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Manufacturers See Q2 Sales Drop, But Optimistic About 2024

Image courtesy of Kohler

By Elisa Fernández-Arias

Key Takeaways

  • Manufacturers most optimistic about 2024 sales 
  • They reported sales declined 1.3 percent YOY
  • And their Q2 KBMI rating dropped

Despite a decrease in their Q2 KBMI rating, manufacturers are the most optimistic about 2024 out of all K&B industry segments, according to NKBA’s Q2 Kitchen & Bath Market Index (KBMI). The Index is a quarterly report on current/future kitchen and bath industry demand as well as issues and challenges facing industry professionals.

Manufacturers’ overall 53.9 KBMI rating is down from 58.4 in Q1, reflecting the slower growth reported across the industry. The rating is at its lowest level since the COVID-induced recession of 2020 and is in line with Q2 ratings from other industry segments – designers, builders and retailers.

Manufacturers’ KBMI rating for Current Conditions fell to 44.7 from 52.8 in Q1, while their rating for Near-Term Conditions declined to 63.9 from 65.8. Their assessment of Industry Health was nearly flat, at 65.6, slightly higher than the 65.0 reported in Q1. 

Facing the Challenge of Chilled Demand

Higher interest rates and prices have chilled customer demand in the manufacturing segment. Consumers tightened their Q2 spending, resulting in a decline in both sales and orders. Orders for K&B products fell to -1.0 percent year over year, while sales were -1.3 percent year over year.

To offset higher prices, manufacturers reported that they are offering rebates, consumer incentives or builder discounts. They are also increasing minimum order quantities, streamlining marketing materials and opening lower-cost sales channels.  

One bright spot for manufacturers is that capacity constraints are minimal. The manufacturing segment has seen six consecutive quarters of capacity improvement, with the majority (86 percent) facing no significant constraints in Q2. Slower activity has allowed manufacturers to catch up on backlogs. And lack of capacity constraints frees up manufacturers to meet demand and reduces overall lead times for most products. Lead times for refrigerators and cabinets, however, still exceed two months. However,  the good news is that lead times will continue to decline as demand eases.

A Positive Outlook for the Future

Despite declining Q2 sales, manufacturers look to brighter times ahead. They expect sales to improve in the near future, rising by 1.2 percent in Q3; to some extent this optimism reflects a seasonal pickup that typically happens around the fall, as consumers travel less relative to summer months, according to the report. This rise in sales is expected to lead to growth of 2.3 percent for full-year 2023.

And manufacturers are feeling even more positive about next year, so much so that they are the most optimistic of all segments expecting a rebound in 2024. Six of 10 expect their revenues to grow in 2024, an indicator that the current slowdown will be short-lived. Only one in 10 expect their 2024 revenues to decline. “As the economy becomes more stable, we are hopeful that business will continue to prosper,” said one manufacturer. “We have found that the K&B remodeling sector has slowed down a bit but believe 2024 will pick right up.”

And manufacturers are ready to meet the coming demand for kitchen and bath products. Expecting renewed growth in 2024, around 71 percent reported that their current infrastructure is equipped to handle the surge in remodeling demand – or that they intend to increase their capital expenditures to align with that future demand.

Click here to download the full report.

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Retail Sales Drop in Q2, Will Remain Strained in 2024

Retailers reported lower YOY sales in Q2, which will slightly improve but continue to be soft in the rest of 2023 and 2024.
By Elisa Fernández-Arias

Key Takeaways

  • Retailers among least confident segments
  • Retail sales down 3.3 percent YOY
  • Decrease in retailers’ Q2 KBMI 

Retailers reported a sharp drop in sentiment in Q2, according to NKBA’s recently released Q2 Kitchen & Bath Market Index (KBMI), a quarterly report that examines current/future kitchen and bath industry demand as well as issues and challenges facing industry professionals.

Retailers’ overall 54.9 rating is down from 67.5 in Q1, reflecting the slower growth reported across the industry. The rating was at its lowest level since the COVID-induced recession of 2020, which is in line with those from other segments surveyed — designers, builders and manufacturers.

However, retailers stand out because their drop of nearly 13 points is greater than the declines relayed by builders, designers and manufacturers. Additionally, retailers’ KBMI rating is lower than all segments’ average 56.1 KBMI rating. Even though retailers’ Q2 KBMI rating declined, it’s still an indication of growth as any rating above 50 indicates industry expansion.

The decrease in Q2’s KBMI rating is primarily due to the significant drop in retailers’ Current Conditions, 44.8, down from 67.1 in Q1. Other components were relatively flat, with Industry Health at 66.3 from 67.1 and Future Conditions at 69.5 from 69.6 — which indicates optimism about the future.

Sales and Foot Traffic Down, but Traffic High Quality

Consumers are price shopping online, often ordering directly from websites versus visiting stores in person, contributing to the retail segment’s low demand for kitchen and bath products. Retailers reported sales fell 3.3 percent year over year as foot traffic declined. Foot traffic was down an average 8 percent and represents further weakening, year over year, from the quarter-over-quarter decline of 5 percent reported in Q2 2022.

Higher prices for K&B products is a pain point for consumers, according to the report. This has cooled purchasing, contributing to the drop in sales. Retailers reported that the cost of many of these products increased year over year, and that these gains were in the low double digits – for example, mirrors, shower units, hardware, and cabinets all saw an 11 percent cost increase in Q2 compared with the previous year. Eventually, these increases were passed on to consumers. 

However, there is a silver lining for retailers: existing store traffic is higher quality, according to the report, meaning that those customers who did shop were committed to making purchases. This may be due to the fact that not all consumers are impacted by high prices. While some are demanding lower-grade/lower-cost products, wealthier customers are unfazed. About 23 percent of retailers say that kitchen and bath customers shifted to lower quality and cost options quarter over quarter in Q2 2023 from Q1 2023; about 27 percent reported that on average consumers gravitated toward higher-end options.

Wealth, income and pricing trends are at the root of this divergence. Around 77 percent of retailers who cited customers downgrading blamed higher pricing and strained budgets. Additionally, nearly half of retail professionals who reported that more consumers were upgrading attributed their behavior to wealth and lifestyle improvements. However, one in five of these professionals said upgrades were due to first-choice products not being available.

More good news is that retailers’ inventories are more balanced: after several quarters of drawdown, 71 percent of retailers say inventory levels are now stable — so they are now more aligned with current demand.

Low, Slightly Improved Sales Expected for the Future

The retail segment expects sales to improve in the near future, rising by 2.3 percent in Q3. To some extent this optimism reflects a seasonal pickup that typically happens around the fall, as consumers travel less relative to summer months, according to the report. This rise in sales will partially offset the impact of lower sales earlier in the year, leading to flat to negative revenue growth for full-year 2023 — in contrast to the growth expected in the other segments.

Retailers expressed concern about what lies ahead in 2024. In the context of the cautious optimism felt across the K&B industry that there will be a rebound next year, retail professionals are the most cautious. About 62 percent expect flat or declining revenue next year, with only 38 percent calling for higher revenues.

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Mortgage Rate Levels Boosting New Construction

New homes gaining share due to limited inventory of existing homes, according to recently released NKBA research.
By Elisa Fernánez-Arias

New homes have gained share of home sales this year, according to NKBA’s recently released 2023 Kitchen & Bath Market Outlook Update, which revises the forecasts made in the baseline report released in January of this year. With mortgage rates at or near a 14-year high since 2022, homeowners “locked” into lower mortgage rates as compared to current ones are reluctant to sell and move. This has led to an undersupply of existing homes for sale: in May 2023, there were three months of supply, lower than the four months required for a balanced supply. As a result, new homes have gained share of home sales this year.

New Home Sales Boosting the Construction Industry

If people are buying homes, they’re more likely to buy new construction. In May, new home sales made up 15 percent of total home sales, as compared to 10 percent in the previous year, 11 percent in 2021, 15 percent in 2020 and 9 percent in 2019. In every month this year through May, new home sales have been at their peak over five years.

This has boosted the construction industry. Nationwide, builders’ 2023 sales growth expectations have shifted from a decrease of 9 percent when we asked them in November 2022 to an increase of 7 percent forecast in April this year. Additionally, home builders surveyed in April expected to start 3 percent more homes this year, up from the decrease of 9 percent they predicted when asked in November 2022.

Builders are rapidly completing homes to meet demand and also adding to the pipeline by starting new homes at a steady pace. Completions have caught up with starts and have trended together in recent months, and the number of housing units under construction remains elevated at 1.7 million. In fact, despite improving cycle times, under construction units are at record levels — higher than they have been since the 1970s.

What This Means for the K&B Industry

In the short term, the elevated number of housing units under construction is expected to drive demand for K&B installs in new construction. New production homes are likely to be built with larger kitchens and bathrooms, according to the 2023 mid-year Market Update, while other areas will be smaller to enhance affordability.

Nevertheless, units under construction are increasingly dominated by multifamily units: as of May 2023, they amounted to about 1 million units, almost 60 percent of the total. This will temper K&B spend, since the quality of K&B products in multifamily unit construction is typically lower than in single family unit construction, making the amount of money spent on kitchens and baths in multifamily units significantly lower than in single family homes.

According to NKBA’s most recent 2023 mid-year Market Update report, the forecast for K&B new construction spending in 2023 is $111 billion. This is a decrease of 4 percent year over year, much better than the 17 percent decline in the baseline forecast reported in January.

In the longer term, lower mortgage rates will boost the housing market, to the benefit of current and new homeowners, driving up K&B spending. For example, as rates stabilize, K&B remodels can be expected to go up as homeowners tap into their record levels of home equity to complete R&R projects they had been waiting to get started on.

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Designers Most Confident Segment in Q2

Designers are optimistic going into the second half of 2023 despite reporting a lower KBMI.   
By Elisa Fernández-Arias

Key Takeaways

  • Designers most upbeat out of all segments
  • The segment reported sales grew 1.4 YOY
  • They also reported decrease in Q2 KBMI rating

Despite a decrease in their Q2 KBMI rating, designers were the most upbeat out of all K&B industry segments, according to NKBA’s Q2 Kitchen & Bath Market Index (KBMI), a quarterly report on current/future kitchen and bath industry demand as well as issues and challenges facing industry professionals.

Designers’ overall 57.8 rating is down from 61.6 in Q1, reflecting the slower growth reported across the industry.  The rating was at its lowest level since the COVID-induced recession of 2020, which is in line with the ratings from other industry market segments from the Q2 survey– builders, retailers and manufacturers.  

Designers’ rating for Current Conditions declined to 51.5, from 57.0 in Q1, while their rating for the Health of their segment also fell, down to 65.2 from 67.0. Additionally, their rating for Near-Term Conditions decreased to 66.2 from 67.6. This compares with an overall industry KBMI rating of 56.1. 

Designers – along with builders –  rated demand as most resilient. And the overall design segment feels optimistic about the second half of 2023 and full-year 2024. Even though designers’ Q2 KBMI rating declined, it’s still an indication of growth as any rating above 50 indicates industry expansion.

A Slowdown, but Near-Term Expectations Positive

Designers reported slow growth in Q2, with year-over-year sales growth of only 1.4 percent. A significant slowdown in design firms’ residential K&B projects is due to higher lending costs and overall higher prices that are negatively impacting consumer discretionary spending habits. Project completions in Q2 slowed to a year-over-year growth of 1.3 percent, down from 1.8 percent in Q1. Additionally, leads have declined for more than one-third of designers.

Still, design firms reported a nearly three month backlog of projects, which helps insulate them against the current slowdown and gets them through Q3 2023. They also expect new leads to offset project cancellations, with 45 percent of firms expecting the usual fall pickup in Q3-Q4.  Designers expect a 4 percent sales pick up in Q3, the highest projection among all market segments.

Trends and Solutions

Designers reported a shift in customer segments’ spending habits, with price-sensitive customers downgrading while those with higher incomes are looking to upgrade to higher quality materials and finishes. A larger share of designers (42 percent) indicate that their customers are unfazed by higher pricing, compared to the previous quarter (33 percent). It may also explain why designers have more pricing power, with 7.5 percent being the average upper limit of a cost increase versus the industry average of 7.0 percent. 

Design firms also reported clients’ continued shift toward higher quality products and services.  Some clients are even choosing to reduce project size or scope rather than reduce quality and many clients are opting for higher quality materials regardless of cost. There’s also been an increasing divergence in the size and scope of design projects, with 41 percent getting larger (up from 36 percent in Q1) and 21 percent getting smaller (up from 17 percent in Q1). 

Designers reported that an increasing number of projects are hybrid in nature due to rising costs, with customers becoming more hands-on and doing partial work to save money.

Designers also reported that an increasing number of projects are hybrid in nature due to rising costs, with customers becoming more hands-on and doing partial work to save money. These types of projects will be a persistent trend, according to designers, with some already adapting to this shift by facilitating collaboration.

And homeowners are choosing to remodel instead of move. “People are choosing to renovate their existing spaces/homes instead of buying a new home and relocating, due to the current economy,” said an interior designer based in Texas. “Many clients are focusing on adding resale value to their current property and choosing materials that will add value and interest for potential future home buyers.” 

Optimism Looking Ahead

While design firms faced challenges in the first half of 2023, nearly half (47 percent) expect higher revenues for the full year, while only 28 percent expect lower revenues. Designers also predict sales to increase by 6.8 percent compared to 2022. And 48 percent expect higher revenues in 2024, with only 13 percent forecasting a decline. 

These forecasts are in line with the rebound that the K&B industry as a whole expects for 2024. 

Design firms say K&B project deferrals exceed cancellations, and pent-up projects will bolster demand in the second half of 2023 and into 2024.  Renewed optimism for the coming year is consistent with homeowners’ high levels of home equity and the increasing numbers of older homes (20-39 years) in need of a design “refresh” in coming years.

Click here to download the full report.

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Takeaways From NKBA’s Q2 KBMI

The Index is at its lowest since the 2020’s COVID-led recession, but the K&B industry continues to be fundamentally strong.
By Elisa Fernández-Arias

NKBA released its Q2 2023 Kitchen & Bath Market Index (KBMI), a quarterly report that examines current/future kitchen and bath industry demand as well as issues and challenges facing industry professionals. In the face of unpredictable economic conditions, this report is a valuable resource that provides historical context and insights that can help businesses make future decisions.

Key takeaways from NKBA’s recent KBMI report include:

  • The kitchen and bath industry slowed in Q2 2023 as higher interest rates and product/ material prices deterred many homeowners from spending money on their home.  The KBMI Index rating is now 56 out of 100, down from 62 reported in Q1 and at the lowest level since the COVID-led recession in 2020. A rating above 50 still indicates industry growth, however, the growth that the industry experienced in Q2 was driven by price only.

  • All four segments are impacted by softening demand, but not to the same degree.  Kitchen and bath activity slowed in Q2, especially among retailers and manufacturers, while designers and remodelers fared better due in part to backlogs. The ratings for each segment’s current market conditions are: Manufacturing, 44.7; Retail Sales, 44.8; Building and Construction, 50.9; and Design, 51.5.

  • K&B pros expect 4.9 percent full-year sales growth for 2023, based on their expectation of raising prices by about 7 percent.  This indicates that any growth will be nominal—from price increases alone—while project/order volumes will be flat or negative for 2023. Once again, the sentiment for this measure varies widely by segment. K&B builders/remodelers are most optimistic, reporting high single-digit revenue expectations for 2023 (9.6 percent), while retailers are expecting flat-to-negative growth of -0.4 percent.

  • The K&B industry remains fundamentally strong despite the cooldown in demand.  Solid industry fundamentals are evidenced by the fact that pros rate their segment as “strong” (65.2 out of 100) and, perhaps more importantly, they continue to pass off rising costs to maintain margins. The majority of KBMI respondents (86 percent) cite flat or higher margins, up from 83 percent in Q1. 

  • The 2023 outlook is still positive, fueled by pent-up consumer demand for remodeling.  Fortunately, current market conditions have not dampened optimism for 2024. Half of all K&B pros are expecting higher revenues next year. Manufacturers are the most optimistic, with 60 percent predicting increased revenue. Retailers, in contrast, remain more concerned, with only 38 percent expecting revenues to rise next year.

  • Worries about a recession are fading as inflation recedes, but the industry is now focusing on a structural problem that is more concerning: labor scarcity.  The availability and cost of skilled labor is now the top concern of K&B firms, especially when it comes to meeting the approaching boom in demand. Firms have reported addressing this issue by maintaining staffing.

The Q2 2023 KBMI report includes more data by industry segment – design, manufacturing, retail sales and building/construction – than ever before.  To download the full report, click here.

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K&B Remodel Demand Hampered, But Not for Long

Mortgage rates, lower savings, home equity per household, and other housing market factors are impacting the industry.
By Elisa Fernández-Arias

Following a surge in home improvement spending during 2020-2022, overall kitchen and bath remodeling in 2023 is slowing in the face of several persistent economic challenges – decreases in household savings, elevated mortgage rates and a decline in consumer sentiment regarding personal finances. 

NKBA’s recently released 2023 Kitchen & Bath Market Outlook Update, however, reports that some consumer segments are more upbeat about their personal finances and are moving forward with 2023 kitchen and bath remodeling plans. And the longer term kitchen and bath remodeling outlook remains strong due to millions of homes entering prime remodeling years, elevated levels of home equity and pent-up demand from projects being deferred until economic conditions improve.

Homeowners and K&B Remodels

About 80 percent of outstanding mortgages are locked in at rates below 5 percent, which is far lower than current rates and driving these homeowners to stay put and remodel vs sell. Another factor impacting homeowners’ shift toward kitchen and bath remodels is the increase in home equity per household.

Homeowner equity is also at record levels: $333,000 in Q1 2023, an increase of $59,000 since 2019 (adjusted for inflation). With 22 percent more equity in their homes today vs pre-pandemic, some homeowners are choosing to remodel their kitchens or baths despite uncertain and challenging economic conditions.

Home equity gains have been driven by home price appreciation since 2012, with Miami showing the biggest gain at 200 percent.  This is followed by Tampa (191 percent), Las Vegas (176 percent), Orlando (172 percent) and Atlanta (166 percent). The gains persisted despite some home equity lost to declines in home values since 2022, especially in the West.

Despite these gains, cash-out refinances have declined because of rising rates, temporarily depressing short-term demand for remodeling. However, once rates have normalized, some who have been waiting to take out these loans will do so, freeing pent-up remodeling demand.

Difference Among Income Tiers

Highest income tier households are less sensitive to mortgage rates and continue investing in luxury kitchen and bath remodels. Only 14 percent of funding sources for kitchen and bath repair and remodel (R&R) projects were tied to rates for these households, with annual household income greater than $160,000.  This compares to 20 to 28 percent for households in lower income tiers.

Households with higher incomes were also feeling more optimistic about personal finances compared to six months ago. Sentiment was 100 out of 140 in May 2023 for households in the top third income tier, up from 85 in December 2022. For those in the middle income tier, sentiment was also up to 87 from 74. Households in the bottom third income tier, however, showed a drop in sentiment to 71 from 73.

A Deeper Dive 

To learn more about these and other insights from NKBA’s midyear 2023 K&B Market Outlook, download the full report here.

This article is the second in a series of articles about the midyear 2023 K&B Market Outlook, with the third installment scheduled to be released next week.

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Top 10 Takeaways from NKBA’s Showrooms Report

Discover the role of independent showrooms in new builds and remodeling as well as current challenges.
By Elisa Fernández-Arias

NKBA’s first-ever Independent Kitchen & Bath Showrooms report highlights pivotal information about the changing role of showrooms in the K&B industry. The report, released during an NKBALive Research Reveal on Thursday, June 22, is available free to NKBA members here

Below are the top 10 highlights of the report.

  1. Independent showrooms continue to play an important role. Independent showrooms are integral in the kitchen and bath industry’s new build and remodeling projects, including DIY and those directed by a designer.

  2. Homeowners are most likely to frequent independent showrooms.
    This customer segment generates three times more revenue than industry professionals such as designers, contractors and builders. Homeowners are making K&B purchases for DIY projects and some designer-involved projects.

  3. Independent showrooms face several major challenges.
    The first is keeping products current and attracting consumers. The second are factors outside of their control, including supply chain/ product availability, recession, inflation and labor shortages.

  4. Many independent showrooms are evolving. Within the past two years, 65 percent of showrooms carried new brands, 53 percent remodeled their showroom, 50 percent added or improved their technology, and 40 percent added new product categories.

  5. Technology is key to independent showrooms success.They are turning to technology to improve the customer shopping experience and to help make their own operations more efficient. In the past two years alone, about 41 percent of showrooms enhanced their monitors/displays, and 30 percent updated their design software/hardware.

  6. Independent showroom sales have remained steady.
    Of the independent K&B showrooms surveyed, 70 percent reported 2022 annual sales of over $1 million, while 22 percent noted sales of $5 million or more.

  7. Independent showrooms are positive about the future. Despite uncertain economic conditions that continue to impact new construction and remodeling, independent showroom dealers project 2023 sales to be on par with 2022 and 2021.

  8. Homeowners frequently turn to independent showrooms.More than one-third of homeowners visited an independent K&B showroom for ideas and design inspiration. Additionally, seven in 10 homeowners start their K&B remodeling project by consulting with a  showroom/store (23 percent), a designer (24 percent), or a builder/contractor (24 percent).

  9. Homeowners want to see K&B products in person before buying.
    Two-thirds of homeowners also reported that they upgraded their purchase after learning about product features and functionality as well as available brands. These estimated upgrades reportedly added 31 percent to the cost of products purchased for a full-scale kitchen or bath remodel.

  10. Those who shopped at an independent showroom also made their final purchase there. Only 6 percent did not. Additionally, two-thirds of the showroom professionals surveyed reported a conversion rate of 50 percent or more, with the median conversion rate being 64 percent.

To download the full report, click here.

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10 Takeaways from NKBA’s Mid-Year Market Update

Much has changed since January when the 2023 K&B Market Outlook was initially released. 
By Elisa Fernández-Arias

NKBA released its 2023 Kitchen & Bath Market Outlook Update this week, which revises the forecasts made in the baseline report released in January. Since then, mortgage rates have remained elevated, but inflation has fallen and the economy and the job market continue to outperform expectations.

The report was publicly released on July 13 and is available free to NKBA members here. Key takeaways include:

  1. Residential K&B spend is expected to fall 5 percent to $179 billion in 2023 — below the record highs of 2022, but above pre-pandemic levels. The mid-year outlook is more positive relative to the earlier baseline due to an uptick in demand for new homes during the last three to four months.

  2. The long-term outlook for K&B remodels remains strong. This is due to several factors: an additional 2.2 million homes entering prime remodel years in the next five years; homeowners sitting on record levels of home equity; and repair and remodel (R&R) projects being deferred beyond 2023.

  3. Homeowners with lower mortgage rates are incentivized to remodel versus sell. About 80 percent of outstanding mortgages are locked in at rates below 5 percent, which is far lower than current rates and driving them to stay put.

  4. New construction K&B spend is forecasted at $111 billion in 2023, a decline of 4 percent from the start of the year. This forecast is more optimistic than the earlier baseline prediction of $96 billion, primarily driven by a 10 percent decline in housing starts.

  5. Our forecast for repair and remodel spend is $68 billion, a decline of 8 percentage points from the beginning of 2023. The decline is in large part due to high inflation, which continues to erode excess household savings, which was the primary driver of R&R spending during the pandemic. Higher interest rates have also made it less appealing to tap into home equity, diminishing another source of R&R funding. One bright spot, however, is that higher income households are less rate-sensitive and continue investing in luxury K&B remodels.

  6. Professional spend in 2023 is expected to fall 5 percent, while DIY declines 7 percent. Since the PRO spend measure includes new home construction, this decline is forecast to be smaller than DIY because of the recent surge in new construction. We also forecasted that $154.9 billion of PRO spending will be driven by new construction and high-spend remodels in 2023.

  7. Housing units under construction remain elevated at 1.7 million, and are expected to drive demand for K&B installs in new construction. And despite improving cycle times, under construction units are at record levels.

  8. With one million multi-family units under construction, the share of multi-family units will increase in 2023 and temper K&B spend. The forecast number of multi-family units for late July is 994,000 and is 695,000 for single-family units.

  9. Household savings rates have significantly declined from pre-pandemic era-highs and remain below pre-pandemic levels. As a result, the excess savings that helped the remodeling boom has decreased significantly and is trending lower.

  10. The risk of recession remains. The probability of a recession over the next 12 months remains elevated at 61 percent, according to the Wall Street Journal Forecasting Survey. And the Fed could implement another one to two rate hikes this year to achieve its target of 2 percent inflation, which would likely slow down the economy.

To download the full report, click here.

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Modern Industry, Modern Solutions

Independent K&B showrooms are remodeling, adding product categories and implementing technological solutions to attract more customers.
By Elisa Fernández-Arias

When faced with new and existing challenges, independent kitchen and bath showrooms are coming up with creative, effective and successful solutions to stay competitive and win over consumers, according to NKBA’s first-ever independent Kitchen & Bath Showrooms report.

The top internal challenges cited most were keeping products current and attracting customers. In fact, 67 percent said developing relationships with homeowners is extremely important to their success. And many recognize that they need to continually evolve their strategy to service the needs of their customers and stand out among their competition.

“[C]onsumers who are remodeling their kitchens or baths place a very high value on seeing and touching products before they purchase them.”

The study also showed that, contrary to popular belief, online shopping doesn’t rank high as a challenge. And, according to most showrooms interviewed, it’s not eroding showroom sales because consumers continue to place a very high value on seeing and touching products before purchase. 

Changes in Showrooms

In the past two years, 65 percent of showrooms interviewed for the study have introduced new or additional brands, while 53 percent have significantly remodeled their showroom and 40 percent have added product categories. Within the next two years, four in ten showrooms will be carrying new brands or remodeling their space.

Showrooms are also turning to technology to improve the shopping experience as well as their own operating efficiencies. It is particularly noteworthy that 50 percent of those interviewed reported adding new technology to their showrooms in the past two years, while 35 percent plan to add it within the next two years.

“About half of the showrooms interviewed said they added new technology to their locations in the last two years to improve customers’ shopping experience.”

Enhanced monitors and displays were the most frequently mentioned enhancement in terms of customer-facing technology, while updated design software and hardware were the most popular for operational technology. A respectable number of both showroom dealers and designers expect virtual technology to be increasingly used in kitchen and bath design over the next few years.

Insights From the Research Webinar Panel

Panelists from NKBA’s webinar that introduced the results of the research report offered helpful insights into staying competitive in today’s ever-changing retail landscape. 

Using a website in tandem with in-person sales can be a smart move. Purchasing habits, as well as how designers work with their clients, have changed due to the pandemic. It’s important to think about how to attract customers to the website, connect them with designers and eventually get them to physically visit the showroom. The panelists also touched on strategies for client meetings, such as combining showroom visits with Zoom designer meetings, and offering both in-person and online or video conferencing.

Providing high-quality customer service and creating relationships in showrooms is essential for success. Designer Paula Kennedy, CMKBD, a webinar panelist, emphasized the importance of personal relationships in the industry. She told showroom owners that designers are loyal to specific sales people and will follow them if they move from one company to another. Also important: Having meeting rooms in the showroom with screens where designers can meet with their clients to discuss ideas. 

Technology is a big part of a showroom’s success today… and in the future. The webinar panel emphasized the need for lighting solutions in showrooms, where clients can see products in a variety of settings and lighting types.  In addition, 3D rendering is an effective way to show customers what new products could look like in their homes. Finally, they stressed that showrooms should prioritize new technology as part of their product mix –  notably smart toilets and motion sensor faucets –  since learning about new trends is part of a successful and engaging showroom experience.

Want to Learn More?

To learn more about these and other insights from the Independent Kitchen & Bath Showrooms study, download the full report here. To watch the NKBALive Research Reveal on the Independent Kitchen & Bath Showrooms report, go here to view the session on demand.

This article is the last in a series of three articles about the Independent Kitchen & Bath Showrooms report. To view the other articles, visit NKBA.org/insights.

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Showrooms Play a Key Role in K&B Projects

Nearly half of all homeowners surveyed start their K&B remodeling project by consulting with an industry pro, whether that be a designer (24 percent) or a showroom/store (23 percent).
By Elisa Fernández-Arias

Independent showrooms are integral to the kitchen and bath industry’s new builds and remodels, according to NKBA’s recently-released Independent Kitchen & Bath Showrooms report. The pivotal role of showrooms applies to both DIY and designer-involved projects, indicating their importance to homeowners and designers.

The first-ever Showroom report details extensive topics, including past and expected future sales, consumers’ reasons for visiting showrooms as well as how likely they are to purchase products. Below are highlights of the report, which can be downloaded here.    

Homeowners’ Use of Showrooms in K&B Remodeling

Homeowners are the customer segment most likely to frequent showrooms — and they generate three times more revenue than industry pros such as contractors, builders and designers. This shows the important relationship between homeowners and showrooms, but what does this really mean?

When seeking out direction in remodeling, homeowners look to professionals  —  which includes going to showrooms or stores. Seven in 10 homeowners start their K&B remodeling project by consulting with a designer (24 percent), builder/contractor (24 percent) or a showroom/store (23 percent). And according to panelists featured in NKBA’s webinar that debuted the report, designers will demonstrate to their clients — who may have already compiled a list of products they researched online — the importance of going to a showroom and speaking with a showroom expert.


To watch the NKBALive Research Reveal on the Independent Kitchen & Bath Showrooms report, go here to view the sessions on demand.


Additionally, more than one-third of homeowners visited an independent K&B showroom for ideas and design inspiration. Homeowners look to showrooms for product knowledge and to see products in person.

How do they choose which showrooms to visit? Over 40 percent of homeowners were referred by an industry professional, while 25 percent found a showroom via research, and 17 percent were referred by family/friends. And 60 percent of homeowners took a virtual showroom tour before visiting in person. 

The Homeowner Shopping Experience  

More than 80 percent of homeowners say it’s important to see K&B products in person. Consumers want to touch the products, see the accessories and get a sense of the actual colors, according to panelists featured in the NKBA Research Reveal. Designer Paula Kennedy, CMKBD, said on the webinar that the client is dealing with the two most important things in their life when remodeling — their home and their investment in their home.  Added Kennedy: “Those are two very emotional things…they’re going to want to  touch that faucet, touch that cabinet door, get that hands-on, personal attention.”

“The two things a client is dealing with when renovating are two of the most important things in their life — their home and their investment in their home…  they’re going to want to touch that faucet, touch that cabinet door, get that hands-on, personal attention.” —Designer Paula Kennedy, CMKBD, during NKBALive Research Reveal webinar.

In fact, the report indicated that only six percent of homeowners did not make a final purchase in the showroom they shopped. The main reasons some shopped but did not purchase from a showroom were the variety of services, quicker product availability and broader product selection available from other retailers. Also, two-thirds of industry pros surveyed reported having a conversion rate of 50 percent or more, with the median being 64 percent.

Indeed, two-thirds of homeowners reported they upgraded their purchases in showrooms after learning about product features/functionality and available brands. These upgrades, according to those surveyed, are estimated to have boosted total product purchase by 31 percent for a full-scale kitchen or bath remodeling project.

Showroom Sales Steady

Of independent K&B showrooms participating in the research, 70 percent reported 2022 annual sales of $1 million or more; 22 percent reported sales of $5 million or more. Despite the uncertain economic conditions that continue to impact new construction and remodeling, showroom dealers forecast 2023 sales to be on par with 2022 and 2021 actual sales. And most showroom dealers rate the current health of the kitchen and bath market positively, with an average rating of 66 percent on a 100-point scale.

A More Detailed View

To learn more about these and other insights from NKBA’s Independent Kitchen & Bath Showrooms report, download the full report here.  

This article is the second in a series of three articles about the Independent Kitchen & Bath Showrooms report, with the third and final installment scheduled to be released next week.

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Five Practices For Designing A Luxury Outdoor Kitchen

Designers in NKBA’s Luxury Outdoor Kitchen Report share insights related to aesthetics, seasons, space, products and ROI.
By Elisa Fernández-Arias

Five key practices are used when designing an outdoor kitchen, according to NKBA’s recently released Luxury Outdoor Kitchen Report. They include combining the inside and outside aesthetics, extending the seasons (and therefore ROI), recouping square footage and more.

Below, the five practices highlighted in the Luxury Outdoor Kitchen report that are necessary to design a successful outdoor kitchen.  

Harmony

Creating harmony between the outdoor kitchen and the rest of the home is necessary to design a successful outdoor space. Coordinated materials, surfaces and colors help blur the lines between inside and out — and the outdoor space can share the rich colors, layers and textures of interiors. Finally, outdoor furniture and fabrics bring beautiful ‘interior-like’ softness to the outside, sharing the comfort of the indoors with the outdoors.

Timelessness, Evolution and Belonging  

This key practice is often a part of major renovations or ‘phased’ development projects to ensure new additions to a home seem as if they’ve been there since the beginning. Designers said they want to preserve a cohesiveness, which means sourcing aged materials for a ‘built together’ or harmonious look. This means that even if the main home is built decades before the outdoor space, the new outdoor structures can be designed to match.

Product innovation and materials are helping create this seamless experience from the inside to the outdoor space.  

Extending the Season… and ROI  

Extending the season extends the value, which also improves a client’s return on investment. Multiple areas of heated entertainment zones, such as infrared heaters, fireplaces, firepits and hot tubs, help extend the season in outdoor spaces even in the coldest climates. It’s no longer just the value of the interior that drives ROI, but also the outdoor space.

Additionally, designers can make outdoor spaces more accessible even in less than ideal conditions with creative solutions like installing easy to open and close doors and windows that seal off the outdoor entertainment area, or disappearing drop-down bug screens. This also extends the time spent in the outdoor space.

In this project by Larry Rych, one can see the use of tiers in the outdoor space that spills down into the yard with the man-made babbling brook. Photographer: Michael Alan Kaskel.
Discovering, Creating and Recouping Square Footage

Outdoor kitchen and living areas create more square footage for living and entertaining within the same footprint, enabling different rooms for different uses. One particularly effective strategy is to create tiers. For example, one designer reported creating a garden made up of different tiers that had a serene, man-made babbling brook, with the ‘rooms’ spilling down into the yard along with the brook to create different experiences in the space.

Another strategy for creating more space is to go up a level, which creates views, privacy, and luxury entertaining areas out of what was previously thin air. A designer who used this solution created an upper deck with innovative stucco and decorative barrier walls for a home in a crowded neighborhood lot that had privacy issues. The walls of the design made it possible for the homeowner to block neighbors while also enjoying views of the landscape and nearby city lights from their outdoor space.

Crafting the Vision Around the Homeowner’s Passion

Getting to know the client – what they like to do and how they like to entertain – is a must to help the designer prioritize the client’s requests for the outdoor space. One designer, for example, designed the outdoor space specific to their client’s passion for golfing. While the client loved living on a golf course, they preferred to finish rounds with friends at home instead of at the club  – so the designer created an outdoor installation with amenities including a putting green, pool, hot tub, kitchen, bar and lounging areas.

Additional Insights Available

To learn more about these and other insights from the Luxury Outdoor Kitchen research report, download here. To watch the NKBA Summit on Designing the Outdoor Kitchen, go here to view the sessions on demand.

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Luxury Outdoor Kitchens On The Rise

This high-growth category is rapidly becoming a staple for many homeowners.
By Elisa Fernández-Arias

The outdoor luxury kitchen category continues to grow at a fast clip, according to NKBA’s first-ever qualitative Luxury Outdoor Kitchen report. What’s more, the recently released report highlighted how this high-growth category is accessible to all designers thanks to the transfer of most interior design principles to the outdoor space. 

Causes and Trends

The expansion of outdoor luxury kitchens is due, in large part, to the COVID-19 pandemic that drove more in-home entertaining and cooking, which propelled a need to expand into outdoor spaces to accommodate this shift.  “Spending $1000 on a meal downtown, in a mask, in a private box, ruined the experience of a high-end restaurant,” said Matt Herbert of Sherwood Outdoor Kitchens, who along with Emily Bell of Bell Design Studios, Isabella Blue of RISE Outdoor, John Cialone of Tom Stringer Design Partners and other designers participated in the qualitative report.  “People changed how they entertained at home. They want to be outdoors. The focus is on the experience now. And cooking at home is cooler than going to a restaurant. High-quality food, high-quality cooking, high-quality environment.”

“There will never be a home we design without an outdoor kitchen, ever.” —Sandra Gjesdahl, Bristol Design and Construction

And as the wellness trend has continued to gain momentum, consumers are increasingly seeking to connect with nature through their outdoor space – space that can also be used to increase the footprint of smaller homes.  The move into expanding outdoors has also  created a need for new products to enhance the space, including pizza ovens, all-year luxury cabinetry, UV-resistant countertops, and appliances that can withstand the elements. “There will never be a home we design without an outdoor kitchen, ever,” said Sandra Gjesdahl of Bristol Design and Construction, in the Luxury Outdoor Kitchen report.

Given the growth of the category, it should come as no surprise that luxury outdoor kitchens have become an expected “standard” for luxury home builds. “Most ground-up new projects are taking outdoor spaces into consideration,” noted Nar Bustamante of Nar Design Group, in the report. “New construction definitely includes outdoor living kitchens, pools, decks. It’s a priority.”

Outdoor is Accessible to All Designers  

What’s more, this high-growth category is accessible to all designers. The designers participating in this research had very diverse backgrounds and varying degrees of outdoor kitchen experience. Some designers began their careers as construction contractors, starting the project with this point of reference; some started out as architects, using these skills to create the outdoor space and then added finishes and appliances; and those who were kitchen and/or interior designers transferred their interior design skills to the outdoors, focusing on client needs and lifestyle to inspire them.

Many Interior Design Principles Transfer

Many interior design principles transfer to the outdoor space, making the luxury outdoor kitchen category highly accessible to nearly anyone with design experience.  First off, the design process is the same: a designer of the outdoor kitchen must understand the needs of their clients and how they entertain — thinking through functionality, flow of space and aesthetic, adequate storage, washing, prep, cooking, serving, and easy clean-up.

Additionally, both interior and outdoor kitchen design require building and coordinating a team of specialists. Designers need to find the right partners (which may be different from those used for the interior) and then coordinate the order and timing of each facet of the project. 

Designers also have to consider different ways to make the outdoor space – like indoor spaces– flexible so that the client can use it for different experiences. Partnering with a tech integrator is also important to ensure an easy, comfortable ambiance. 

“Outdoor kitchens take cues from the inside, acting as an extension of the interior,” said Kerrie Kelly of Kerrie Kelly Design Lab, one of the participants in the report. “The appliances are a bit different, but a lot of the same rules apply.”

Want to Learn More?

To learn more about these and other insights from the Luxury Outdoor Kitchen study, download the full report here. To watch the NKBA Summit on Designing the Outdoor Kitchen, go here to view the sessions on demand. 

This article is the second in a series of three articles about the Luxury Outdoor Kitchen, with the third and final installment scheduled to be released next week.

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Top 10 Insights About Luxury Outdoor Kitchens


NKBA’s research report offers up important insights and advice on designing an outdoor kitchen space.   
By: Elisa Fernández-Arias

NKBA released its first-ever qualitative Luxury Outdoor Kitchen report last week, after kicking off a virtual Summit that showcased its findings. The report contains insightful information on the key practices, design principles, and material and product trends driving this influential category.

Below are some of the report’s highlights:

  • Luxury outdoor kitchens are a rapidly growing category. The COVID-19 pandemic completely changed the experience of dining, with many more people preferring to entertain, eat and relax at home in their outdoor kitchens.

  • New construction prioritizes outdoor spaces. Most new residential construction projects include outdoor living spaces that include kitchens, pools and decks.

  • Quality counts. One of the elements that defines luxury outdoor kitchens is quality, with designers pointing to solutions such as luxury-level outdoor cabinetry, as well as countertops and appliances designed to withstand the elements.

  • Seamless transitions expand the home. Seamless design transitions between indoor and outdoor are accomplished through fixtures, finishes and coordinated materials, surfaces and colors — all of which ease the flow between spaces.

  • Comfort is key. A luxury outdoor kitchen should include amenities such as a galley workstation, oversized TV or media screen, bar, ice maker, refrigerator, comfortable seating and more. Focusing on how a client sees comfort will help design the ideal space.

  • Extending the season improves ROI. Multiple areas of heated entertainment zones, such as infrared heaters, fireplaces, firepits and hot tubs, extend the season in outdoor spaces, providing a higher return on investment.
      
  • Creative solutions can expand the outdoor space. By using strategies such as having outdoor ‘rooms’ spill out into unusable yard space or creating upper levels, designers can increase the functionality and size of the outdoor space.

  • Sustainability is in. Clients want sustainable features and elements, which designers can provide by sourcing locally, designing for longevity, and leveraging natural renewable materials.

  • Many interior design principles are transferable. Principles used in interior design — including the design process itself, building and coordinating a team and using curated experiences/moments to drive the luxury experience — can also be used successfully in outdoor design.

  • However, there are also different design principles. Designers must consider how to anticipate and mitigate the impact of seasonal changes on the outdoor kitchen. The weather, humidity, temperature, wind direction and sunlight can all have a negative effect on outdoor kitchen products/materials if not treated properly. 

To learn more about these and other insights from the designers interviewed in the Luxury Outdoor Kitchen study, download the full report here. To watch the NKBA Summit on Designing the Outdoor Kitchen, go here to view the sessions on demand. 

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Designers More Optimistic About Future Outlook

Key Takeaways

  • Designers report flat Q1 KBMI rating  
  • Two out of three KBMI components rebounded 
  • Reported sales grew 1.7 percent YOY
Still, challenges remain due to clients’ tightened budgets and fear of economic uncertainty.
By Elisa Fernández-Arias

Despite recording a flat Q1 KBMI rating, designers seem more optimistic about business when looking ahead. Indeed, this sentiment was in line with the overall positive shift for all market segments – designers, retailers, builders and manufacturers – coming out of the first quarter of 2023.

Designers reported a 61.6 KBMI rating, barely up from the 61.1 recorded in Q4 2022. This compares to an overall industry rating of 62.4 in Q1 2023, up from 61 the previous quarter.

Despite the lackluster overall rating, however, designers reported a major upswing in quarter-over-quarter ratings for industry Health and Future Conditions, two of the three components that make up the KBMI.  

Designers rated Health at 67 for Q1 2023, a significant jump from the previous quarter’s 63, and slightly higher than the overall industry rating of 66.6. They rated Future Conditions at 67.6 for Q1 2023, an even bigger increase from the 58 reported in Q4 2022, and only slightly lower than the overall industry rating of 68. As for Current Conditions, designers reported a rating of 57, a drop from the previous quarter’s 61, and lower than the overall industry rating of 59.

Sales Slow, but Projects Pacing Ahead 

Designers reported that sales grew 1.7 percent in Q1 2023, similar to the 1.8 percent gain across all segments. Nevertheless, this was a drop from the year-over-year sales growth of 6.2 percent in Q4 2022 and 2.4 percent in Q3 2022.

Despite the sales slowdown, designers reported that projects were moving forward without delay and pacing better than in Q4 2022. About 70 percent of designers reported canceled or postponed projects in Q1 2023, down from 80 percent in Q4 2022. The canceled or postponed projects were due to economic uncertainty, according to 45 percent of designers. Designers also noted that their affluent clients were still moving forward with work – softening the financial impact of cancellations and postponements.

Designers are selecting brands based on cost-to-consumer since client budgets are tight, and lesser-known brands offer more affordable solutions.

As for project size, 46 percent of designers said the average Q1 2023 project measured the same quarter-over-quarter. They reported that consumers were hesitant to expand the scope of kitchen and bath projects in a high-inflation, high-interest rate environment.

Around 56 percent of designers reported that backlogs were about the same on a quarter-over-quarter basis, a 12-percentage point increase from designers who reported that backlogs were about the same quarter-over-quarter in Q4 2022. In addition, designers said the demand for kitchen and bath design services has relatively stabilized in Q1 2023 compared to Q4 2022.

Lead Growth, but Budget Challenges   

‘New lead’ volume increased in Q1 2023, according to 37 percent of designers, a healthy increase from the 23 percent who reported the same in Q4 2022. This uptick in project demand was stronger than anticipated, however, 43 percent of designers expect  ‘new lead’ volume growth to remain flat in Q2 2023.

The uptick in project demand in Q1 2023 was stronger than anticipated, however, 43 percent of designers expect this to remain flat in Q2.

Designers also reported selecting brands based on cost as opposed to brand preference or aesthetics. In addition, 75 percent of designers said they continued to substitute brands for sinks, followed by mirrors (71 percent), shower units (69 percent), refrigerators (63 percent), faucets (58 percent) and lighting (58 percent).  Designers noted that they were selecting brands based on cost-to-consumer since consumer budgets are tight, and lesser-known brands offer more affordable solutions. 

Additionally, designers reported opting for lower-price products and materials to help clients stay within budget. Other strategies that helped: providing clients with factory-made instead of custom-made options, and offering products that were aesthetically similar but of lesser quality than their luxury counterparts.

About the KBMI

The KBMI report is conducted quarterly by NKBA and John Burns Research and Consulting to examine the overall state of the K&B industry, current conditions and challenges as well as future expectations. The Q1 2023 survey netted over 800 responses from NKBA members in four main industry segments — retailers, designers, builders and manufacturers. 

To download the full report, click here.

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The Future Of Bathroom Design: Customized, Spa-Like Experiences 

Key Takeaways

  • Bathroom projects are getting larger and more involved;
  • Spa-like bathrooms will grow in popularity;
  • Larger, more luxurious showers ill be in vogue, as tubs will be removed;
  • Greater usage of technology will enhance the spa-like feel.

By Robert Isler

Virtually every aspect of the primary bathroom – from layout, to color scheme to usage of technology – is evolving. According to NKBA’s newly-released 2023 Design Trends report, the bath is transforming from a place of basic functionality to a space that offers sanctuary, a spa-like retreat. This is particularly relevant for the growing segment of the population who are looking to age in place.  

Expansion and Customization

Combining the feedback of 600 K+ B specialists, NKBA’s 2023 Design Trends report outlines emerging trends over the next three years.  One of the biggest trends for the bath, similar to the kitchen, is the opening up of the bathroom and connecting the bath to an adjacent room, in this case a dressing or sitting room.  The walls are coming down to open up and increase the bathrooms footprint (63 percent).  Where space is limited, designers are installing skylights and windows above the tub to enhance the sense of space.

77 percent of respondents say the removal of tubs to create a larger space for showers will be popular over the next three years.

It is clear, bathroom projects are bigger and more involved than last year according to 32 percent of designers surveyed.  Tubs are being removed to allow for larger, more customized showers (77 percent), with many installing large showers that can accommodate two people, often with zero-clearance entrances and multiple showerheads to create a spa-like experience.  And while many are removing tubs, others noted that for higher-end bathrooms, if space allows, a bathtub is still the focal point. 

Technology: Comfort, Ease and Luxury  

Subtle, unobtrusive technology is also on the rise.  From the floor, to lighting, to water temperature, designers are seeing an increase in requests for technology that enhances the ease, comfort and customization of the bath.  Heated floors (69 percent) and smart control thermostats (67 percent) are becoming a norm while other technologies such as motion sensors for lighting, speakers and even the integration of lighting and physical therapy options for showers are gaining traction.  All point to an increase of highly personalized, sanctuary-like bath environments.   

Clean Lines & Easy to Clean

Similar to what is being implemented within kitchens, designers are eliminating clutter in the bath. Incorporating seamless storage solutions for a cleaner look.  From linen storage cabinets (72 percent) to vanities that contain hidden outlets (62 percent), the demand will be for more storage and hidden solutions.  In addition, large format tiles and slabs which have fewer grout lines are becoming more popular as they require less maintenance and have a clean aesthetic.  

Lastly, color. To set the mood, blues and greens are expected to be the dominant bathroom colors over the next few years. Fused with whites, they will add warmth and contribute to the overall calm, oasis-like feel. As one designer put it, “Blues and greens are always popular as a reflection of water, so playing on different hues and values will still be present.”

Click here to download the full report.