Over 250 kitchen and bath professionals we spoke with in early June indicated that while growth in 2Q will be slower than last year, they expect a rough patch to be mild in duration. In fact, designers, builders/remodelers, retailers, and manufacturers alike remain optimistic about the underlying strength of demand for their products and services.
Amid these mixed signals, pros also indicated a “silver lining” for companies that undergo slower growth in mid-2023, as this period can provide time and opportunities to explore new technologies to support growth when the market picks up again, as it surely will in coming years.
Here are the main takeaways:
1. Despite wider expectations of a downturn for the building products market in 2023, kitchen and bath professionals are optimistic, still rating the health of their segment as normal relative to history.
In June, we asked pros for an advance read on the economic health of their segment of the residential kitchen and bath industry on a scale of 0 (extremely weak) to 100 (extremely strong). The result? Pros’ average rating was 58 out of 100, meaning they feel their industry’s health is in a normal range. These results align with our “Health of the Kitchen and Bath Industry” index, which has proven to be a highly reliable measure of market conditions.
As Bill Darcy, CEO of NKBA, explained,
“There definitely is a mixed consensus among the NKBA Community in terms of how revenues will perform in the latter half of 2023. Although some members are being impacted by softening consumer demand, many geographic markets and brands seem immune to any signs of a slowdown. We will look to the next KBMI for the official measure of Q2 performance and expectations for 2023 and 2024.”
2. Overall demand for kitchen and bath remodeling remains steady.
Nearly 7 in 10 kitchen and bath professionals reported that homeowner interest and demand for residential kitchen and bath improvement and remodeling services is as strong or stronger today than it was over the past three years. This finding is particularly significant considering that demand in 2021 and 2022 included double-digit sales growth, on average. Only a small share (31%) of pros cited weaker demand conditions.
As Bill Darcy further explained,
“Homeowners absolutely love to invest in their homes to make them better. Remodeling is a necessity for some, but for many, it is a hobby, or in some cases, an obsession. A kitchen or bath remodel enables a homeowner to improve the functionality and aesthetics of their home, but it also can increase the value of their home, contribute to the quality of their life, and elicit a sense of pride.”
“Not only is a kitchen remodel a top choice of homeowners looking to stay in their homes for the long-term,” said Darcy, “but it can also have big payoffs to homeowners who are planning to sell their homes when mortgage rates moderate. A newly renovated kitchen often helps homeowners sell their homes faster and for more money.”
3. Some kitchen and bath professionals shared concerns over softer market conditions in 2Q23.
As Bill Darcy explained,
“This early read for Q2 and Q3 performance aligns with the strategies we see being executed by several of our largest NKBA and Global Connect members who are making significant capital expenditures in the North American market. They are looking past 2023 and focusing on the bounce that many industry economists predict will begin in 2024 and last for the remainder of the decade.”
4. Opportunities abound for companies to invest in their future growth by adopting new technology.
To be sure, human judgment will remain vital in this space. As one professional designer explained, “Clients have difficulty putting into words what they want. It takes an intuitive and seasoned designer to do that.” Even so, many pros envision a greater role for AI in generating designs and assisting in selecting finishes and textures.
Other important tasks cited as ripe for efficiency gains with the help of technology include contract management, project management, space measurement, and training employees.
Kitchen and bath companies that anticipate softness in the middle part of this year can take time to re-invest in the businesses and in technology to increase operational efficiency and optimize their social media strategy. Those that use tech to their best advantage should begin to see payoffs when the market cycles back upward again in 2024
In partnership with the National Kitchen and Bath Association, the Kitchen and Bath Market Index Survey examines current kitchen and bath industry demand, future expectations, and issues and challenges that industry professionals are facing in their businesses. For more insight into building products industry conditions, please contact us or check out our research and consulting solutions.