Why would someone pay $300 for a faucet, let alone $5,000 for a toilet? Plumbing & Mechanical is starting a four-part series on bathroom trends, beginning with this issue. We do want to discuss other topics in the series, but for this introduction, we want to consider overall buying habits for what many consider that most important room in the house.
America's middle-market is trading up to “New Luxury,” according to a book titled “Trading Up,” written last year by Michael J. Silverstein and Neil Fiske, both VP-level consults from The Boston Consulting Group who have spent their careers studying retail practices.
“They are willing, even eager, to pay a premium price for … products and services that possess higher levels of quality, taste and aspiration than other goods in the category, but are not so expensive as to be out of reach,” say the authors.
So many middle-market consumers want to trade up that they've turned the adage “the higher the price, the lower the volume” on its ear. As a result, many manufacturers are learning how to mass-market what not so long ago would have been considered luxury items for a very limited market.
Granted, this doesn't mean middle-market consumers can afford to make all their purchases this way, but a considerable number are doing so in select purchases. Also, the authors make the case for something they call “rocketing” - consumers at the lower end of the income spectrum often may spend a disproportionate amount of income on one or two purchases that have great meaning to them. This combination of “trading up” where it counts and “trading down” where it doesn't means that middle-market consumer buying habits no longer necessarily conform to income levels.
What's caused the rise in trading up? The authors give many well-documented reasons, but for PM readers, one notable reason to consider is the rise in homeownership. Thanks to low interest rates and greater accessibility to mortgages, more Americans own homes than ever before - there are 73 million homes owned by somebody in the United States, up from 41 million in 1970.
Meanwhile, thanks to a rise in real estate prices, homeowners, on average, have $50,000 worth of equity in their homes, and the entire pool of U.S. home equity is nearly $8 trillion. In our estimation, that's a lot of money for tubs, showers and toilets!
Because homes are bigger and more valuable these days, plenty of home equity “cash” is used to pour right back into the home for improvements. Because homeowners have such an affinity for their homes, particularly for the bathroom and kitchen, the authors suggest that money spent there is rarely considered to be wasted. In 2001, Americans spent $160 billion on goods and services for their homes, up from $67 billion in 1970.
Before we move on, we found one other reason very interesting, and that is the savings passed on to consumers by large discount retailers. Wal-Mart with its “everyday low prices” comes to mind, but then again, so do Home Depot and Lowe's. The authors estimate that in 2003, approximately $100 billion was freed up this way and became available for spending elsewhere.
We'll take a more detailed look at specific plumbing and heating purchases in the next three months, and further look at this notion of “trading up.” For this month, we spoke to a few plumbing manufacturers for their ideas on “mass luxury.”
American Standard“I think there's a new definition for what a lot of consumers consider 'luxury,' ” says Gary Uhl, director of design, American Standard. “I think the old definition was that a luxury purchase was designed to impress others. Now I think people are buying luxury items to make themselves happy.”
Uhl thought some examples of these types of purchases could be seen by American Standard's sister company Porcher, which marketed, at least in this country, the first vessel sinks or in the deeper-soaking tubs in his company's Standard line. On a somewhat smaller scale, he says many marketing executives at his company are surprised at the strength in brushed nickel finish to faucets.
Uhl also says the company's Champion toilet, which has a wholesale price of more than $400, has beaten expectations, too.
“It may be a premium-priced product,” Uhl says, “but in addition to its flushing performance, which we did promote when it first came on the market, the Champion is at a little higher height. That's an attribute we didn't promote, but that I think people noticed and considered worth the extra money.”
Kohler Co.“Homeowners don't just fix up the kitchen or bathroom like they might do with other rooms in the house,” says Rick Relef, vice president, global faucets, Kohler Co. “They go all out for these rooms, so the mindset for making purchases is there.”
While we want to focus on the bathroom for this series, Relef did say Kohler's pulldown kitchen faucets have been a surprising hit. The faucets, which for chrome retail at $300, offer a distinct difference from the more common pullout kitchen faucet, he says. “Most people consider the kitchen as a factory so whatever can make cooking and cleaning that much simpler is worth the added price.”
Meanwhile back in the bathroom, Relef says the company confidently projects 30 percent growth in sales volume over the next five years for shower systems like the Waterhaven.
Toto USA Inc.“I think 'discretionary time' may be more important to consumers today than 'discretionary income,'” says Lenora Campos, Ph.D, public relations manager, Toto USA Inc. “Everyone these days has had to contend with increasing demands on their time, whether or not they are at work.”
As a result, Campos believes that people may purchase a fewer number of items, but they want the items to be of real value. That means that everyone has their own individual way of deciding, so manufacturers have to offer a “mass-customized” approach to their products.
Certainly, a full bathroom collection with a coordinated look is one way of doing just that. “People don't have time to figure it out,” she adds.
We hope to go into this in more detail later in our bath series, but Campos did leave us to consider Toto's $5,000 Neorest, a computerized toilet that even promises a cleaner flush.
Remodeling For LuxuryWhen it comes to “trading up” in bathrooms, PM readers are in the thick of it. They are installing many of the products we think as upscale items, such as body spray shower systems, large soaking tubs, custom shower surrounds, unique sinks and designer collections (including faucets, sinks and toilets).
An exclusive PM study finds upscale items prevalent in today's bath remodeling projects.
by Kelly Faloon
Our “Bathroom Installation and Remodeling Study 2004” was sent to 2,000 Plumbing & Mechanical subscribers last year (with a 19 percent response rate). Nearly 83 percent of respondents' bathroom remodel projects are residential rather than commercial or institutional. About 86 percent of the respondents said they influence the brand selection of at least one product in a bath remodeling job all or most of the time. The top three reasons for making a recommendation to a homeowner are:
- 1. Quality of the product;
2. Installed the product before and prefer it; and
3. Easy availability of the product.
When asked which tub and shower products/systems they recommended, purchased or installed as part of these bathroom remodels, 71 percent said multihead showerhead systems, 50.3 percent said customized shower surrounds/walls, and 34.1 percent said steam or aroma-producing systems. Other mentions were large/deep tubs, tankless water heaters, shower doors and custom fixtures.
Nonfixture products recommended, bought or installed for upscale bathroom projects include decorative plumbingware such as soap dispensers, towel bars, grab bars, etc. (80.7 percent); floor covering such as tile, marble, laminates (39.4 percent); and lighting, electrical and communications (29.1 percent). Other mentions include cabinets, countertops, radiant floor/wall heat, indirect water heaters, vanities, skylights and wall tile.
Respondents mentioned a slight change in the number of products that fit into a bathroom suite design concept from five years ago - 47 percent saw more suite products and 44 percent saw the same number of suite products. About two-thirds estimated an installation increase in these products over the next five years.
A complete copy of the survey can be purchased for $195. For more information, contact Cory Maxwell at 248/244-6415, firstname.lastname@example.org.