by Philippa Turrell, Editor of K&B News
Finance for Kitchens
Owned by German kitchen furniture group Nobilia, Kutchenhaus always targeted the premium end of the retail market. However, in a bid to provide greater volume for its factory, it recently made the decision to target the middle market. “Previously we would probably target the top 8 per cent of the market, which is fine and is a customer that will always have money to spend. The problem is the volume isn’t there. So we’ve had to now come into the middle market and go after the volume, and it’s been successful”, says head of sales and operations Phillip Croak.
But isn’t the middle market very competitive, with many kitchen furniture manufacturers and retailers targeting the masses? Phillip tentatively agrees, but points out: “People have had to, because that’s where they know the volume is. But where we are now, where we are positioned , we are very competitive within that market. Our average kitchen spend at the moment, if I look at it across the board in all the stores, is just under £10,000, which will obviously include fitting, appliances and everything else. We do kitchens for £20,000, we do kitchens for £6,000, but on average (our kitchen sales are) just under £10,000.
Moving consumer markets
To make the move into the middle market, Kutchenhaus has not changed its kitchen offer but instead looked at how the business could attract a wider scope of customers. Phillip continues: “The great thing about the brand is that it’s German. But it can also be the worst thing about the brand because if you think of German, you think of high-end luxury, which obviously comes with a price tag. So it’s about changing customers’ perceptions.” He continues: “one thing we found when we looked at the middle market, it’s OK telling people we’re affordable but when they walk into (our) showrooms, the first reaction they’ve got is ‘wow, they must be expensive’.”
So the company has worked hard on showcasing the affordability of their kitchens, with an online configurator which is also available instore, to give customers a better idea of prices – with and without appliances.
However, arguably, it is the advertising of its financial packages which has helped push the message that its expensive looking showrooms are reasonably priced. Kutchenhaus not only promoted its financial packages in its advertising, through print and social media, but also on posters in the showroom – stating how much a kitchen could cost per week.. Phillip says: “We need to prove the fact that we are affordable, without devaluing the displays, because they are there obviously to give people inspiration.”
Finance supports sales
Phillip says 35 per cent of its sales are on interest-free credit, and this has grown since Kutchenhaus opted to advertise finance products more readily. Peter Nicholson, partner of Consumer Credit Solutions, its finance provider, says: “If I go and sit down with a client who I’ve never met before and they tell me credit is about a third of what they do , then it’s doing its job.. It’s getting customers through the door. It’s getting higher order values.” And Andy Wallace, Managing Partner of Consumer Credit Solutions, adds: “If a kitchen retailer that’s plodding along – I say plodding, at £1m turnover – if they take on the right credit products and the right advice they should make £1.3m. There is that increment out there that they can’t sell to at the moment. What one single change could a typical kitchen business make that could put a third on the turnover, other than finance? There aren’t many silver bullets out there. “
Phillip explains how finance has helped his business: “The great thing with finance is it enables (consumers) to make the purchase they wouldn’t necessarily do. So what we find is they tend to come in with a budget in mind. 80 per cent of the time it is (realistic) but when you start showing them (around the showroom), they ant the extras that they haven’t thought about. So finance enables them to do that. When you’re asking someone for an extra £3,000 or an extra £50 a week it helps.” Interestingly, although the company is targeting the mid as opposed to the top-end of the market, Peter Nicholson says: “Finance helps you maintain your order value. Finance allows a consumer to make that choice. And I think that’s a good statement, personally.”
In fact Phillip suggests that its financial products have helped keep the business going over the last five years, particularly now it has moved into a different market. He explains: “Our typical age range probably 12 months ago was 50s+ and what we’re finding now is that anyone from 30 onwards is coming in and finance has been a big part of it. It means it is affordable.”
In fact Phillip suggests one of the first questions customers now ask about is whether the company offers a finance package. Andy Wallace adds: “It’s a USP for companies like Kutchenhaus because most (kitchen retailers) don’t have a credit offer. It’s one less reason (for a consumer) to buy from (a competitor) and that could be a game-changer.”
Change for the better
In fact, change has been at the heart of Kutchenhaus, as not only has it changed its target market but it has ensured the business has focused on the consumer by improving its service levels. Phillip continues: “We want customers to walk in and be amazed from their initial enquiry about a kitchen but we want them to start talking about us afterwards, as well, for the service they’ve received. When we used to install a kitchen, we’d tidy up and we’d leave. now we do follow-up calls three months later to find out if they’ve had any issues and rectify them straight away.”
And Kutchenhaus is looking to change its showroom environments too, refitting them to show the latest Nobilia furniture styles. It has already refitted its York showroom, with the rest to follow. Phillip continues: “It’s all about trust at the moment. The consumer is not very trusting and it’s about saying we are investing – come and see us.”
Certainly the move from top-end into the middle market seems to have been successful for Kutchenhaus, as Phillip concludes: “Business is very good at the moment. We are currently about 30 per cent up on last year. I would probably say we are slightly outperforming the market.”
Published by K&B News October 2013