Key Takeaways:
- As prices spike, consumers are more likely to research more thoroughly and purchase online.
- Retailers are reporting higher levels of customer discomfort with increased prices.
- As long as they have to wait for delivery, many consumers will opt for higher-quality products.
By Dianne M. Pogoda
As producer and consumer prices climb ever higher, retailers are reporting their customers are researching — and buying — more online. Those that have well-established ecommerce operations are coping with the shift, but stores that don’t are feeling the pinch.
These were among the findings in the latest NKBA/John Burns Kitchen & Bath Market Index (KBMI) report on the 4th quarter of 2021. According to more than 850 NKBA members who responded to the quarterly survey, business remains strong, with an overall KBMI rating of 82.1, reflecting vigorous expansion in the closing months of 2021. Their vision of the future earned a hearty 76.6 rating, up six points from the prior quarter. But anecdotal responses indicate that inflationary pressures are having an effect on business.
Inflation has been a hot topic for months, with consumer prices up nearly 8 percent compared to a year ago. Vendors, plagued by supply-chain woes in getting materials to produce merchandise as well as labor shortages, keep raising prices to retailers, who pass those price hikes on to consumers. In the survey, 98 percent of retailers said vendors raised prices in Q4 and 40% said prices on wood goods were the most common to increase.
Kitchen and bath retailers reported price increases between 11 and 16 percent across all nine product categories tracked. Bathtub prices rose 16 percent, while tile, cabinets and vanities were each up 13 percent. Refrigerators, stoves/ranges, toilets and countertops each spiked 12 percent, and faucets rose 11 percent in the three-month period. Retailers reported rising discomfort from their customers about the price hikes, and consumers are frequently responding by searching online for the best deals and availability — and with free shipping as an incentive to buy, they’ll look anywhere in the country.
As one retailer put it, “My customers have never been more informed than they are now. They come into the store having researched a few product options ahead of time.” Another added, “I’ve noticed more consumers coming into my store and leaving without a purchase. When I inquire, they say they’re going to purchase something online. Some walk-in customers are taking the quotes we create for them and plugging them in online, where they’re finding they can get things faster than the lead times we can give them.”
Retailers also report that availability remains consumers’ top priority, but product quality is a close second. “Prices continue to rise with entry level, so many people feel like they’re already spending the money, so they might as well pay a little more for high-end products. They want quality, and are remodeling with the idea that they’re not moving anytime soon.”
It appears that as long as consumers have to wait for deliveries, often with weeks stretching into months, they don’t mind spending more for higher-quality materials and merchandise. Online research has led consumers to be open to lesser-known brands with availability. One dealer said, “Customers are asking for brands I’ve never heard of. They are doing research online and then coming into the store to see if I sell it.”
Average foot traffic at brick-and-mortar stores was nearly flat, as retailers pointed to the increase in online shopping. Compared to Q3 2021, average foot traffic in the 4th quarter inched up just 2 percent. Retailers attributed some of the expected slowdown to the holiday season — appliances and countertops aren’t typical gift items — but the majority said in-store product shortages are the major factor driving more e-commerce sales.
So how are retailers coping? Some are stocking up on inventory, and others are building their own ecommerce operations. “Luckily, we have a robust online store,” said one dealer. “Our ecommerce sales have gone up significantly over the past few months. We’re offering brands not available in stores.”