Despite a growing economy, kitchen and bath dealers continue to face challenges when it comes to profitability. Rising material costs and projected labor shortages are driving up costs in a time when memories of the Great Recession still have many consumers battling some residual price sensitivity. Online competition also continues to be a factor in today’s market, with consumers often pricing out products online using their smartphone – sometimes without even leaving the showroom. All of this makes staying competitive more important than ever.
Yet for kitchen and bath firms who do only a few dozen – or even a few hundred – projects a year, getting the best possible price on products and supplies can be a challenge.
Buying groups offer one solution for cutting costs through shared purchasing power. The idea is for multiple small kitchen and bath firms to work together as one, giving them the buying power of a much larger company. This can result in significantly discounted prices.
Of course better pricing is just one part of what these organizations are all about – and some would argue that group purchasing isn’t even the most important benefit. Rather, members cite business help, networking opportunities, skills training, industry friendships and access to member-only services as a big part of what makes buying groups worth joining.
According to Leah Peterson, executive v.p. of the Charlotte, NC-based SEN Design Group, “The biggest benefits of buying groups for kitchen and bath dealers and designers are purchasing power and networking.”
Tom Cohn, exec. v.p. of the Bethesda, MD-based Bath & Kitchen Buying Group (BKBG), believes that buying groups make independent showrooms “more profitable, easier to operate and more professionally rewarding.”
Brian Penabad, v.p. of the Marietta, GA-based FEI Group, parent company of KBx and K&B Alliance, agrees: “There are so many benefits, but networking with like-minded entrepreneurs and learning from other business owners is far and away the biggest. Members share both successes and failures with one another, how they’ve struggled and how they’re thriving. This type of front line knowledge is invaluable to becoming a better, more forward-thinking business owner.
“But there’s a bonus,” he continues. “While you forge business partnerships that will help you guide, position and shape your business for tomorrow, you’ll also form lasting friendships and create incredible memories with a first-class group of true professionals.”
Jeff MacDowell, director of the Luxury Products Group in Aurora, OH, agrees that friendships and networking are part of the added value members derive from these groups, but he cautions that it’s important to understand that despite their benefits, buying groups aren’t one-size-fits-all. He suggests, “If a showroom is considering any buying group, they should really look beyond just what products that group offers. They should speak to some of the members to see if there are similar qualities to their [own] showroom, and if the group is an actual partner of both the vendors and membership. If you have a one-way street on either side, it may not be the best fit. Too many kitchen and bath showrooms do not understand who their real competition is, and a buying group can help clarify that by giving a showroom connections to other similar showrooms for advice.”
While the basic concepts behind buying groups might be similar, each group has its own unique personality, benefits, character and vendor relationships, so finding the right ‘match’ is more likely to lead to a positive experience.
According to Peterson, “The benefits of SEN go far beyond buying power and networking. Our members average 31% higher gross profits than the industry average. SEN provides the business education, coaching, exclusive business software, marketing tools and manuals that are second to none, the best in the industry. Whether you’re fluent in business best practices or a novice, we can teach you how to make real money in this industry.
“We have a member that joined two years ago after the owners met us during their first trip to KBIS. The SEN booth was showcasing our Network Management System software (SEN NMS) and they had just started a small cabinet business outside a major metropolitan market. Fast forward and this couple has picked up three SEN-vendor partner cabinet lines, completed our 1:1 business coaching and a three-year profit plan, completed our four-day Business School and run their business off the SEN NMS. They are now a $2.5 million business and they expect to double that in 2018. That is the power of SEN.”
Members, she notes, will “accelerate revenue growth, productivity and profitability.” In short, she concludes, “You will earn more and learn more with SEN.”
BKBG is unique in that it is “the only shareholder-owned group kitchen and bath purchasing organization in North America,” according to Cohn. “The group operates with an owner-driven focus on improving shareholders’ profitability and operating efficiencies, and keeping shareholders in front of the style curve.”
Cohn notes that, “BKBG also helps its shareholders improve customer experiences and refresh their showrooms by providing funds to change older, dated or obsolete displays with new offerings from BKBG Preferred Vendor Partners.” He adds that the group’s peer-to-peer networks comprise those with similar business models in noncompeting markets that meet face-to-face at its annual conference to discuss trends, market conditions, HR practices, marketing efforts and other aspects of owning and operating an independent showroom.
Other benefits include everything from a weekly blog with content that shareholders can use on their websites to a monthly magazine that profiles showrooms and manufacturers to a career center that connects graduates from the nation’s top design schools to kitchen and bath member showrooms seeking new talent.
Of course money matters can’t be discounted. As Cohn says, “If someone left a bag of money at your front door, would you pick it up? BKBG delivers a bag of money to its shareholders’ front doors weekly, monthly and quarterly.”
The Luxury Product Group is unique in that “it offers much more than decorative plumbing,” MacDowell maintains. “We have cabinets, lighting, appliances and more. We also help with the indirect spend, with service providers so you can control all of your costs as a business. Our members work in the business every day, and have little time to work on the business.”
He continues, “We also provide amazing networking opportunities, where we can share best practices and keep ahead of our competition. LPG is truly special because we don’t let just every vendor or member in the group. We really want to take the approach of curating each brand, and making sure luxury fits in each demographic market we are in. In the very near future, LPG will be offering its members enhanced marketing services, training services and much more.”
At FEI Group, “We have strength in numbers,” states Penabad. “In over 200 markets nationwide, the members of FEI Group provide turnkey services for the multifamily, single-family, foreclosure, remodel, student, senior and military housing markets.
“That’s not all. KBx and K&B Alliance members have access to exclusive supply programs, operational resources, national business programs, full-service rebate tracking and reporting, business insurance, brand marketing, benchmarking and best practices. These are all vital to the growth and profitability of all kitchen and bath firms.”
He explains that KBx is made up of independent cabinet and countertop dealers who service local, regional and national builder markets, while K&B Alliance represents kitchen and bath, and decorative plumbing and hardware showrooms and suppliers. Together, the two represent over 200 showrooms in 35 states.
Penabad jokes that, “We’re the ‘ungroup,’” adding, “We’re about business, but we’re big on culture and having fun, too. Our focus is to aid our members’ professional and personal growth, and we bring 20 years [of] experience in building and managing groups to achieve that.”
Although industry buying groups have been around for decades, many dealers are either unfamiliar with their offerings or simply haven’t gotten on board.
According to Penabad, “There’s a real lack of knowledge and understanding of what these groups do for their members. A common misconception is that there’s a ‘catch.’ That’s not the case with us. Ask any one of our existing members and they’ll tell you: Our goal is to bring better business practices and more profitability to our member companies, while promoting business autonomy.
“To us, it’s simple: KBx and K&B Alliance companies have an advantage in their markets because they have access to programs and services exclusive to members, all while maintaining their independence.”
SEN’s Peterson believes one of the reasons people put off joining is the work involved in engaging in a new venture, explaining, “Committing to business training is like committing to exercise. It’s easy to put off, even though you know the exponential benefits in every aspect of your life. It’s going to be challenging.”
She continues, “It’s even easier to put off business improvement in a good economy – like right now. Dealers can’t book out far enough, they ‘don’t have any time’ to join. [But] as we all know, this, too, will pass. And when the economy invariably flips downward, it’s not a great feeling to realize you’ve missed the window to invest in building a stable business. The benefit of a group like SEN is to empower you with the resources to thrive in any business cycle.”
At BKBG, Cohn thinks that, “Many independent showroom owners erroneously believe that they will have to dramatically change their businesses and operations if they join or that they will have to purchase products and services that do not fit their business model. But nothing could be further from the truth.”
Luxury Products Group’s MacDowell also believes that confusion can prevent potential members from joining buying groups. He explains, “There are many groups where you can’t easily see the value proposition. It isn’t communicated well, and a new business looking for a buying group would have no idea who to call first. There really needs to be a compelling, well-marketed plan that shows the value to both members and vendor partners.”
If you’re contemplating joining a buying group, MacDowell suggests the following: “Ask questions, and see if joining the buying group will make your business run better. Be prepared to contribute, and engage other members once you join. Now, more than ever, buying groups are necessary to help you grow. There is too much pressure on small independents from Amazon, and the larger national distributors, which prevent them from being competitive. Be sure with the group that you join, you can actually have a voice in making change. No one likes to be in a one-way conversation – members and vendors alike.”
Peterson states, “If you’re currently selling any of the product lines that are represented in a buying group, then [by not joining], you’re simply passing up cash that can help fund your retirement or college savings accounts or that you can invest in your business. When you join, we will encourage you to pick up a cabinet line if you aren’t already carrying one of our cabinet partners. Why? More money! But more importantly, the more that members purchase from our partners, the more everyone earns. SEN calls this the ‘Power of One.’
“Many members of buying groups consider the rebates earned as ‘icing on the cake,’ even if they amount to tens of thousands of dollars annually. These members consider the knowledge, training, strategies, relationships and tools gained from their group affiliation to be the ‘cake.’ Indeed, fully engaged members will point to the hundreds of thousands of gross profit dollars gained as evidence of the value achieved through group interaction.”
She continues, “We have all heard the expression that ‘two heads are better than one.’ Now imagine how much better hundreds of heads are working together toward a common goal of greater dealer growth and profitability. It’s out of this synergistic environment that great new ideas are born, incubated and developed by SEN for the benefit of members and preferred vendors alike.”
FEI Group’s Penabad asks, “Where else can you plug in with the most creative, most successful minds in the industry? Whether it’s member site visits, regional meetings, supplier trips, manufacturer tours, benchmarking workshops, cocktail parties, trade shows, monthly conference calls or our National Conference, we offer members the opportunity to connect with their peers face-to-face.
“The annual FEI Group National Conference is arguably the most important personal and business affair event on the FEI Group calendar each year. We discuss business experiences, learn from each other’s winning ideas and mistakes, make friends, laugh and address the opportunities that impact our businesses every day. And we’d be remiss not to mention product procurement and leverage here, too. We are in a position to negotiate supply programs on behalf of large numbers of dealers that result in benefits not typically available to one showroom attempting to negotiate on their own behalf.”
So, for those considering joining a buying group, researching the various options and benefits would be a good place to start. Or, as BKBG’s Tom Cohn concludes, “Follow Nike’s mantra: ‘Just do it!’” ▪