Many are attracted to the KBB business by the lure of big- ticket prices. But with those come big risks. Wayne Dance, MD of InHouse, highlights the main pitfalls and how retailers can build a business that will stand the test of time
The KBB industry is seen by many who enter it as a golden goose – an opportunity to earn big money. It’s easy to understand why.
First, you have the big price tags on kitchens, bedrooms and bathrooms and the availability of vacant premises. These are likely to have stood empty for a long time, making landlords willing to offer attractive rents with deferred commencement, which buffers the cost of opening up and fitting out displays.
Add to this various manufacturers who offer kamikaze deals to new retailers to display their products. Then you have installers who offer their services either way below normal price, or in some instances free of charge, in return for a promise of the future installation work on end-consumer sales. When you put all this together in a business plan blender and press the mixer button, it makes a very appetising pie.
In reality, it’s not quite as lucrative or as easy as it all sounds. Two out of every three new home-interest business start-ups fail in the first three years of opening. There are various reasons for this, such as being underfinanced, in the wrong location, choosing the wrong supplier, being naïve about business, poor customer service or even the prevailing economic climate. These add up to the main reason for bankruptcy: cash flow – or the lack of it.
How does a retailer ensure they can survive? What is the blueprint for a successful KBB retail operation?
The first major consideration has to be getting your research and planning correct from day one. If you were building a house, you would make sure the foundations were sound. If you built a house on quicksand, the outcome would certainly result in collapse.
Once you are sure that your research has given the right demographic, the right location and the right suppliers, you then need to ensure your business is not underfinanced. This is to protect yourself in the event of a quiet spell, so you don’t go into starvation mode and create cash-flow and credit line issues.
Planning the right displays and targeting the right audience should go hand-in-glove to avoid becoming just another pea in the industry pod.
In order to maximise margins, a retailer needs to stay above the levels of the mass-market giants, such as the sheds. Create designs that are hard to copy and are not easily accessible from competitors. This way, you are creating a select market for your business. It’s too easy to get obsessed with price.
Price is important, but it’s not the most important reason to buy. If it were all solely about price, we’d all be living in the cheapest houses, driving the cheapest cars, wearing the cheapest clothes and eating the cheapest food.
Brand awareness and value for money should be the core focus of a retailer’s marketing attack. That’s why InHouse as a supplier has spent more than £1.5 million creating brand awareness for its network.
Love it or loathe it, the internet is here to stay. It can be both instrumental and detrimental to business, because it opens up a much larger choice for the consumer. Again, this is another reason to market yourself above the rest.
The worst thing that can happen to a retailer is when he or she bears the cost of a showroom where a consumer can see, feel and experience the products they are interested in, then spends the time educating the customer, only for that customer to go to a cheaper, online supplier who’s done very little to earn the order. They have no showroom overheads, and they are therefore able to steal the order purely because they are cheaper on price.
By being clever in what you are offering, you minimise your risk and increase your margins. Charge a nominal fee for plans being released so as to protect your design. This might be a £500 release fee that will be refunded once the customer places an order. This prevents the time-wasters using your skills to defect to the cheapest bidder for a similar look. After all, they are coming to you for professional advice and you are investing time and hard-earned experience in providing them with a design.
You wouldn’t expect to go to a lawyer for four hours’ worth of free legal advice, would you? Their rate is likely to be at least £250 an hour. In reality, you are a similarly specialised adviser. It’s far more profitable to have customers who have committed to working with you, than it is to spend time chasing deals only for them to walk out the door.
When planning your marketing campaigns, highlight these USPs on social media, so that the viewer is intrigued by its attraction. Use relevant hashtags for your local area or your USP.
Most importantly, once you win the order, make sure you deliver on what you’ve promised. A happy customer today is a referral for tomorrow. And referrals are the most profitable sales. Every stone dropped in a pond creates ripples. The more satisfied customers you have, the more ripples and positive referrals you create.
However, the opposite is also true. You may do 999 things right and one thing wrong, but it’s always the one wrong thing that crops up in conversation. So make sure that the customer is perfectly happy.
Ask them if they wouldn’t mind writing you a referral letter that you can add to your website with before, during and after pictures.
Remember you get one chance to make a first impression and first impressions last.