Spetterend Sanitair 2025 - Manufacturer report Developments in the sanitary sector
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Spetterend Sanitair 2025 Manufacturer report Developments in the sanitary sector Geert-Jan Aries – Reinier Zuydgeest – Hanane Bouazzazoui
INTRODUCTION Five years ago, the sanitary sector was different than it is today. Online sales were only a very, very small part of the total sales, the sustainability aspect hardly played a role, and the most important design trends were concrete, gloss bathroom furniture and wood elements in the bathroom. In 2025 the sector will also be different from today. The only difference with 2015 is that we do not know exactly what will happen. It is known that a number of developments will have an effect on the sanitary sector. Think for example of changing consumer behaviour, the energy transition, the elderly living longer in their own home, the labour shortage in the construction industry, digitisation and prefab. They will all have an effect on either the demand or the supply side of the market, and will therefore change the whole market. The question that this report answers is the following: what will the sanitary sector look like in 2025 and what does this mean for you? What do you have to do to win in the 2025 market? “Spetterend Sanitair 2025" is a farewell gift for the sector from the Heating and Sanitary Foundation. This foundation consists of manufacturers, wholesalers and installers who have jointly promoted the sale of high-quality sanitary products for more than 25 years. The sanitary market is a slow market, but we do see changes. The change in recent years has made me focus more on an omnichannel approach, even for my relatively older target group ”- Director of Sanitary Specialist 2
INDEX Introduction Market size and outlook of the future Economy Structure Size Future The customer journey Motivation Inspiration and orientation Purchase Installation Trends and developments Luxury and comfort Needs of the 50+ Online and the showroom Sale of complete bathrooms by manufacturers 3 Future scenarios
BACHGROUND OF THE STUDY GOAL OF THE STUDY METHODOLOGY Providing insight into the sanitary market in all its facets, such as channels, The results presented in this report have been gathered by using several research volumes, trends and their impact, wishes and needs, customer journeys, etc., in a methods: way that every level of the business column can get started with the insights. • Desk research • In-depth interviews with industry experts (13) • Online surveys with consumers (1,060) • Online surveys with people over 50 (374) • Telephone surveys with installers (201) • Telephone surveys with retailers (139) The purpose of each research method was different. For example, the purpose of expert interviews was to substantiate the data from desk research and to formulate the right questions for the quantitative part. The telephone surveys with installers TIMELINE aimed to provide more insight into the size of the market, the installation of sanitary products, prefab and the energy transition. In-depth interviews with professionals Start of the study Start online Start reporting Finalisation report interviews 2019 April May June July August September October Start desk Start telephone research interviews 4
Introduction Market size and outlook of the future Economy Structure Size Future The customer journey Motivation Inspiration and orientation Purchase Installation Trends and developments Luxury and comfort Needs of the 50+ Online and the showroom Sale of complete bathrooms by manufacturers 5 Future scenarios
ECONOMIC DEVELOPMENT The Dutch economy is currently in the final phase of a boom. The CPB has predicted a growth of 1.8% for 2019, which is lower than the 2.9% in 2017 and 2.6% in 2018. A growth of 1.4% is expected for 2020 (source: CPB). There CONSUMER INDICATORS appears to be a negative trend. Consumer confidence | Economic climate | Favourable time for large purchases 50 Consumer indicators also appear to be less positive for 2019. Consumer confidence has been steadily declining since May 2018. This trend continued in February and March 2019 and the indicator even turned negative, after a 30 slightly positive score in January. In December 2018 the consumer confidence Average of subquestions indicator stood at 9 points; and in April of that year it even went to 25. 10 Consumers also seem to find the time less favourable for making large purchases. If this trend continues, it is quite possible that the sanitary market has reached its peak in terms of sales, and possibly also in terms of turnover. -10 In addition, there are some social developments that are more or less independent of the state of the economy and thus lay a foundation for the -30 demand for living space (and therefore also for bathrooms). Important developments are: -50 • family dilution (increasing number of single and double-person households, longer independent living of older people); • The continuing interest in buying a house (instead of renting it); -70 • The growth in the number of new build properties delivered. Source: CBS 6
ECONOMIC DEVELOPMENT AVERAGE PRICE OWNER-OCCUPIED HOUSING 400000 Since 2013, the housing market has rapidly increased. The demand for housing remains high, 350000 while the supply has been at a historically low level for some time now. At the end of 2017, the provisional high point of the number of homes sold was reached. After this, the number of 300000 Euro home sales fell slightly again in 2018 and 2019. 250000 200000 In recent years, the construction of new homes has increased rapidly, with an average of around 3.5% per year. However, this is accompanied by substantial growth convulsions. Many 150000 people left the construction sector during the crisis. This means that the current numbers of 100000 new builds have to be produced by a considerably smaller number of construction workers. In 50000 order to meet the high demand for new homes, the building capacity must approximately 0 double. According to the Economisch Instituut voor de Bouw (EIB), there are currently too few building plans to reduce the housing market shortage in the next five years. Nonetheless, housing production will have to increase further in the coming years in order to be able to meet household growth (averaging by 50,000 per year (source: CBS)). NUMBER OF HOUSES SOLD The Dutch housing market has always been strongly linked to the economy. As house prices 300000 rise, consumer confidence rises and we tend to spend more. If the economic outlook continues to deteriorate, partly due to the trade war between the US and China and the Brexit, this may 250000 have an impact on the housing market. A lower rise in house prices and lower consumer 200000 confidence can reinforce each other (in a negative sense) and thus have a negative impact on Number the sanitary market. 150000 100000 50000 0 * The estimate of the average selling prices for existing owner-occupied homes and the number of homes sold is based on figures from ING, Kadaster, BouwKennis, and research from Peels & Dankers, 2017. 7
MARKET STRUCTURE AND SIZE METHOD The sources used to establish the market structure and market size are both quantitative and qualitative. On the one hand, qualitative elements were used from insights that emerged from interviews with parties from different parts of the sanitary sector, and on the other hand, quantitative data emerged from desk research (e.g. CBS, EIB, KPMG), online interviews and telephone interviews. The structure and size of the sanitary sector was determined based on all these sources. The following steps have been taken: • Mapping the actors on the market (retail-oriented, installation-oriented and wholesale role). The contracting companies are kept outside the market structure and market size, because their primary focus is not the sanitary sector. • Determine the market size. This was done with the help of various (online) sources: • USP Sanitary Monitor 2019 – Residential market • USP Installer research fpur Heating & Sanitary Foundation June 2019 – Non- residential market • USP Architectural Barometer – Building volumes • BouwKennis – New-build, non-residential revenue, etc • USP European Installation Monitor 2018 – Non-residential market • CBS – Figures on new-build, number of homes, consumer confidence, etc. • DBSC Consulting/ Technische Unie – Role of the showroom holder In the remainder of this report, the terms residential and non-residential will occur more frequently. Residential buildings are intended for housing insofar as this is not a collective residential building with communal facilities. Non-residential buildings are buildings with a non-residential purpose. This includes buildings with an office, school, health, sports, trade, hospitality or meeting function or other types of energy-using buildings. 8
MARKET STRUCTURE Sanitary products are supplied to the residential and non-residential market through a The table below only includes the channels that actually sell to consumers. This means that wide range of different channels. The different channels can be divided into groups based the wholesale function is not included in this, but that the wholesalers that deliver directly to on the organisations' proposition: the consumer are subdivided into sanitary (and kitchen) specialty shops, tile specialist shops • Retail-oriented companies and installation companies with a showroom. A total of 240 of the 375 (source: CBS) existing • This group can again be broken down into specialised retail trade, which wholesalers have been placed in other groups. includes the sanitary (and kitchen) specialty store, the tile specialist store, and the parallelised retail trade to which the DIY stores can be counted. • Companies focused on installation • This group consists of installation companies with or without a showroom. • Companies with a wholesale function • The sanitary wholesaler and the builders' merchant can be found in this group. • On the next page you can see a schematic (simplified) overview of the distribution. SHARE IN THE GROUPS WITHIN THE MARKET STRUCTURE MARKET (IN TERMS OF ESTABLISHMENTS) Sanitary (and kitchen) specialty store Specialised retail 590 Tile specialty stores Retail-oriented DIY stores 786 Parallelised retail Other retail channels 118 Installation companies Installation with showrooms 2,437 Installation companies without showrooms Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 9
MARKET STRUCTURE (EXCL. FOREIGN COUNTRIES) MANUFACTURER/ IMPORTER BUILDERS’ SANITARY WHOLESALE MERCHANT INSTALLATION INSTALLATION PROJECT SANITARY COMPANY TILE SPECIALTY COMPANY WITH DIY STORE INSTALLER (NO PURE ONLINE OTHER SPECIALTY STORE WITHOUT A STORE A SHOWROOM SALES) SHOWROOM RESIDENTIAL MARKET NON-RESIDENTIAL MARKET (PROJECTS) The sale of sanitary products takes place along a wide diversity of channels. This distribution structure is fairly complex because, in addition to the sales activity when selling sanitary products, installation activity is often also organised by the supplier. The product itself is a semi-finished product. The diagram is a simplified representation, because there are more horizontal and vertical relationships between the different parties than shown. Examples of this are manufacturers who sell directly to the residential market and installers who buy sanitary products at the DIY store or online. These relationships can be seen on the following pages. 10 Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019
MARKET SIZE 2018 The total consumption expenditure for sanitary products, including tiles, is estimated TURNOVER OF THE SECTOR at around 4 billion euros (incl. VAT) for 2018/ 2019. The spending by main categories can be seen in the table on the right. Total 3,984 million The spending per sector can also be found in the table on the right. Here it is shown Turnover sanitary products 2.788 million that 2.5 billion can be found in the residential sector, which is approximately one billion larger than the non-residential sector. Turnover tiles 360 million The sanitary market will experience little growth in the coming years. This is evident VAT 836 million from the figures of Dutch wholesalers. This is also apparent from the USP Sanitary Monitor, which shows a growth of only 1% in the residential market was reported in the first half of 2019. This is mainly due to consumer confidence, the economic climate and the obstacles to new construction. TURNOVER OF THE SECTOR Total 3,984 million GROWTH OF THE SANITARY MARKET IN VOLUME Residential 2,482 million 7,4% Non-residential 1,502 million 6,3% 4,0% 1,9% 2015 2016 2017 2018 11 Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019
MARKET SIZE 2018 Within the residential and non-residential sector, a distinction can be made between TURNOVER OF THE SECTOR (2018) (incl. PRODUCTS, EXCL new build and renovation. VAT) INSTALLATION Residential 2,482 million Within the residential sector, the renovation market is about four times as large as the new build market. This is mainly because more bathrooms are being installed in the New build 495 million renovation market (267,000) than in the new build market (68,000). The same applies to toilets. More partial replacements and accessories are also being purchased to Renovation 1.987 million replace existing products. Within the non-residential sector, the renovation market is also about four times as TURNOVER OF THE SECTOR (2018) (incl. PRODUCTS, EXCL large as the new build market. One of the reasons is that new build has decreased in VAT) INSTALLATION recent years due to, among other things, the shortage of labour. The share of new Non-residential 1,502 million build in the non-residential market is likely to increase in the coming years (source: BouwKennis). New build 306 million Renovation 1,196 million Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 12
MARKET SIZE 2018 RESIDENTIAL - BATHROOMS New build Number of bathrooms 42,225 42,225 Average value OWN X € 1,616 million € 6,070 Number of renovated Existing housing bathrooms 4,387,000 224,000 Average maintenance value € 268 million € 1,968 million € 35 Number of renovated Existing housing bathrooms 3,276,000 42,000 RENT Average value X € 84 million € 1,300 New build Number of bathrooms 22,275 22,275 The USP Sanitary Monitor shows that the average bathroom value of a private tenant is approximately € 2,500. The costs of a bathroom that is placed in corporation housing is lower, around € 1,000. This brings the average to € 1,300. 13 Bron: USP SANITARY MONITOR, AUGUST 2019
MARKET SIZE 2018 RESIDENTIAL - TOILETS New build Number of toilets 42,225 42,225 Average value OWN X € 418 million € 1,675 Number of renovated Existing housing toilets 4,387,000 207,686 Average maintenance value € 38 million € 514 million €5 Number of renovated Existing housing toilets 3,276,000 37,422 RENT Average value X € 58 million € 964 New build Number of toilets 22,275 22,275 The USP Sanitary Monitor shows that the average toilet value of a private tenant is approximately € 1,030. The costs of a toilet room that is placed in corporation housing is lower, around € 700. This brings the average to € 964. 14 Bron: USP SANITARY MONITOR, AUGUST 2019
MARKET SIZE 2018 RESIDENTIAL TURNOVER OF THE SECTOR (2018) (incl. PRODUCTS, EXCL TURNOVER OF THE SECTOR (2018) (incl. PRODUCTS, EXCL VAT) INSTALLATION VAT) INSTALLATION Total 3,984 million Residential 2,482 million Residential 2,482 million New build 495 million Non-residential 1,502 million Renovation 1,987 million On the right-hand side of the page, the turnover of the sanitary sector is split into Sanitary specialty store 1,207 million 48.7% different channels in a table. This is the turnover viewed from the end customer, in this case the consumer. This provides a clear picture of where the consumer DIY store 441 million 17.8% spends his sanitary euro. However, it should be noted here that perception of the Installer (with or without showroom) 401 million 16.2% consumer is not always right. For example, it is difficult for many consumers to see the difference between the sanitary and installation wholesale, building Sanitary and Installation wholesale 130 million 5.3% materials trade, and the DIY store. Online 108 million 4.4% However, this is how the consumer sees the sanitary market. Other (namely IKEA) 76 million 3.1% Tile specialty store 66 million 2.7% Building merchant 52 million 2.1% Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 15
MARKET SIZE 2018 NON-RESIDENTIAL TURNOVER OF THE SECTOR (2018) (incl. PRODUCTS, EXCL TURNOVER OF THE SECTOR (2018) (incl. PRODUCTS, EXCL VAT) INSTALLATION VAT) INSTALLATION Total 3,984 million Non-residentieel 1,502 million Residential 2,482 million New build 306 million Non-residential 1,502 million Renovation 1,196 million Just as with the residential market, the turnover of the non-residential Sanitary and Installation wholesale 1,262 million 84% market is also divided into the purchasing channels. Again, this is reasoned from the end customer, in this case the installer. The Building merchant 90 million 6% assumption is that in the non-residential market (utility) there is always an installer present to install the sanitary products. Other 60 million 4% Manufacturer 45 million 3% The turnover distribution has been determined based on the installation research carried out on behalf of the Heating & Sanitary Online 45 million 3% Foundation. Questions were asked about where the installers work, what the turnover is from the projects and whether this is new build or renovation. The various parties that supply the end customer is determined by means of the USP Installation Monitor 2018, in which the purchase channels of the installers are queried. Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 16
MARKET SIZE 2018 NON-RESIDENTIAL TURNOVER OF THE SECTOR PRODUCTS, EXCL The turnover from the non-residential sector is also split into the subsector. This (2018; INCL VAT) INSTALLATION distribution is based on the installer survey, data from Statistics Netherlands (number Non-residential 1,502 million of locations) and data from BouwKennis (turnover per sector). New build 306 million This shows that most sanitary facilities can be found in healthcare institutions, Renovation 1,196 million business services and hotels / motels. Per subsector there are other reasons for the relatively high turnover in plumbing. For example, care institutions replace their sanitary facilities from a hygienic point of view every 5 to 10 years, which means that a Healthcare institutions 436 million 29% great deal of sanitary equipment is purchased every year. The turnover within the Business services 361 million 24% business services (offices) is mainly because there are simply many offices. Hotels/ motels 330 million 22% Educational institutions 90 million 6% Retail 90 million 6% Government institutions 83 million 5,5% Leisure (conference rooms, sport, 68 million 4,5% etc.) Restaurants/ cafés 45 million 3% Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 17
OUTLOOK 2025 As stated in this chapter, the sanitary market has strong ties with the Dutch economy, The indicators for the future for the sanitary sector therefore do not look very positive. consumer confidence and the housing market. To start with the economy, the expectation This is also reflected in the forecast of revenue growth for the coming years. This is that growth will decline until 2025. However, the economy will continue to grow at prediction is based on economic indicators, the housing market, the USP Sanitary around 1 to 2 percent (source: CPB). Major uncertainties in this prediction are political Monitor and research among installers. Although this picture may not be very rosy, the stability (fragmentation of Dutch politics), the rate of growth that is increasingly net profit is likely to increase faster because the costs decrease. The total costs will determined by the world economy and the diversity of labour relations. This means that, fall by 16% (source: Retailinsiders). The transition from offline to online sales means among other things, temporary employment, payrolling, contracting and self-employed less demand for retail space. This results in a substantial decrease in accommodation workers are new types of employment relationships that have been popular in recent costs due to the increasing pressure on the real estate market to lower the rental years and fall outside the usual employment contract (source: SER). prices. In addition, the other costs have fallen because retailers operate a lot more efficiently and effectively as a result of extensive automation and optimal use of the The housing market appears to be the least optimistic, partly driven by the shortage of available (customer) data. This trend is the result of high price transparency and labour. The investments in, among other things, new build and renovation are expected to competition. stagnate in the coming year and will even slightly decrease in 2020. This year and next year, a fall to 225,000 and 210,000 homes sold is expected, which is expected to result in GROWTH (TURNOVER) OF THE SANITARY MARKET fewer new bathrooms in addition to a lower return tax. The shortage of construction IN VOLUME professionals is also throwing a spanner in the works: the number of building permits 7,4% issued for new houses will remain at or below 70,000 this year - well below the intended 6,3% 87,000 homes that the government wants to add every year. The shortage also causes an increase in labour costs in the renovation market, which also has a negative impact. 4,0% Household consumption will continue to be a major driver of the Dutch economy in the coming years. After years of tax increases and high unemployment, these should become the years in which Dutch people spend their money: unemployment is set at a record low 1,9% 1,5% 1,6% and the government has promised a tax reduction for most households. Consumer 1,0% 0,8% 0,9% 1,0% 1,2% 1,3% confidence is therefore relatively high when compared to 2012. But the top has now been 0,7% 0,7% 0,8% 0,2% 0,5% reached. This consumer confidence is a leading indicator of consumer spending. The 0,0% declining optimism may therefore indicate that Dutch people will spend money less 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 enthusiastically in the future. Without Nitrogen-emission decision With the Nitrogen-emission decision Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 18
OUTLOOK 2025 GROWTH (TURNOVER) OF THE SANITARY MARKET Assuming that the price of the sanitary products increases by an average of 2% per year, IN EUROS the growth of the sanitary sector in euros for the coming years can be calculated. This calculation shows that the market for sanitary products will grow between 2% and 4% in the coming years. However, in all likelihood the costs for the products will also increase (due to, among other things, inflation). The figure also shows the revenue growth including the nitrogen-emission decision. This is 3,5% 3,2% 3,6% 3,3% 2,8% 2,5% 2,9% 2,7% 3,0% 2,8% based on what is now known (October 2019). You can find more about this on the 2,2% 2,0% following pages. 2020 2021 2022 2023 2024 2025 Zonder de stikstofuitspraak Inclusief de stikstofuitspraak Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 19
OUTLOOK 2025 THE NITROGEN-EMISSION DECISION AND THE EFFECT ON THE SANITARY SECTOR In the past two months, a rather heated discussion about nitrogen emissions has been going on in Dutch media, politics and society at large. At the end of May, the Dutch Council of State ruled that the policy to reduce the emission of nitrogen that had been in effect since 2015, was failing and was not matching European regulations. These regulations determine the allowed levels of nitrogen emission near protected natural areas, the so called Natura 2000 areas. Because the policy did not help to reduce nitrogen emissions to the allowed levels, it was abruptly cancelled. This development has major consequences for the Dutch construction industry, since many permits for construction projects that were based on this policy were withdrawn. A large number of construction projects, with estimations up to 18.000 construction projects are now at risk of being delayed and possibly cancelled altogether, depending on new policy and legislation. The problem is so serious that politicians and media are even speaking of a lockdown of the construction industry. In the Architectural Barometer Q3 2019 research of USP a number of questions have been added regarding the nitrogen-emission decision. The results show that the impact of the focus on nitrogen emissions on the construction market is mainly felt in the Netherlands, making it a Dutch problem for now. EFFECT DECISION ON THE BUILDING PROJECTS EFFECT DECISION ON THE BUILDING PROJECTS Do you expect that current focus on nitrogen emissions will have a For which type of projects do you expect this influence to be strongest? strong effect on the number of postponed and cancelled projects? [% of architects] [% of architects] EU average Netherlands Netherlands (Very) large effect 6% 30% Residential 38% Some effect 12% 11% Non-residential 31% Little to no effect 82% 59% Infrastructural 12% Source: USP ARCHITECTURAL BAROMETER, SEPTEMBER 2019 Don’t know 19% Source: USP ARCHITECTURAL BAROMETER, SEPTEMBER 2019 It is quite clear that Dutch architects are substantially more worried than their European colleagues about the effect the current focus on nitrogen emissions will have on the construction market. As to why this is such an apparent problem in the Netherlands and not so much in other European countries, several reasons can be found. These can be found on the next page. 20 Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019
OUTLOOK 2025 THE NITROGEN-EMISSION DECISION AND THE EFFECT ON THE SANITARY SECTOR First of all, the Netherlands has one of the highest relative nitrogen emission levels of THE EFFECT ON THE SANITARY SECTOR WILL BE SMALL all European countries. Additionally, the Netherlands is a very small country that counts 160 Natura 2000 areas of which 117 are endangered by nitrogen levels. Based on the previous page and the left-hand column on this page, the idea may Furthermore the Netherlands uses a very strict approach of EU legislation. EU arise that the nitrogen decision leads to a nitrogen crisis in Dutch construction. legislation determines that projects can not have a significant effect on nature, but it However, it can also be said that the construction sector, and with it the sanitary leaves the definition of significant open. Dutch legislation interprets these EU sector, are talking themselves into a crisis. regulations very strict, and more strict than for example Germany. One of the reasons why the nitrogen decision has less influence on the construction This leads to the chance that a construction project is near one of the endangered sector than currently is being claimed is that the renovation is highly license-free. Natura 2000 areas and that a project has a significant effect on nature is relatively These renovation projects therefore have nothing to do with the nitrogen statement. high in the Netherlands, which has led to the situation of many construction projects This is good news for the sanitary market, because the renovation market is one of being at risk of postponement or even cancellation. Meanwhile, the shortage of the main markets for sanitary products. residences in the Netherlands adds to the problem. Most of the Dutch architects who expect the focus on nitrogen emissions to strongly affect construction projects, mainly Corporations also have little or no trouble with the nitrogen decision, mainly because expect problems in the new build residential sector. they build within the cities. As a result, their construction projects are not in the vicinity of the Natura 2000 areas and are therefore not affected by the nitrogen It is clear that problems regarding nitrogen emissions are mainly a Dutch problem decision. This also applies to other building projects that are build within cities. due to strict regulations and a dense population. The number of Natura 2000 areas in other countries might as well lead up to a slowdown in construction in other countries The permits for small contractors and freelancers are also exempted from the if legislation will be interpreted as strict as in the Netherlands. nitrogen ruling. They can therefore continue to build. In addition, the government is introducing a new calculation method that should make it possible to grant permits for small projects. Projects that can prove using the new method that they do not affect nature are eligible for a permit. Starting September 16, people can use the new calculation tool, says agriculture minister Carola Schouten. In short, the sanitary sector should thus not talk itself into the crisis. 21 Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019
OUTLOOK 2025 OTHER FACTORS The sanitary market is moving. These are no revolutionary shifts, but nevertheless clear shifts that have been visible since 2000 for consumers, retailers, wholesalers and installers. For all parts of the sanitary column it is essential to orientate for the future and to make clear choices. It is of strategic importance to choose a position and then fill it in optimally. Consumers are increasingly asking for a transparent and professional partner to do business with. Companies that clearly present themselves to the consumer are recognisable for that consumer and can assure themselves of a commercially interesting future. There are plenty of opportunities in the market, for example active processing of the market for rental properties (with a customised product) or by responding to the trend towards beautification. These opportunities must be optimally utilised through clear choices in business operations. Sustainability also offers market opportunities for the sanitary market. The high quality and environmental requirements of the Netherlands and Europe were previously seen as a disadvantage. Now it is an advantage: consumers have more confidence in European, and therefore Dutch, products. A circular economy also seems to fit well with the Netherlands. The Netherlands is at the forefront of recycling: 79% of waste is recycled. 22 Source: USP RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019
Introduction Market size and outlook of the future Economy Structure Size Future The customer journey Motivation Inspiration and orientation Purchase Installation Trends and developments Luxury and comfort Needs of the 50+ Online and the showroom Sale of complete bathrooms by manufacturers 23 Future scenarios
THE CUSTOMER JOURNEY IN THE RESIDENTIAL MARKET THE FUNNEL MODEL The customer journey is globally the "journey" that a customer makes when he or she goes to buy a product. This starts with the orientation but also continues until (far) after Familiarity the purchase. It is important to map out the customer journey, because if you know which phases your customers go through, what they feel and what they need at different times, Trust you can respond to that. The traditional description of the buying process has traditionally been in the form of a Consideration funnel, from fame to loyalty: consumers start with a set of eligible brands and reduce this number to eventually make a purchase. However, this approach no longer works fully in the present time. Particularly due to an increase in the number of digital contact Purchase moments, the number of brands does not decrease, but often increases. In addition, there are also more and more private label products for sale. The communication during contact moments is also much less one-way traffic from provider to consumer, but is Loyalty Source: USP initiated or controlled by the consumer. The customer journey also differs per product type. For products with a low level of THE ACCELERATED CUSTOMER JOURNEY MODEL customer involvement, the customer journey is very fast. These are products you do not usually think about, such as various accessories in the bathroom. For products with a START Familiarity high involvement, such as a complete bathroom, other phases of the customer journey HERE Trust are important. With this type of product, consumers usually spend more time in the orientation and assessment phases. Evaluation Consideration In other words: for each product the customer journey and the length of the phases are different. In this chapter we focus primarily on the customer journey of the complete bathroom. For more information about this you can go to the additional reports. Usage & Purchase Experience Installation Source: MCKINSEY 24 For more information about the customer journey, see the "Customer journey" report
THE MOTIVATION MOTIVATION NEWLY PLACED BATHROOM CHANGE IN LIVING CONDITIONS - TOP 5 What are the main reasons that a new bathroom has been installed? Has the bathroom been purchased in response to a certain change in your living [% consumers who have purchased and installed a bathroom] conditions? [% consumers who have purchased and installed a bathroom] MOTIVATION TOTAL Verhuizing naarinto Moving eenanieuw huis new home 32% Aesthetics 93% Aanpassing voor veroudering Adaptations to aging 16% Comfort 54% EenAbaby baby 5% Maintenance 57% Changing or creating a new room 28% Lichamelijke beperkingen Physical limitations 4% Sustainability 16% Pension Pensioen 2% Om het mooier To make it moretebeautiful maken 45% No specific Geen specifieke changes verandering 34% Verhogen van het comfort Improve comfort 41% (Noodzakelijk) onderhoud (Necessary) maintenance 32% The motivation phase in the customer journey is the phase in which (potential) Verbetering van het uiterlijk Improve the look van of mijn huis my home 25% buyers realise that they have a problem or challenge, or that they would like Wijzigen Change existing de to space bestaande be more ruimte flexible 23% something. Verhogen van dethe Increase waarde valuevan hethome of the huis 22% The majority of bathrooms are purchased in response to a certain change in Problemen oplossen Solve issuesmet schimmel around / vocht mould/ damp 14% living conditions, such as a relocation. These changes often lead to investments Schade herstellen Repair damage 11% in a house such as a bathroom. Om de sustainability To increase duurzaamheid ofte verhogen the property 8% However, in about a third of cases, the bathroom is purchased without a specific Besparen van energiekosten Save energy costs 8% change in living conditions. Additional Om mijzelfintemy bathroom wassen home 7% Reasons to buy a new bathroom and to install it (mainly) have to do with Extra badkamer To create in mijnspace additional huis 5% aesthetics and comfort. It must look beautiful especially. Verhogen van de natuurlijke Increase lichtinval natural light levels 4% Anders Other 9% Don’t Weet niet/geen know mening 1% 25 Source: USP CONSUMER RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019
THE INSPIRATION AND ORIENTATION INSPIRATION ORIENTATION How did you find inspiration for your bathroom? How did you collect further information about the bathroom? [% consumers who have purchased and installed a bathroom] [% consumers who have purchased and installed a bathroom] % ONLINE % BOTH % ONLINE % BOTH % OFFLINE % OFFLINE 29% 55% 16% 30% 56% 13% ONLINE INSPIRATION AND INFORMATION - TYPE OF PAGES OFFLINE INSPIRATION AND INFORMATION What type of pages have you visited? How did you do this? [% consumers who have purchased and installed a bathroom] [% consumers who have purchased and installed a bathroom] Sanitary Sanitairspecialty store speciaalzaak 53% Winkelbezoek Store visit 66% DIY store Bouwmarkt 37% Verkoper ininde Sales representative winkel the store 60% Product Product 35% Brochures/ folders Brochures 41% Brand Merk 24% Professional Professional 21% Manufacturer Fabrikant 16% Tijdschriften Magazines 16% Professional Professional 12% Tv-programma TV-show 16% Anders Other 8% Anders Other 4% Don’t Weet niet/geen know mening 7% Weet niet/geen Don’t know mening 2% Source: USP CONSUMER RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 Source: USP CONSUMER RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 26
THE PURCHASE PURCHASE OF BATHROOM The actual money is earned in the purchase phase when the potential customer In what type of store was the bathroom purchased? becomes a real customer. But to get a potential customer to spend his money [% consumers who have purchased and installed a bathroom] on your products, he must know the product and the product must meet certain 58% 59% requirements. 59% Only one store 57% 55% Currently, almost 60 percent of the complete bathrooms are purchased at one point of sale, which in most cases is the bathroom (and kitchen) specialty store. 45% 15 percent of the bathrooms are purchased at the DIY store. This picture is 43% 42% 41% different when a bathroom is purchased at several points of purchase. In that 41% Multiple stores case, the DIY store has a much larger share. Only a small part of the bathrooms are currently being purchased abroad (4%; not shown in the table). 2015 2016 2017 2018 2019 The main reasons for buying a bathroom at a certain point of purchase are the PURCHASED AT ONE STORES PURCHASED AT MULTIPLE STORES price, the quality of the products and the service. However, there are [% bathroombuyers] [% bathroombuyers] differences per purchasing channel. For example, the price is mainly important 2018- 2018- PURCHASE PLACE PURCHASE PLACE at the DIY store, wholesaler and online, and the service (different options/ 2019 2019 layout/ design) is more often decisive at the sanitary specialty stores and the Bathroom (and kitchen) specialty store 63% Bathroom (and kitchen) specialty store 54% installers with showroom. The installation is also a decisive reason for DIY store 15% DIY store 48% consumers to buy a bathroom from the installer. Installer with a showroom 8% Tile specialty store 32% Wholesale 4% Online 22% These reasons are also endorsed by the retailers who participated in the study. Ikea 3% Ikea 16% However, they still add warranty as an important aspect of the purchase. They also indicate that especially the quality of the products has become more Installer without a showroom 3% Builders’ merchant 15% important in recent years. Comfort/ luxury items and maintenance have also Builders’ merchant 3% Installer with a showroom 8% become more important, while the brand and origin of the products have Online 1% Installer without a showroom 6% become less important. Wholesale 6% 27 Source: USP SANITARY MONITOR, AUGUST 2019
THE PURCHASE REASON FOR PURCHASE POINT A number of different stores are usually visited before a definitive choice is made. You indicate that you have purchased the bathroom at your point of purchase. What Expert estimates indicate that on average 3 - 5 showrooms are visited before a point is the reason for this? of purchase is chosen. [% consumers who have purchased and installed a bathroom / toilet room] De price The prijs 53% The main reason to buy a bathroom at a certain point of purchase is the price. Because of the internet and the resulting price transparency, the price becomes a De kwaliteit vanofde The quality producten the products 38% more important part of the sales conversations. Comparable products can often be De service The service 36% obtained for a cheaper price. For specialists, this means that they must be well aware of their added value and must also ‘sell’ it to the consumer. De showroom The showroom 27% Other important aspects are the quality of the products and the service. However, The Deguarantee garantie 22% there are differences per purchasing channel. For example, the price is mainly The Deinstallation plaatsing 18% important at the DIY store, wholesaler and online, and the service (different options/ layout/ design) is more often decisive at the bathroom specialist shops and the The sales representatives De verkopers 15% installer with showroom. The installation is also a decisive reason for consumers The after-service De nazorg 10% Themerken De brands 8% 28 Source: USP CONSUMER RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019
THE PURCHASE – PURCHASE CHANNELS SPECIALTY STORES WITH A SHOWROOM INSTALLERS WITHOUT SHOWROOM The specialist shops with a showroom (sanitary specialist shops, installation After a number of relatively calm years during the crisis, the order portfolios of installation companies with a showroom and tile specialist shops) are in 63%, 8%, and 0% of companies clearly increased in 2018. Although the order portfolio decreased again in the the cases respectively the purchase points for a complete bathroom if it is first half of 2019, many (smaller, medium-sized) installation companies still focus on purchased at one store. When a bathroom is purchased at multiple purchase installation and sale of (sanitary) products to others (e.g. the showroom of the wholesaler). points, the tile trade is involved in 32% of purchases. All these types are, in the eyes of the consumer, specialist shops where high-quality sanitary products are Sales by installers without a showroom will also come under further pressure in the coming purchased and installed. years. The number of installers will decrease in the coming years (aging, insufficient inflow of skilled personnel), which will put pressure on the prices of the installers. The influx of Consumers buy at specialty shops with a showroom because the showroom is foreign (Polish) employees will not be sufficient to compensate for the loss of capacity. known in the consumer's environment. They are often distinguished by a high- quality showroom, a high-quality range (top brands), good advice and knowledge In response, manufacturers will innovate with new products in the coming years, which will and a good installation service. greatly shorten the installation time of a bathroom. The consequence of this is that fewer structural problems arise with the processing of sold bathrooms. It is becoming ever more necessary for companies of this kind to professionalise and thus better arm themselves against developments in consumer behaviour The number of freelancers will most likely continue to grow, partly due to the shortage of (increasing online orientation) and competition. Among other things, this leads to a professionals. One of the reasons is that there is plenty of work for them to do. The showroom of sufficient scale to serve the consumer in an inspiring environment. freelancers primarily focus on installing or building products/ bathrooms and will have little Furthermore, these companies must profile themselves more actively in the influence on the sales of products. environment, so that consumers can continue to find their way to the showroom. Given the large investments that such changes entail, there will be fewer specialists in the coming years. The companies that remain will generally become ORDER PORTFOLIO larger and work in a larger region How large is your current order portfolio? [% of installers] 9 8 7 (MONTHS) 6 5,8 5 5,1 4 3 2 1 0 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4' Q1 Q2 Q3 Q4 Q1 Q2 29 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17 17 '18 '18 '18 '18 '19 '19
THE PURCHASE – PURCHASE CHANNELS DIY STORES SANITARY WHOLESALE Sanitary is an important product group for the DIY stores. In 2018, approximately 11% of Wholesalers operate in a very competitive market. The boundaries within the sector, and the total turnover in DIY stores was realised by the sanitary product group. In 2019 (up to between wholesalers and other sectors are becoming increasingly blurred, possibly due to and including July) the share is 10.6%. This share is mainly achieved through smaller technological developments including the internet. Competition comes from many sides sanitary products, such as shower heads and accessories. Larger, and often more including: expensive, sanitary products are purchased more often at the specialised stores. • Existing wholesalers in the same product category In general, it is expected that the sanitary range of the DIY stores will become more • Wholesalers in other product categories that expand their range, for example an luxurious in the coming years. Products with an extra (design) value are added and a electrical wholesaler that will also sell sanitary products limited number of brands are used. It is clear that there is a price ceiling for the consumer of • Producers who start selling directly to companies and thereby circumvent the wholesale the DIY stores. Above this ceiling, people no longer take the risk of installing the products trade themselves. The sanitary products sold in the construction market currently mainly concern • Business customers who purchase directly from producers/ brand owners individual items replacing existing parts. In order to respond to competition and pressure on margins, wholesalers must work on two In addition, the construction market is increasingly used by freelancers as the purchasing things. First, they must provide more added value, for example by: channel for sanitary products. A number of DIY store chains (e.g. Hornbach) have already • Offering knowledge about products, suppliers and application possibilities opened a special counter for self-employed professionals. • Helping customers and suppliers to reduce costs, for example by ensuring more efficient NUMBER OF STORES purchasing or lower inventories NUMBER OF DIY STORES • Relieving customers and suppliers by taking over tasks 2018 Praxis (Maxeda) 176 Hubo (DGN) 169 Secondly, they must strengthen their position in the value chain, for example by: Source: DAHNE VERLAG GMBH 2019 Gamma (Intergamma) 165 • Scale increase Karwei (Intergamma) 130 • Broadening of assortment Independent members (DGN) 68 • Adding services to products Multimate (DGN) 48 • Forward and/ or backward integration Formido (Maxeda) 42 Kluswijs 32 Hornbach 14 IBW 5 30 Bauhaus 3
THE PURCHASE ADDED VALUE SHOWROOM ACCORDING TO CONSUMERS ROLE OF THE SHOWROOM What are the most important added values of a showroom of, for example, a sanitary specialty store? The showroom is under pressure due to the increased competition from web shops that sell [% consumers who have purchased and installed a bathroom / toilet room] sanitary products, such as soak.nl and badkamerwinkel.nl. Nevertheless, the number of Be able tokunnen Inspiratie gain inspiration opdoen 66% ‘retailers’ is also increasing. This refers to retail chains that are fully focused on the sale of bathrooms and present themselves as the point of sale for sanitary products with a large Verschillende producten See different zien products 61% number of sales-promoting activities. There are various formulas such as Sanidump (with a Expertise van de verkoper Seller's expertise 38% price-aggressive image) and Brugman (strong brand recognition, partly due to a combination with kitchens). Kwaliteit vanof Quality dethe producten products 36% Prijzen Can kunnen vergelijken compare prices 36% The reason that the number of showrooms is increasing is on the one hand because online sellers will also open showrooms (Maxaro, Badkamerwinkel.nl), and on the other hand Verschillende Differentmerken brandsonder under11dak roof 33% because entrepreneurs know that consumers see the added value of a showroom. This Een dagje A day uit out 10% added value ensures customers visiting and buying from the showroom, even when online Showroom heeft has Showroom geennomeerwaarde added value 1% buying might be easier. The added value of a showroom is mainly the possibility of gaining Source: USP CONSUMER RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 inspiration and seeing different products. Based on this, a showroom should be an ‘inspiration center’. FUTURE OF THE SHOWROOM ACCORDING TO THE DETAILS The retailers also indicated that a showroom will continue to exist because it meets the In 5 to 10 years, will the importance of a sanitary showroom increase or decrease? [% of retailers] needs of customers, helps customers in making decisions, and gives them the opportunity Increase Toenemen 41% to see the sanitary products. Gelijk Remain theblijven same 35% Afnemen Decrease 24% Source: USP RETAILER RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 31
THE INSTALLATION 33% OF CONSUMERS HAVE INSTALLED THE BATHROOM THEMSELVES AND THIS SHARE WILL DECREASE IN THE Consumers often want to be helped from start to finish and would prefer to leave the renovation of a bathroom to another party. However, the higher NEXT YEARS price tag attached to this service is an obstacle. An average renovation of INSTALLATION OF THE BATHROOM the bathroom easily takes 100 hours of installation work (2 to 3 weeks). Who installed the bathroom? This means € 4.000 to € 6.000. However, this will increase in the future. [% consumers who have purchased and installed a bathroom / toilet room] Professionals are already scarce and in the near future they will only become harder to find. 63% 66% DIFM 62% 59% By installing the bathroom yourself you can save on installation. However, 57% there are also disadvantages to installing it yourself: • Waste that needs to be cleaned up 43% • Uncertainties: what do you encounter? 41% 37% • Little support from others 38% • Knowledge level of the do-it-yourselfer 34% DIY The shift from Do-It-Yourself (DIY) to Do-It-For-Me (DIFM) is a trend that was expected due to the expected impact of Europe's aging population. Although older generations have more DIY experience, age influences their ability to do work themselves, leading to more outsourcing. In the meantime, the younger generation is less experienced and therefore tends more towards DIFM. They prefer to spend their time on other activities, 2015 2016 2017 2018 2019 although they have less income to outsource DIY jobs. More DIFM means more involved professionals, which causes problems for DIY matters. That is why DIY retailers try to attract professionals as customers or offer installation services to consumers. 32 Source: USP SANITARY MONITOR, AUGUST 2019
THE INSTALLATION PROFESSIONAL Who arranged the professional for the bathroom placement? In approximately one third of the bathroom placements, the professional is arranged by [% consumers who have purchased and installed a bathroom / toilet room] the point of sale. However, this share differs considerably per purchasing channel. For example, in the specialised retail trade (sanitary specialty store/ installers with % ME/ PARTNER % POINT OF SALES showroom), about three-quarters of the bathrooms sold are also installed under the direction of the company itself (own installers or installers hired by the company). 62% 38% For retailers who offer installation as a separate, extra product (installation here is primarily a service and not a main activity), this percentage is significantly lower, because installation is not offered directly in the price. PROFESSIONAL Which professionals did you hire? For products purchased in the DIY store, the consumer usually arranges the Contractor Aannemer 40% installation themselves. This is because it often concerns a replacement of existing products. Plumber Loodgieter 35% Tiler Tegelzetter 33% The demand for installation and assembly will increase in the future. Many installers have also realised this and the number of self-employed persons without employees in Handyman Klusbedrijf 30% the Netherlands has grown considerably (scarcity offers opportunities). Currently, Stukadoor Plasterer 19% around 60-65 percent of the HVAC-installers are self-employed (source: CBS). Sanitary retailers and installation companies will increasingly engage self-employed Elektricien Electrician 18% professionals to meet consumer demand. In addition, this group will certainly also install its own bathrooms, for which the products are usually purchased at builders' Timmerman Carpenter 10% stores (including Bouwmaat). DIY stores are actively promoting the sale of building Anders Other 6% materials (including sanitary products) to self-employed workers. Hornbach, for example, has opened a special collection counter for freelancers and contractors. 33 Source: USP SANITARY MONITOR, 2019
Introduction Market size and outlook of the future Economy Structure Size Future The customer journey Motivation Inspiration and orientation Purchase Installation Trends and developments Luxury and comfort Needs of the 50+ In this report four trends are discussed that are relevant to the Online and the showroom wholesaler. Of course other trends also influence the work of the wholesaler. These trends can be found in the trend report and Sale of complete bathrooms by on the website. manufacturers 34 Future scenarios
LUXURY AND COMFORT Luxury and comfort are becoming increasingly important in the bathrooms of consumers. For example, they increasingly opt for rain showers and floor heating. Walk-in showers are also purchased more often. The advantage here is that these showers are also suitable for the time when people are less mobile. Some describe a comfort bathroom as a bathroom that is suitable for the future. In summary, luxury bathrooms with more comfort are increasingly being bought. 35 For more information about luxury and comfort, see the report "Developments in the sanitary sector"
LUXURY AND COMFORT Wellness is a popular trend among consumers. Wellness means the following: REASONS FOR A NEW BATHROOM feeling good through optimal care, enjoying beneficial moments, relaxing indoors What are the main reasons that a new bathroom has been installed? or outdoors. Om het mooier To make it moretebeautiful maken 45% There have also been trends in the sanitary market in recent years, which are Verhogen van het comfort Improve comfort 41% related to the strong desire for wellness. This is mainly reflected in the range and (Noodzakelijk) onderhoud (Necessary) maintenance 32% the enormous sale of whirlpools and showers in all sorts and variants. This includes steam showers, rain showers, massage showers or combinations of Verbetering van het uiterlijk Improve the look van of mijn huis my home 25% these functions. Wijzigen Change existing de to space bestaande be more ruimte flexible 23% In addition, sustainability also plays a role in the comfort level of the bathroom. If Verhogen van dethe Increase waarde valuevan hethome of the huis 22% the house, and therefore the bathroom, is provided with extra insulation, this Problemen oplossen Solve issuesmet schimmel around / vocht mould/ damp 14% naturally results in energy savings and a lower energy bill. But they also get Schade herstellen Repair damage 11% much more comfort and the house is worth more. Om de sustainability To increase duurzaamheid ofte verhogen the property 8% Besparen van energiekosten Save energy costs 8% CONSIDERABILITY SUSTAINABILITY Additional Om mijzelfintemy bathroom wassen home 7% When buying a bathroom or products for this, what is more crucial when purchasing? Extra badkamer To create in mijnspace additional huis 5% % SUSTAINABILITY % COMFORT Verhogen van de natuurlijke Increase lichtinval natural light levels 4% 43% 57% Anders Other 9% Source: USP SANITARY MONITOR, AUGUST 2019 Don’t Weet niet/geen know mening 1% Source: USP CONSUMER RESEARCH FPUR HEATING & SANITARY FOUNDATION, JUNE 2019 36
BATH TYPE LUXURY AND COMFORT – THE CONSUMER What type of bath have you purchased? [% of consumers] THE CONSUMER IS LOOKING FOR LUXURY 74% Consumers are looking for beautiful, functional products that transform the bathroom from a functional 72% Standard bath space into a space where it is pleasant to be. This translates into: • The emergence of large walk-in showers, where consumers can shower, massage, and enjoy extensive and unhindered; • The emergence of large shower heads, with which an optimal shower feeling is created; • The emergence of multifunctional shower panels in which various functions (shower, massage, rapid rinsing, etc.) are combined; • Growing sales of design products. Consumers are looking for a unique design with which the 16% 14% Freestanding bath bathroom can be decorated entirely to their own taste; 13% Corner bath 9% • The use of home automation (automation of technical installations in the home) will certainly increase in the bathroom in the coming years. Think of for example digital shower buttons. 2015 2016 2017 2018 Source: USP SANITARY MONITOR, AUGUST 2019 SHOWER TYPE HEATING TYPE What type of shower have you purchased? What type of heating have you purchased? [% of consumers] [% of consumers] 57% 48% Towel radiator 48% Walk-in 44% 39% 39% Cabine Floor heating 20% 18% Panel radiator 15% 15% 12% 11% Designer radiator With curtain 6% 5% 6% 5 Steamcabine 6% 4% Shower/ bath combination 37 2015 2016 2017 2018 2015 2016 2017 2018
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