Pitfalls, pain and pleasure

Swift Electrical commercial director Malcolm Scott gives his take on the pros and cons of getting involved in the contracts market

Should kitchen studios be more involved in the contract sector? Many already are, but it’s an area full of opportunity, pitfalls, pain and pleasure.

When my daughter Sophie was born 25 years ago, I was the northern regional manager for Waterline. I left the hospital just after the birth to travel straight to a crisis meeting in Hull with a kitchen retailer who had just advised me that the three kitchens I’d sold him a month earlier would never be paid for, as the builder he had fitted them for had ceased trading and reformed overnight into a new legal entity.

In 2008, north-Wales builder David McLean Homes, which employed 130 staff and had a turnover of £160 million, unexpectedly called in the receiver, resulting in a loss for Swift of nearly half-a-million pounds.

On the other side of the coin, I left the kbb Birmingham 2012 show one day early to travel to a Fairview Homes development in London, where I picked up a single order for over £600,000 of Whirlpool appliances. And of the 2,464 trade accounts who have purchased from Swift so far this year, five of the top 10 are contract customers.

So, the answer is ‘yes’ to contracts, but with the proviso that you choose very carefully. ‘Contracts’ is a very wide umbrella covering everything from new house building and refurbishment to student accommodation, local authority work, buy-to-let and major construction projects.

In the new-build sector, the top 20 builders have a joint turnover of over £11 billion a year and build well over half of all UK homes. This group of majors are very well covered by specialist contract businesses like Alno Contracts, Moores Furniture, Symphony, BK Nolte Contracts, Project Kitchens, Stuart Frazer Contracts, and many others.

The opportunity in new-build for kitchen studio businesses must, surely, rather be with the local bespoke builder sector, which is probably about 5% of the market. These smaller builders specialise in ‘upmarket’ homes, where the client is often given a budget to select their own kitchen from a ‘tied-in’ retail showroom.

There are a number of small showroom businesses who take on contracts for developments with typically 20 or 30 kitchens over six to nine months, but this can be a very demanding undertaking, tying up cash and eating up staff time. Some make it work for them. The bigger the builder, the more regulations and complicated contracts there are.

It may surprise you to learn that around 10% of all kitchens supplied in the UK last year went to ‘buy-to-let’ landlords. A big proportion of these are local business people who own just one or two properties who, unless approached, will typically buy from Howdens or a builders merchant. To keep rents high, many smaller buy-to-let landlords are willing to spend a bit more on the kitchen and, since they want a local ‘one-stop shop’, they will deal with local showrooms who target them.

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