Kitchen and Bath - market data - Brief Article - Statistical Data Included

Home Channel News, May 21, 2001

The kitchen and bath category has managed to duck the slings and arrows being flung by a softening economy and to provide dealers and suppliers with reliable growth that is likely to continue through 2001.

The category's strength could be appreciated in the 29 percent sales increase and 31 percent profit gain achieved last year by Bed Bath & Beyond, the industry's premier specialty dealer, which ended 2000 with 311 stores and plans to add 80 superstores this year. It could also be witnessed and heard on the floor of last month's Kitchen and Bath Industry Show in Orlando, Fla., where dealers and suppliers basked in the glow of a remodeling sector that's still buzzing with activity.

Vista Information Systems, the research arm of CCI-Triad, estimates that the $1 billion faucet segment would grow annually by 20 percent, and that the $475 million bath and shower accessories segment would expand by 15 percent per year. Cleveland-based market research firm The Freedonia Group projects that cabinet shipments would increase annually at an average rate of 5.3 percent through 2004, when those shipments are expected to equal nearly $12 billion, more than four-fifths of which will come from kitchen cabinets. Trade magazine Kitchen & Bath Business surveyed 20,000 consumers and projected that while the number of households nationwide that planned to execute kitchen and bath jobs this year would grow by only 1 percent from 2000, their expenditures for kitchen and bath projects would increase at double-digit percentage rates to $19 billion and $8 billion, respectively.

That companies wanted to hop onto this fast-moving bandwagon was clear when, in January 2000, Furniture Brands International agreed to license its Thomasville brand for use on a line of kitchen cabinets that American Wood-mark would make exclusively for Home Depot. This was the first time Thomasville's name has been placed on a non-furniture product.

About a year ago, Amazon.com added kitchens to its array of e-stores. Last fall, online retailer OurHouse.com added to its roster of service providers Kitchen Tune-up, the 325-unit kitchen restoration franchisor. Around the same time BuildNet, the online exchange that helps homeowners find qualified homebuilders, added Plumbing-Online which connects homeowners to qualified plumbers.

New significance

For brick-and-mortar home-improvement dealers, kitchen and bath has always been a core category, and one that contributes significantly to their stores' reputation as destination venues for home decor merchandise.

However, the category took on a new and surprising dimension last year, when some of the industyr's largest dealers started viewing major appliances as their newest product niche.

The $14 billion-plus retail appliance market is dominated by Sears, which captures nearly two-fifths of that total and whose annual sales are more than the next nine largest appliance dealers combined. Lowe's laid claim to being the industry's second-largest appliance dealer, and its chairman, Bob Tillman, expects his company to surpass Sears within five years.

That goal became more daunting after Home Depot and Wal-Mart decided to offer in-stock major appliances in their stores. Depot struck a supply and installation agreement with General Electric, and it, too, is shooting for No. 1 status at some point in the future.

All of this commotion forced Circuit City - which at one time ranked second to Sears in appliance sales - to leave the category entirely to stay out of the way of the market share battle that its officials saw brewing between the other giants.

Exactly why more dealers want to sell appliances, whose profit potentials is sometimes at odds with their price sensitivities, had some industry watchers scratching their heads. But for dealers like Home Depot and Lowe's, appliances not only complement their kitchen departments, but also showcase a number of services - such as delivery and installation - that encourage customers to become frequent shoppers of those stores.

Kitchen and Bath

% of total Top 500 sales

KITCHEN 4.60%

Top 500 sales: $5.52 billion

BATH AND PLUMBING: 8.97%

Top 500 sales: $10.82 billion