It was a year of ups and downs for SME businesses in 2023 and there’s no doubt that it was a challenging time for the KBB sector. Now in 2024, the cost-of-living crisis remains a concern for many, but interest rates are thankfully less volatile.
Order book: Stuffed or Sparse?
How healthy are your order books currently looking? The kbbreview Retailer Survey asked over 500 independent KBB retailers and found that:
- 58% were 2-3 months ahead
- 25% were 4-6 months ahead
- 10% were over 6 months ahead
- 17% were less than 2 months ahead
A healthy order book signals business strength, but a bulging one can send customers elsewhere, so it’s important to strike the right balance. The sweet spot differs for each retailer but tends to be around that four-month mark.
The economic pulse
We can’t deny that there have been stresses and strains in the industry thanks to economic uncertainty. Independents have always tended to target mid and high-end users as these customers are willing to pay a premium for the turn-key service you offer.
However, the middle has been squeezed in the current economy and they are now delaying spending. Kitchens, bathrooms and other home improvement items are aspirational purchases that can easily be postponed. This mid-range customer is now so money-conscious that they want to know the exact costs and then take the time to commit. Many people are also coming out of five-year fixed-rate mortgages and are cautious about spending until they know their new rates.
Customers that are continuing to buy are those with more expendable income, at the higher end. The lower end is significantly affected and either not purchasing at all or buying from cheaper online retailers. This is evidenced by the kbbreview Retailer Survey which found that 25% of retailers catering to the higher end of the market have reported higher numbers of enquiries compared to a year ago. In contrast, there was only a 13% increase for those catering to lower-budget customers.
At the start of the year, the British Retail Consortium cautioned that increasing living expenses will persist in putting pressure on household finances. Retail is an industry that is extremely sensitive to economic downturns, so it’s little wonder that 2023 was quieter. As we sit firmly in 2024, the picture is looking a little brighter. Houzz's 2023 State of the Industry report found that 62% of design and build firms reported having a "good to a very good year" and 67% reported an expected increase in revenue.
Whilst many consumers are still concerned about mortgage costs, we are also seeing green shoots in the property market which is directly linked to many retail purchases. As a strong indicator of consumer confidence, the property market saw Sales Agreed rise 15% in Q1 2024 compared to the same quarter last year. It’s common knowledge that when the property market is performing well, consumer confidence grows.
The upcoming election could also see a rise in consumer confidence. People may delay making big purchasing decisions until 2025. Conversion rates in the KBB sector are also showing positive signs. The kbbreview Retailer Survey found that around a massive 60% of enquiries result in a sale.
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How can you survive in 2024 and beyond?
The biggest USP of the KBB retailer is the personalised service you offer. You add real value to your customers. People buy from people, so you need to be trustworthy, likeable, creative and knowledgeable. Your reputation is the key to your success. How can you stand out from the crowd?
You need to have an eye on the future. As the economy begins to stabilise, you need to consider who your audience is and work out who has money to spend. The “not move but improve” market is a significant market to target right now as people invest more in their homes.
Our latest Property and Homemover Report highlights who moves, when and what goods and services are they looking for at the moment. We have also analysed the regional market for 1m+ properties as there has been a surge in sales – an ample opportunity for higher-end service requirements such as flooring, bathroom fittings, and fancy gardens.
Cutting back on your marketing is a bad move. You need to continually promote to ensure consistent enquiries. The kbbreview Retailer Survey found that two-thirds of KBB retailers are increasing their marketing. These independents driving their marketing campaigns forward will come out as the winners as they continually promote their brands and attract new customers.
Conclusion
The sector is showing a real mixed bag of performance. Retail insights poll organised by Kitchens & Bathrooms News found 38% said business was down on the same time last year. 31% said business was the same as in 2022. 31% said sales were up. Similarly, the kbbreview stated that 53% said enquiries and footfall were down but a fifth said they were up, and a quarter said they remained the same.
Retailers are having to work a lot harder to get deposits from clients. People want all the nice tech like a hot water tap but don’t necessarily have the budget. The biggest issue is that customers have smaller budgets, yet prices are 10-20% higher than two years ago, so KBB retailers need to be clever with designs to deliver within their client’s price bracket.
In KPMG’s latest consumer pulse survey of 3000 UK consumers, they found that 41% of consumers indicate they feel less financially secure as they approach 2024 compared to the beginning of 2023. In 2024, 58% of consumers plan to reduce non-essential spending, while just 8% anticipate spending more than they did in 2023. They found that people would rather spend money on a holiday than any other nice-to-have purchase.
Due to the high cost of home improvement services, it’s interesting to note that one-fifth of consumers had less than one month's wage of savings. Furthermore, one in ten individuals reported having no savings at all, a figure that rises to nearly a third among lower-income groups.
Market analysts expect that in 2025 higher incomes will result in higher consumer spending. In terms of the future, it’s really about finding the audience which is always ready to spend the savings on a new kitchen or bathroom and going after them. How about focusing on homemover marketing?
