Bathroom Fixtures Go Upscale

Those who still believe that searching for a new toilet bowl means a trip along dirt roads to stores on the edge of industrial zones and out-of-the-way warehouses have apparently not done any home improvement work lately. Ceramics and bathroom accessory companies - which for years only worked with construction firms and developers - have over the last year invested substantial sums in setting up new showrooms, brands and advertising in order to attract private customers.

According to Amir Rapaport, CEO of Negev Ceramics, the drop in new construction and the increased amount of home improvement projects, stemming from relocations and investments in current apartments, have prompted these companies to appeal directly to individual customers. Rapaport says this trend is in line with the style revolution the industry has undergone in the last two years and the increasing tendency to showcase bathroom accessories, which in the past were less prominently advertised.

The changes in the client base and its tastes led the companies to recognize the importance of stores that appeal to the private market, and they have started investing in store accessibility and design. "We went with larger stores where there is room to display all the items and styles. It lets the customer see everything all put together," Rapaport says.

A survey of the ceramics and bathroom accessory industry conducted by Czamanski Ben Shahar, a consultant for some of the chain stores in the business, found that the market share of the ceramics, marble and bath accessory industry in Israel is estimated at NIS 2 billion to 2.5 billion annually, split between the contractors' market and the private sector. The industry includes imports and local production and supplies ceramic tiles, marble, bathtubs, toilets, bidets, and kitchen and bath accessories. The industry is also branching out to parquet floors.

According to Tamir Ben Shahar, a managing director of Czamanski, in the past people would refurbish their homes on average every 15 years, but that has dropped to eight to 10 years. This is increasing the private sector's spending.

"The recession in the construction industry led to increased competition and spurred the upscale market while weakening the market for cheaper products. The fight to win over customers spurred the companies to increase their investment in showrooms," says Ben Shahar. Competition further stiffened with the arrival of do-it-yourself chain stores, which began to sell bathroom accessories.

The companies have invested very large sums in showrooms. Several months ago Aloni opened a new store in Shefayim, an investment of $1.5 million. The new store sprawls across 2,000 square meters, including showrooms. A company official says the new store will be a major factor in increasing Aloni's share of the consumer market: "In our business, 80 percent of sales are still made via private distributors and not through retail outlets. If the chains work right, their market share will increase." Aloni is now focusing only on large branches. Its outlets in Netanya and Tel Aviv have closed, the Haifa store was improved and now sprawls across more than 1,000 square meters, and a similar sized branch opened in Jerusalem.

Rapaport is unmoved by Aloni's large showrooms. Unlike its competitor, Negev Ceramics does not operate out of 1,000-square-meter or larger branches. "We are not in stores with thousands of meters. We think that the task of choosing materials is hard and a 700-square-meter store is the most a customer can absorb. I think that in our industry there is difficulty and confusion, and we are trying to embrace the customer with this size store," says Rapaport. He adds that Negev Ceramics is investing $8 million in refurbishing and upgrading its stores and that it will soon open a branch in Ra'anana as well as another one in the north early next year. The chain will then have nine branches, including one outlet store.

He says that the investments needed today in showrooms will cause the market, whose value he believes will soar 15 percent over the coming year, to become one with three or four players. "In my assessment, there will be some acquisitions in the market," he says, stressing that Negev Ceramics is sure of its business model and thus is working on opening a chain of stores in the United States.

Not only large chains are upgrading and investing in their stores. Among the companies that have changed their showrooms are small chains such as Chezi Bank in Bnei Brak and Mody in Haifa.

Oren Duenias, the co-CEO of Mody Ceramics, said the company, which currently has three stores, plans to open two more branches in 2005. Mody recently invested substantial sums in a new branding campaign to attract private customers. Duenias is observing the competing stores with some concern. "Aloni and Negev saw that our operations over the last few years bore fruit and have focused on similar operations. They want to appeal to the same market sector," he says, adding: "We must be professional in order to maintain this market sector." Duenias' growth target is very ambitious: 20 percent annually. "We want to reach a total of seven stores like the large chains," he says.