Outlook Improving; Uncertainty Lingers

HACKETTSTOWN, NJ — Economic uncertainty tied to the COVID-19 pandemic remains the greatest challenge for kitchen/bath industry professionals, although business conditions are reportedly improving and the outlook for the future is even more promising.

That’s the key finding of the Q2 2020 Kitchen & Bath Market Index (KBMI), a survey of National Kitchen & Bath Association members involved in manufacturing, building/construction, design and retail. The KBMI, whose results were released in August, was the latest in a quarterly series conducted jointly by the NKBA and John Burns Real Estate Consulting, a housing industry research and consulting firm (see related graph, above).

Kitchen and bath professionals list economic uncertainty as their greatest challenge, followed by a potential new wave of COVID-19, the economic recession, consumer confidence and stock market volatility, according to survey results. The impact of COVID-19 and the corresponding economic fallout on the industry “remain obvious, but there are signs of optimism ahead,” said researchers, citing a pent-up demand for home improvement work. The industry now expects a full-year’s sales decline of 4.4% in 2020, a considerable improvement from the 13.7% drop expected when surveyed the previous quarter.

“Our members are feeling more optimistic about their business and the state of the kitchen and bath industry than they were last quarter,” said Bill Darcy, CEO of the Hackettstown, NJ-based NKBA. “While there is an expected revenue decline for 2020, the industry is still valued at $130.8 billion, and as homeowners feel more comfortable returning to showrooms and resuming work in their homes, we’re well-positioned for a steady recovery and eventual rebound in the long run.”

The KBMI also identified a trend of homeowners shifting to lower price points for renovation projects, “indicating that while consumers might be spending more than they were in the early stages of the pandemic, they remain cautious,” said Todd Tomalak, principal at John Burns Real Estate Consulting.

According to the Q2 KBMI, 78% of those companies surveyed noted demand for lower prices, as consumers face the economic uncertainties resulting from the pandemic. “Besides undertaking smaller projects, the average homeowner is looking for more budget-friendly options, lowering the price point of projects of all sizes,” the KBMI noted. “This shift may also be partially attributed to older customers delaying projects, perhaps due to concerns about COVID-19 exposure, and more Millennials with smaller budgets turning toward renovations.”

Among other key findings:

  • Nearly half (43%) of surveyed companies report a major change in the type of products and services requested by clients. Almost all (98%) of those experiencing shifting demands from clients have seen a rise in the desire for wellness products in response to COVID-19. From no-touch appliances and anti-microbial materials to outdoor kitchens, homeowners are thinking long-term about how they use their kitchens and baths in a world where health and sanitation are top-of-mind. Additionally, more consumers are considering changes to their homes that allow them or their relatives to age in place, like ADA requests and in-law suites, rather than turn to retirement homes and communities.
  • More than half (59%) of NKBA members are experiencing supply-chain disruptions, including longer lead times, slowing production and shipping delays – all of which affect their business. Those in flooring (63%), appliances and cabinets (61% each) are most impacted.
  • Half of building & construction firms say 80%+ of their active projects are on schedule, a 300%+ improvement from Q1. Project delays are mostly due to concerns about safety and personal finances, but 80% of postponed projects are expected to resume by the end of 2020.
  • Foot traffic to retail sales firms dramatically improved in Q2, though it remains below pre-COVID levels. After seeing a drop-off of 75% in Q1, retailers now report a decrease of 34% in foot traffic for the second quarter.

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