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Faucet function vs. fashion

BY HBSDEALER Staff

The faucet category is one of the more artistic areas of home improvement. Many of the manufacturers treat their products as high art—displaying them in expensive press kits or in luxurious tradeshow booths.

Consumer research from Port Washington, N.Y.-based NPD Group shows the average price of faucets increased to $67.30 in 2008, up $4 from $63.30 in 2007. But there are signs that consumers may be choosing more practical, middle-of-the-road styles.

Where are they buying faucets?
1. Channel Demographics by income

Channel demographics by income Less Than $45K $45K–$100K >$100K
Warehouse home center 65.0% 73.4% 64.6%
Department stores 5.5 5.7 2.3
Hardware stores 4.8 2.9 2.5
Mass merchant 7.9 1.8 0.9
Kitchen & bath specialty 1.0 2.9 6.1
Other 15.7 13.3 23.5

“This is a style-driven category, but we’re beginning to see a little more function over fashion,” said Mark Delaney, NPD Group’s director of home improvement.

For instance, sales of faucets over $75 peaked in the third quarter of 2007 at 40.9 percent, and have declined since, to the most recent figure of 30.3 percent. About 43 percent of the faucets sold from January 2006 to March 2008 were under $50. (See chart 3.)

Meanwhile, chrome’s position at the top of the preference list is being challenged by stainless steel, nickel and pewter, which gained 5.2 percentage points. While chrome is still the leading material choice, it dropped 8.6 points to 41.7 percent. (See chart 2.)

“When you start looking at finishes, faucets are one of the few home improvement categories that are very heavily advertised—it’s all about sexy elegant finishes and brands,” Delaney said.

Brand increased in importance as a purchase motivator, up 2.1 points to 20.5 percent, trailing price and features. (See chart 5.)

As in most home improvement categories, the warehouse home centers dominate the action—with 68.3 percent market share. The domination is seen across all income categories. (See chart 1.)

As the consumer’s income increases, so do his or her chances of shopping in a kitchen and bath specialty outlet. Likewise, as the consumer’s income decreases, so do his or her chances of shopping in a mass merchant. Interestingly, the warehouse home centers have a near identical share—65 percent—of both the under 45K market and the over 100K market.

Regardless of retailer, faucet consumers showed a dramatic increase in selecting a retailer based on proximity. Close to home is now neck and neck with product availability as a reason to chose a retailer. (See chart 4.)

OTHER FINDINGS:

Older customers (65 plus) described features as the leading purchase motivator. Younger customers (18-44) described price as the leading purchase motivator.

Kitchen and bath specialty stores enjoyed the highest price index of all channels—164, compared to 103 for warehouse home centers and 48 for mass merchants. (A 100 index is average.)

Unit sales of faucets with pullout spray spouts increased by about 7 percentage points over last year.

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Honda lawn mowers recalled

BY HBSDEALER Staff

American Honda Motor Corp. is recalling about 20,500 Honda Lawn Mowers, according to the Consumer Products Safety Commission.

Arear shield attached to the lawnmower can break off and be thrown at the operator, posing a laceration risk. The company has received one report of this incident, but no injuries have been reported.

The recall includes HRX walk-behind lawn mowers, and the items were sold from Oct. 27, 2007, through June 2008.

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Fannie Mae, Freddie Mac woes could lead to Fed takeover

BY HBSDEALER Staff

Following a slew of funding problems for government-sponsored mortgage finance companies Fannie Mae and Freddie Mac, the federal government is considering taking over the two organizations, according to a report by the New York Times.

The two mortgage companies, which are government-sponsored entities (GSEs), have had difficulty raising funds in the face of the housing market downturn.

According to the report, a plan is under consideration by the Fed to place Fannie Mae and Freddie Mac into conservatorship, which means losses on home loans under their names would be paid by taxpayers. The newspaper cited individuals briefed with the government’s plan, although the sources also said no action is imminent.

Congress created Fannie Mae during the Great Depression and created Freddie Mac in the 1970s. Later, legislators eased some restrictions on the two organizations to help spur growth, allowing them to cash in on the slew of jumbo mortgages that eventually entered the market. Like many other mortgage companies, the two groups were deeply hurt by fallout in the housing market. But unlike other mortgage companies, Fannie Mae and Freddie Mac collectively hold huge relative chunk of the outstanding mortgages in the United States.

Shares of Fannie Mae and Freddie Mac are expected to slide further today, after plunging throughout the week. If the government were to take over the companies, their stock would be worth “little or nothing,” according to the New York Times.

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