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The kitchen
and bathroom distributor market is substantial at some £825 million
turnover at distributors’ prices in 2006. The market had shown some
growth, but has slowed down over the last two years, in particular
reflecting a down turn in consumer confidence levels
The kitchen and bathroom industry
performed well over 2003 and 2004, with the shower sector in particular
producing good results. These trends were driven partly by house price
inflation building consumer confidence and acting as a positive driver
for a number of consumer durable markets, supported by high levels of
mortgage advances for home improvements.
A further factor influencing the
market has been the continued growth of the self-build sector, where
high quality fittings tend to be installed. The builders/owners in this
sector often demand higher value products and fittings, which are
differentiated in terms of style and performance and this can offer
opportunities for the distributors and their customers.
Late in 2004, rising interest rates
and further speculation of a significant fall in house prices dampened
consumer confidence somewhat, and this had a knock on effect on consumer
spending.
This has lead to a more difficult
period for the kitchen and bathroom industry with 2005 and 2006 both
suffering from more cautious levels of consumer confidence, along with
increased price pressure resulting from increased imports from low cost
manufacturing countries. Higher inflation driven by increased raw
material and power prices has also created pressure on margins in the
market.
The current situation remains one of
caution. On the one hand consumers are reasonably confident, employment
levels are high and disposable income continues to rise, but on the
other hand, interest rates are on a rising trend, inflation is rising
and the house price rises seen in recent years are diminishing.
Thus the market remains under pressure
and is unlikely to see good growth in the near term though should
experience improved growth levels in the medium term future.
The distributor market has
consolidated in recent years, with large merchant groups such as
Wolseley and Saint Gobain taking share, primarily through acquisition.
Most recently this trend has been reinforced by the BSS acquisition of
AHED.
Nevertheless the market offers
opportunities for regional and local distributors, as these more local
suppliers can offer a competitive edge by creating loyalty through fast,
efficient service and knowledge of the local customer base and their
requirements.
The larger distributors account
for around 60% of the market, with the larger regional organisations
accounting for a further 30% or so. The nationals would include the
major distributors PJH Group, Broughton Crangrove / Galley Matrix (part
of Wolseley), Mark Two, Waterline, BDC, Ideal Bathrooms, Neville Lumb,
Cakebread Robey (part of Saint Gobain Distribution) and Allied. In
addition AHED (part of BSS), Arrow, Maurice Lay and Stearn would also be
included.
The larger regional companies
would include Mark Abrahams / Robert Lee, Uptrend, Cooper Callas,
Scorpion, Farmiloe & Farmiloe, James Theobald, Sinks and Things, William
Ball, Micro Matthey, JP Distribution, Davroc, CRS Wholesale and Qualitex
etc.
There are estimated to be around
100-130 small, regional companies, distributing appliances,
furniture, sinks or bathroom products. Some of these companies are very
small, operating in a 'local' area, while others may cover a wider
geographical area such as Greater London.
Bathroom products continue to account
for the greatest share of distributors' business with 39% followed by
kitchen furniture with 25%, shower products, kitchen appliances and
others. Within bathroom products, baths and sanitaryware take the
largest share with 44%, followed by accessories and brassware.
The bathroom and shower sectors have
maintained share, largely due to the inherently fragmented nature of the
sectors and the proliferation of product choice. Also the growth of the
shower market has underpinned this sector and created additional
opportunities for distributors. In common with many other products,
cheaper imports from low cost manufacturing countries provides a
significant threat, as competitive distribution channels increase their
level of direct importing. Conversely this is also an opportunity as
more distributors themselves increase their level of own branding and
sourcing from overseas.
An increasing focus on the kitchen in
the media etc, has maintained the significance of this sector, though
the level of competition remains high and as consumer confidence
reduces, the impact on higher value kitchen purchases can be immediate.
In addition, consumers
are placing more emphasis on appliances, accessories and elements such
as lighting, in some affecting how much they are willing to spend on
furniture.
The free-standing cookers market is
dominated by the retail multiples who are very strong in microwaves,
washing and laundry appliances and refrigeration appliances.
Distributors account for a smaller share, though there has been
increasing demand for larger, higher value kitchen appliances such as
‘Range’ cookers and American appliances etc, supporting the
distributors’ position in the market.
The kitchen and bathroom distributors
have two major customer groups, the kitchen and bathroom retail
specialists which account for 48% of the distributors’ sales and the
builders merchants with 32%. Others include DIY outlets, other
retailers such as department stores, electrical independents and
contractors.
The kitchen and bathroom retail
specialists sector has been under pressure in the last two years
reflecting the more cautious consumer environment, though they remain a
very important part of the distributors’ customer profile. It is the
smaller and medium sized builders’ merchants who tend to purchase
from kitchen and bathroom distributors. However, this sector of the
merchant industry is declining as the major regionals and nationals take
share and an increasing number of smaller merchants purchase direct,
often using buying groups to get better terms.
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