashback offers for consumers do help and there are also product lines that only showrooms can sell and that helps improve our margins. So, you have to find the right products that you can at least make a little more margin on rather than trying to sell products readily available online where it’s nigh on impossible to get anything out of it.”
While this is a common complaint, there are undoubtedly many retailers who do make a reasonable margin on appliances, or at least enough to make it worth their while. However, many of these have long-standing local reputations that allow them to sell at full RRP.
Andrew Macintosh, for example, who runs an eponymous kitchen studio in Chiswick, says he only sells at that price. “Having direct accounts and main displaying dealer status with two brands maximises our margin, but yes, it is lower than everything else in a typical kitchen bundle of products.
Appliances and me
Belinda Dangerfield, Quadus Living
While appliances are integral to our kitchen offerings, profit margins in this area can be slim due to heavy price competition, unlike units and worktops, which typically offer stronger margins.
Appliance profitability in our business often hinges more on rebates and incentives than on direct sales margins.
However, years ago, I made a strategic decision to focus on displaying and quoting appliances that are studio-exclusive and not available for purchase online. This approach allows us to maintain healthier margins on these products and offers clients products that aren’t widely discounted by online retailers.
Ultimately, our approach to selling and discussing appliances is crucial to the complete service we provide. Helping clients select appliances ensures all elements – from cabinetry to appliances – are cohesive in both design and functionality, which clients appreciate as it streamlines their experience and builds trust. Clients also often value the convenience of purchasing everything from a single, reliable source.
We do spend a fair amount of time discussing appliances during the design process, even though they don’t yield a high margin. However, we view this as an essential investment in creating a kitchen that meets the client’s needs in both functionality and style.
Enhancing supplier relationships could improve profitability in this area. For instance, greater transparency in pricing or more in-depth training on the benefits of each appliance model would enable us to convey value more effectively to clients. I encourage my staff to attend training days that offer hands-on experiences – Siemens and Miele particularly excel at this.
In the end, appliances may not yield the highest margins, but they are crucial for delivering a high-quality, integrated kitchen experience. The combination of appliances with cabinetry and overall design completes the client’s vision and journey, making them indispensable to our service and product offering.
“However, I don’t see it as a problem for us, and I don’t think we’re on our own. Going back 25-30 years when online discounting started it was more of a factor, but we have had a long time to develop our business model since then.”
For many other retailers though, the combination of low margins and onerous display demands have led to appliances being seen, as Trevor Scott from RFK in Rugby describes it, a ‘necessary evil’.
“In order to benefit from a trade price that affords us a reasonable margin, our principal suppliers enforce rigid criteria to ensure a significant proportion of our showrooms are dedicated to their products,” he says. “If we don’t comply, we don’t get the right discount and can’t make any money. Yet we train on the products, have live demonstrations and we know how best to design them into the furniture.
“And yet we are also expected to pay for the displays – albeit at a good discount.
“We prefer to be upfront and show an honest RRP to our clients which we are confident will hold up well against any online search, but that is often at a cost to our bottom line. We prefer to effectively loss lead with these products so we can supply the complete project and stay in control of the job.
“We try to hit a steady, reasonable, blended margin across all products supplied but if a high percentage of the job is made up of low margin appliances, then this is increasingly difficult.”
This idea of looking at the margin across the entire project rather than just focusing on appliances is seen by many to be a reasonable way of squaring this circle.
Richard Hibbert from KSL in Sudbury, and chairman of the KBSA, also takes this more pragmatic approach – albeit with clenched teeth.
“We make money on kitchens, and appliances are part of that,” he says. “It’s harder to make money out of individual items whether that’s appliances, brassware, sinks or anything else and we choose our suppliers based on quality, support and service.
“The bottom line is that we have a set of parameters our designers work to. Some companies quote appliances at an extra low price as this is something that consumers can check online but we don’t work like that. The way we sell is that the appliances are included in the kitchen – if they’re spending £30k on a kitchen, that’s all in, we don’t give individual prices and they’re not looking at the details.
“The bigger problem for me is that virtually all appliance manufacturers want a set percentage of display space and I keep saying to them that I only have 100% at my disposal. I’ve got some of them, even within their own groups, coming to me and saying they want 80% of one brand and 33% of another…”
So, given all this, why sell appliances at all? The simple and unsurprising answer is the need to have full control of the project – as one retailer told us, “Our customers come to us for a whole kitchen, not parts of it”.
John Lindsey, from Audus Kitchens in St Albans sums it up well: “Offering appliances allows us to manage the project end-to-end and gives clients a seamless experience, and that’s a big selling point for our business.”
Project management, design, service, and expertise are all huge parts of what makes the independent retail experience so unique and removing appliances from that process would, according to Nathan Damarell from KF Kitchens in Plymouth, fundamentally alter that.
“Good kitchen design cannot ignore methods of cooking, so the appliances need to be at the forefront of it,” he says. “To me, they’re not a necessary evil, they’re the starting point for design and if you ignore the appliances because they are not profitable enough, you’re not doing your job.
“The retailer needs to ensure they don’t price themselves out, but customers need to live with their appliances for the next 20 years and if the budget is too low, they need to increase it.”
Suppliers
Given the views of most retailers on margin, it’s not unreasonable to ask whether appliance suppliers really understand how independent studios work when it comes to displaying and specifying their products.
While they are a key element of every kitchen as far as project management is concerned, the relative margin can affect how much effort a retailer puts into the specification.
“Regardless of margin, we find most of our customers are not actually very interested in appliance specifications,” says Andrew Macintosh. “And we send the ones that are to the manufacturer showrooms on Wigmore St where they generally upscale their selections.”
Alex Jenman from Gainsborough Kitchens in Lincolnshire happily admits that he gets the appliance conversation over and done with as quickly as he can.
“Appliance manufacturers seem to think that we’re going to spend a lot of time discussing all the functions of every appliance, but we don’t. The truth is we spend a lot of time discussing the design of the kitchen and when we know the kind of money we’re talking about we want to get the appliance conversation and sale closed as quickly as possible.
“We have favourite appliances, they’re nice and easy, we can say they’re good, they’re right for you and here’s a couple of features that are relevant. Clients go with our recommendation 99% of the time.”
Is there an answer? What can brands and suppliers do to make appliances more profitable for the retailers that display them?
“Ideally, suppliers could support with better margin structures, offer more substantial rebates, or even provide tailored packages that reflect the realities of the retail market,” says John Lindsey, from Audus Kitchens. “But to reward you more, they all want more sales and that’s not always possible – but they don’t seem to acknowledge that, they just want more!”