Direct supply, buying groups and online competition has seen distributors placed under increasing price pressure, with demand for faster deliveries. How can the channel respond?

In an uncertain economy, the bathroom and kitchen has been put under increasing price pressure, with consumers firmly focused on value.

Savvy shoppers are seeking out the most competitive prices, particular where there is little discernible difference between products and services.

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And suppliers have looked at how to best deliver these to the consumer through direct supply, online and most recently buying groups.

This has been reflected in the market for distribution. Sales and marketing director of Frontline Bathrooms Michael Sammon comments: “A big factor has been the introduction of large online retailers with fast-moving product lines at low prices. It’s really changed the market place with some consumers now confidently buying a full bathroom online without viewing the product in a showroom.”

Director of MTW Research Mark Waddy comments: “This pricing pressure is resulting in serious margin erosion for ‘traditional’ or ‘mass market’ kitchen and bathroom distributors, with this sector accounting for less than 20% of the market in 2019.”

And he adds: “In 2019, distributors are set to be further ‘squeezed out’ of their traditional market positions by buying groups who are often more able to compete on price and continue to gain prominence.”

Under pressure

With the disappearance of once big-brands BCG, Cooper Callas and most recently N. Froy & Sons at the beginning of the year, it could signal a sticky end for the channel.

And despite doubling its turnover in 20 years of business, to more than £120million and outperforming the market every year over the last decade, managing director of IDS John Bagshaw says his company hasn’t always been successful in converting market share.

Managing director of IDS John Bagshaw

He says: “We are working harder to make less. We are caught in a downward spiral of diminishing returns and I think a lot of distribution companies are.

“You need a clear strategy and a focus to be excellent at everything you do in terms of productivity.

“Everything has to be maximum efficiency and you have to get it right first time or you’re losing money.”

However, there is still plenty to play for, as it should be pointed out the kitchen and bathroom distributors market is set to top £1billion in 2019, for the first time since 2008, according to MTW Research.

Product differentiation

Forward-thinking distributors have invested in their business to offer greater product choice for differentiation, stocking to improve availability and delivery to meet the expectations of the Amazon generation.

In fact, managing director of JP Distribution Graham Bucktrout says distributors are best placed to react to the demands of a changing market with fast-paced interior trends: “Distributors today have the ability to source market-leading ranges of products, selected from the best manufacturers and use their years of distribution experience to ensure an efficient, logistical supply.”

And distributors have broadened their portfolio, with brands and unbranded products to increase their market offer.

Certainly that’s the experience of IDS, as John Bagshaw says: “We have increased our product portfolio and focussed on innovation.

“We like to work with suppliers on an exclusive basis and we have a proven track record of sustainable growth, with many years or meeting joint objectives for growth.”

Waterline has also added to  its portfolio with Samsung and KitchenAid appliances now offered as exclusive brands.

However, own brands are also proving to be successful for retailers, as sales and marketing director of Frontline Bathrooms  Michael Sammon says this has been key for the company: “We strongly believe in offering branded products, as they credibility with the trade.

“However, the changing market has given us the opportunity to grow our own brand product offering as consumers are looking for high quality, design-led products that brands offer but at more affordable prices.

“The growth of the business over the past couple of years has largely been driven by our own brand Aqua Products.”

Stock and delivery

But the growth in distributor’s product portfolios has also been supported by investment in stock and delivery.

Graham Bucktrout of JP Distribution explains: “Both the expectations of quick delivery driven by online providers, coupled with generally lower stock levels within retailers/merchants, has increased the demand for an efficient, quick delivery service.

“That’s the skillset of a good distributor, regular deliveries to many branches and retailers.”

Chief executive of PJH Richard George

And chief executive of PJH Richard George agrees: “Next day delivery, class-leading customer support, fleet investment, as well as bringing new products, innovations and on-trend products to market far more quickly has been key to our on-going success.”

Managing director of Waterline Barry Head point outs its investment in stock and delivery: “We are proud to offer an extensive stock holding at our four locations for rapid nationwide delivery.

“We have recently expanded our installation-ready furniture serve area due to greater demand, offering increased capacity to our customers and providing a valuable opportunity for retailers to free up showroom storage space whilst reducing installation times.”

In addition, Smiths-Briten has invested £3million into a new HQ, The Sink Space has opened its first ever showroom, Davroc has invested in warehousing and IDS has unveiled a £1million distribution centre.

In fact, such has been the investment in IDS, John Bagshaw says it would be difficult to cite an exact figure “but it runs into tens of millions in stock, showrooms, new depots, IT, a wide variety of trucks from Artics down to Sprinter vans, marketing, training…the list goes on.”

Advantage of online

Certainly online has negatively impacted on profit margins, and continues to be a challenge, as Mark Addy of MTW Research reports: “Online retailers are set to account for 20% market share in the next few years”.

However, the increasing role of digital has also enabled distributors to open a better communication channel with retailers, enhancing service efficiency.

John Bagshaw comments: “We have 15 websites covering IDS brands and the other leading brands that we supply, together with a fully-transactional website for 24/7 online ordering.”

And following customer feedback PJH has recently invested in online ordering, as Richard George of PJH says it “initiated investment in Partners Portal, the company’s eCommerce platform that now underpins PJH’s online ordering system.”

Technology has also been key to Waterline which has partnered with Compusoft and EQ Software to enhance its online user’s experience, as Barry Head explains: “Working closely with EQ we are now able to incorporate all aspects of our quarterly Blue Book promotions into the data catalogue and proactively highlight to retailers the availability of promotional pricing as the quotation is created.”

Now customer facing

And it is the support offered by distributors to its retailers which not only maintains loyalty but also helps boost customer sales.

According to Mark Waddy: “In 2019, distributors are concentrating on offering more consumer-focussed marketing and promotion tools, such as POS, marketing campaigns, social media campaigns etc.”

And certainly that’s the case at Frontline, as Michael Sammon says: “We’ve had to become a brand that is more on-trend and consumer friendly than we were previously.

“The Frontline brochure, products and marketing campaigns are all focused on appealing to the end=consumer and this has really helped our retailers retain sales against the big internet companies.”

While the changing demands of the market may see distributors evolve their business, the relationship with retailers remains strong.

As Richard George of PJH concludes: “The retailer still values the customer service and support from dealing with a single point source for many brands and not having to manage multiple suppliers.

“Those distributors that can provide the best support to retailers will always have a future.”