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Top 5 Takeaways from NKBA's Q2 Kitchen & Bath Market Index

Supply chains, demand rebound as the industry evolves in the pandemic

August 26, 2020
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The rumors are true: the remodeling industry is bouncing back, and Q2 was much stronger than the first quarter of the year–at least for the kitchen and bath industry. The National Kitchen and Bath Association released its Q2 Kitchen and Bath Market Index (KBMI) in mid-August. The latest report captures the trends and changes due to the pandemic that data from Q1 was just beginning to uncover.

The Q2 index, conducted jointly by NKBA and John Burns Real Estate Consulting, analyzes responses from a quarterly survey to its thousands of members in the design (45% of Q2 responses), building and construction (18%), retail sales (21%), and manufacturing segments (17%). The overall industry sales index is at 44.2, an increase from Q1's 41.0, which is still in the contracting range (50.0 = flat). Current conditions dropped to 31.1 (46.9 in Q1), which is a more comprehensive view of the pandemic than Q1, and future expectations rebounded to 61.9 (19.8 in Q1).

The pandemic is a major disruption in countless industries, and is becoming a major catalyst for changes in the kitchen and bath industry as well. Over 40% of all segments polled reported a major shift in demand in the kinds of products and services requested from clients.

Here are the 5 top takeaways from the report: 

1. Supply chains, manufacturers took a hit, but pros are adapting

Nearly 60% of respondents said they faced supply chain disruptions that impacted their businesses, leading to longer lead times, slowed production, and shipping delays. According to the report, flooring, appliances, and cabinets topped the list of products most likely to be backed up, especially those coming from China. But as the industry adapts its sourcing strategies to the pandemic’s conditions, the blow to companies is less than last quarter.

“We are constantly checking inventories to make sure all products are stocked before we even issue a purchase order,” one published response says. ‘We are only ordering from companies based in the United States right now.”

Kitchen and bath product manufacturers themselves are faring better this quarter:  In Q1, furloughs impacted an average of 61% of the company workforces. In Q2, it was down to 41%, which is still less than ideal, but a fair amount lower than last quarter.

2. Economic uncertainty remains a top concern...

Though Q2’s predicted 4.4% full-year sales decline is significantly improved from the predicted 13.7% decline in the first quarter, 58% of all segments and 62% of designers in the kitchen and bath industry are still reporting that the pandemic has significantly or somewhat lowered demand for the company. 

“NKBA members reported a sales decline of 11.4% on average in Q2 2020 compared to the same 2019 period,” the report says. “Design firms reported the largest year-over-year decline of 14.6% while retail sales, building and construction companies, and manufacturers reported high single digit declines of 9.5%, 9%, and 7.1%, respectively.”

Economic uncertainty, an economic recession, and fear of a second wave of COVID-19 top the list of concerns while the biggest concerns of 2019, such as the skilled labor shortage and material costs, fall behind the larger economic challenges. 

3. ...But luckily bids and proposals for remodeling are higher than Q1

Things are looking up for the kitchen and bath industry as nearly one in three design firms report that clients are demanding more bids/proposals for future remodeling projects due to the COVID-19 pandemic. For reference, only 8% said the same thing in Q1 2020. “The surprising resilience of the economy, likely due to government stimulus, has tempered the fears that were commonly cited last quarter,” the report says.

Though challenges such as a client’s unfamiliarity with Zoom and desire for in-person meetings continue to slow projects down, 86% of designers polled progressed on projects thanks to virtual technology, with over one-third making significant ground.

4. The nature of client requests is changing...

The index revealed that though the high-end market may be unchanged, the behaviors of older demographics and the mid-range buyer are increasingly cautious. “My older/retired clients have delayed their projects while my younger clients are going ahead with plans,” one published commenter says. “Scopes are smaller for younger people, in general, so it’s not the most ideal situation.” Some clients are just paying for design work before committing to an entire project while others are requesting repairs and replacements over a full remodel. 

Instead of full-scale kitchen and bath remodeling projects, polled professionals are receiving inquiries for smaller projects (79% reported an increase) and DIY-assistance (98% reported an increase). Some of the respondents cited a significant change in price points (20%), size of projects (14%) and number of DIY-assistance calls (11%). “Consumers just want to replace a toilet or a sink right now, not a full remodel. We’re getting calls for ideas and help,” one published response says. “What they really need is a plumber or handyman.”

5. ...And so are the hottest products on the market

Intuition would tell you that health-related products would be in high demand during a pandemic, and the Q2 KBMI’s findings back that up as 98% of respondents reported an increase in demand for the products compared to before the pandemic. Air purifiers, touchless faucets, and antimicrobial door handles were the top products experiencing an increase in demand–nearly half of the companies who reported a significant change noted a jump in requests for those items.

Some companies are reporting an increase in ADA-compliant products and aging-in-place designs during the pandemic, according to the report. With retirement homes becoming hotspots for the pandemic and more Americans experiencing sheltering-in-place, homeowners’ relationships with their houses are changing. “Nobody wants to send their parents to a retirement home right now,” one company says in a submitted comment published in the report. “We are seeing a lot more demand for in-law suites and long-term wellness planning and design.”

 

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