Faucet Basics: Part 7
Just about every faucet company describes itself as a manufacturer. Few, however, actually make the faucets they sell. Most buy faucets, or at least the components required to assemble faucets, from outside manufacturers.
It is no secret that many North American faucet manufacturers have shifted much, if not all, of their manufacturing to foreign, primarily Mexican and Chinese, companies. It is less well known that many Western European faucet manufacturers have done much the same thing; shifting manufacturing to companies in former Soviet Bloc countries where there is an abundance of lower-cost skilled labor and an existing manufacturing infrastructure; and to Turkey, the sleeping industrial colossus at the eastern edge of Europe.
Many traditional American faucet makers have become little more than marketing companies, lending their time-honored American names to foreign-made products. This is one reason that the faucets offered by various brands seem to look so similar. They are often made by the same large foreign manufacturer, with only slight stylistic changes.
Faucet companies can be divided into five broad business models, with much overlap. Small and mid-size companies are fairly easy to pin down. But, the mega companies such as American Standard and Kohler are a little more difficult since they incorporate parts of several models. Generally, however, we can identify an overall model. If we can't, then we won't publish a rating until we can.
Companies that fabricate and finish their faucets in factories they own are the Manufacturers.
The key processes involved in faucet manufacturing are casting, machining and finishing. Companies that own their own foundries and machine shops and apply their own finishes are the actual manufacturers. They have direct control of the process of making faucets from initial design through final quality inspection and are able to ensure quality assurance throughout the process. There seems to be a direct correlation between having control of the whole process and a low number of defects and, thus, consumer complaints.
Faucet companies that fall into this category are, for example, all U.S. companies that manufacture primarily in the U.S. Some other "American" faucet companies are manufacturers, but the factories they own are in foreign countries. For example, a faucet company owned by Meridian, manufactures its faucets in Poland in a factory owned by Valvex, also a Meridian company.
Foreign manufacturers whose products are widely sold in the U.S. include
The faucet makers that assemble and finish faucets from critical parts cast and machined by others are Assemblers. Assemblers control some of the faucet-making process but rely on basic faucet components made by outside companies. All faucet manufacturers use outside parts to a certain extent. For example, few faucet makers have the capacity to manufacture the ceramic disks needed for some faucet valves — a very specialized process. But, if all casting and machining are surrendered to others, the company loses much of its ability to assure the quality of some very key processes needed to manufacture faucets.
|Faucet Company Business Models|
|Design & Engineering||✓||✓||✓|
|Marketing & Brand Awareness||✓||✓||✓||✓|
|After-Sale Support||✓||✓||✓||✓*||✓*||* Support may be very limited or even nonexistent in some cases.|
Many Assemblers are also Specifiers (see below). are examples. All of these companies design their own faucets but subcontract the manufacturing of component parts to suppliers outside the company. They then assemble, finish and inspect the faucets in the U.S.
A number of European companies that most of us think of as manufacturers are actually assemblers. for instance, contracts out all component manufacturing, mostly to other German firms. The faucets are then assembled, finished and tested at its plant in Iserholm.
These companies make some very good products, so it looks like the process works pretty well overall.
While Assemblers are also likely to be Specifiers, the reverse is not true. Specifiers are not usually assemblers. Specifiers design and engineer their faucets, and sometimes do their own in-house quality assurance but farm out all of the actual manufacturing — usually including final assembly and finishing. Most of these have been doing this for many years and make no excuses for the fact they consider themselves the creative end of the industry, leaving the nitty-gritty business of actually producing their creations to the less imaginative.
Some very good faucets are built using this model. Companies in this category include Because they do their own designing and testing and have strong internal quality control, they also have a reputation for very good quality faucets with very few defects.
is in this group but uses a slightly different approach. Its faucets are made by Brasstech, a Masco company that sells faucets that it assembles in California. Restoration Hardware, which is a retailer of furnishings and accessories for the home, has no quality control capability and relies on Brasstech for all quality assurance. That reliance is well placed. Brasstech has a deserved reputation for its very good quality faucets.
Some companies do nothing more than gather collections of faucets designed, engineered and manufactured by others. These collections are given a brand name and sold under that name. The faucets are often made by a variety of manufacturers with no particular commonality other than being re-packaged for sale under one brand name.
These are strictly marketing companies and constitute the largest group of companies selling faucets in North America — although their total market share is very small — about 6% of all faucet sales. They are so numerous and spring up so rapidly that we can barely keep up with rapidly expanding segment in our faucet reviews.
Since Marketeers buy faucets already packed in the box and ready to sell from manufacturers, they usually provide no internal quality control but rely on whatever quality assurance is available from the companies that manufacture the faucets.
Marketeer companies generally buy inexpensive foreign, primarily Chinese and Taiwanese faucets but also from Korea, Viet Nam, Malaysia and Indonesia and sell through discount retailers. Some Marketeers, however, offer better quality.
Some companies in this category try to appear to be something other than Marketeer companies. Both for example, go to considerable lengths to appear to be designers and manufacturers of their own faucets. But, even a cursory inquiry reveals that they own no factories and, in fact, import all of their faucets, already boxed and ready to sell, from large Asian manufacturers. Most Marketeers, however, present themselves as just what they are, importers of foreign-made faucets of varying levels of quality for retail sale in the U.S. and Canada.
One commonality among Marketeers that we find very troublesome is the availability of replacement and repair parts, or rather the lack thereof. While some Marketeers, notably
The Retail Rebranders
Large retailers have been rebranding products for just about as long as large retailers have existed. Sears, for example, is famous for its store brand Kenmore appliances and Craftsman tools. Big-box lumber stores and hardware cooperatives buy faucets directly from manufacturers then rebrand and sell them under a store trade name. These are, unfortunately, the faucets that seem to be the hardest to get warranty support or parts for.
store brand Pegasus and Glacier Bay faucets are a case in point — but certainly not the only case. Home Depot faucets are made by factories in (mostly) China. There is no central parts source, so if you need a part, you had better hope you kept the brochure that came with the faucet so you will know how to contact the actual manufacturer. Home Depot can't help you. They don't keep parts and they don't keep a record of which faucet came from which manufacturer — or, at least, no one seems to know where they are.
The problem is hardly insurmountable. Some Rebranders have completely conquered their after-sale servicing issues: notably Sears, whose nationally famous Craftsman tool and Kenmore appliance brands are all made by others. But, unlike other retail rebranders, Sears stocks all the parts and provides all warranty and repair service out of its local stores — proving that the after-sale issues inherent in retail rebranding can be overcome. But, it takes an institutional commitment of resources to do so.
Some big-box retailers have done so. Lowe's®, for example, sells a variety of in-house brands and supports them very well with a backup warranty and parts organization that, most of the time, is very competent. Its store-brand, faucets, come with a lifetime warranty, unusual for a retail rebrander.
RONA, the Canadian big-box retailer (now owned by Lowes), is also an example of good back-end support. RONA, like the Home Depot, its chief competitor in Canada, imports its faucets already in the box and ready to sell from a variety of Chinese manufacturers. It supplies its in-house brand faucets to company-owned stores, franchises and cooperating independent hardware stores throughout Canada and supports them through a third-party warranty and parts organization, Mecanair, located near Montreal.
Is There a "Best" Business Model?
There is a relationship between business model and the quality of the faucets sold by the company, the strength of its warranty, the availability of replacement parts and post-sale customer support. It is not a perfect relationship, however. Not every Manufacturer produces better faucets than every Specifier. But, as a general rule, Manufacturers and Assemblers do tend to produce higher quality faucets, provide better post-sale support, a more extensive replacement parts system and a stronger warranty that Marketeers and Retail Rebranders, which often provide little or nor post-sale support and only a limited replacement parts system, if any.
There are always exceptions. Manufacturers that assemble faucets in Mexico, produce faucets of little better than average quality, while sell better quality faucets.
The most obvious difference among business models seems to be in after-sale support. It is clear that most Retail Rebranders appear to have the most after-sale support issues. It is usually not possible to tell who actually made the store brand faucet and therefore where to get replacement parts. And, the stores often don't know. Plus, store brands are often not the manufacturer's regular line of faucet, so replacement parts may not be in inventory anyway.
Retail sellers such as have no organized replacement parts programs. The ad hoc solution to getting parts is to scavenge them from faucets still on the shelf. Not a very satisfactory solution that will hold up over the years. In a few years they will be out of faucets from which to scavenge, then where do they get parts?
Marketeers, too, generally offer sparse after-sale support. They are wholesalers and typically have very limited in-house support capabilities, if any. Companies such as candidly admit that they will keep replacement parts on hand for just a few years. What they do to support their lifetime warranties after that few years is anyone's guess.
But, we have seen great strides in the post-sale support offered by some Marketeers since we began pointing out the deficiencies in this area over a decade ago. The established companies like all now have fairly extensive post sale support operations. And, while we still get a few complaints about after-sale customer service, it is nowhere near what it was a few years ago. The newer companies, like do not have much of a track record yet, so we do not know how well their after-sale support works.
At the other end of the business model spectrum, Manufacturers and Assemblers are likely to have comprehensive support operations, making it easier to get parts and warranty service. But, some Specifiers also excel in product support. In the complaints we receive about these companies', the issue is seldom with customer support, which is often praised to the sky but with the product itself.
But, the results are still mixed. Some of these companies continue to have customer support issues. are still the standouts in this area and the models that other faucet companies would be wise to copy.
How We Determine a Company's Business Model
Few companies fit cleanly into one business-model category. There is a lot of overlap, especially in a large company with several divisions and diverse product lines.
In our faucet ratings, where a company seems to have multiple or overlapping business models, the overlap will be noted.
Problems with the Marketeer Model
The fastest growing business model in the U.S. is the Marketeer, more particularly the Asia-Marketeers that import low-cost Asian faucets that they buy in wholesale lots and then sell at retail, usually through discount internet venues. In 1999 there were just three Asia Marketeers, then doing business as Clawfoot Supply. Now there are hundreds.
One reason for the rapid growth is the ease with which a budding Marketeer company can be started. The cost of starting a business to import low-cost Chinese and Taiwanese faucets and other sanitary wares is relatively low. No substantial investment in factories or machinery is needed and unlike Retail Rebranders, no expensive brick and mortar stores are involved. All that is required is a rented warehouse and a good marketing plan. And, as Asian faucet factories get more comfortable selling in small lots and single units, a warehouse may no longer be necessary. The products can be drop-shipped from China as ordered.
If the company is already selling from a warehouse operation, then the ease of importing Asian faucets is even greater. Companies like already in the business of distributing faucets and other sanitary and plumbing products, have in place all the necessary warehouse facilities and marketing acumen. The increased profits of importing directly from large Asian manufacturers can be very attractive as is the opportunity for better control over their supply chains.
Competition from Other Marketeers
But, the very simplicity and ease with which an Asian import faucet business can be started may be part of the eventual downfall of the model. The market segment occupied by the Asia-Marketeers is small and already very competitive and there is little the various companies can do to make themselves stand out from the pack. Some, like emphasize the quality of their products.
But, it is hard to overcome the fact that these companies sell roughly the same products manufactured by many of the same Taiwanese and Chinese factories using the same internet retail venues at roughly the same price points. For example, the Ariza faucet sold by Both faucets are probably variations of the LH 88502B2 faucet made by L.S.H. Faucet Co.
Few faucets sold by one Asia Marketeer are not sold by at least one other Asia Marketeer. The completion is stiff and increasing. Every year sees the rise of another crop of aggressive newcomers — most recently — all in hot pursuit of a fairly small market share, adding to the competitive pressures. By most estimates, all of the Asia Marketeers combined produce just 6% of the North American faucet sales.
The intensified competition has already claimed its first casualty: FSA Imports, a long-time importer of Asian faucets that it sold under its Fontaine brand, closed its doors in May 2013 and is no longer in business.
Direct Competition from Manufacturers
However, the more daunting competition in the very near future may not come from fellow U.S.-based Asia Marketeers but from Chinese faucet manufacturers themselves that decide to market their products directly to U.S. buyers rather than through U.S.-based middlemen.
So far only one Taiwanese/Chinese faucet manufacturer has succeeded in establishing a major retail presence in the U.S. market — manufacturer, has already begun selling faucets in the U.S. under its own L.S.H. brand, primarily through the Home Depot.
is likely to be the biggest threat. It has long exported plumbing fittings to the U.S. which are sold widely under the Lota name and provides faucet components and even finished faucets to a long list of faucet companies that sell in North America, including among others. The company also manufactures store-brand faucets for large retailers including many faucets sold by Home Depot. We are starting to see faucets for sale in the U.S. identified as made by Lota. Some faucets under the Lota brand are appearing in Home Depot stores and some store brand Glacier Bay and Pegasus are now cross-branded as Lota faucets.
Lota is also starting to showcase its faucet products on its impressive U.S. website, Lota U.S.A. You cannot, so far, buy a Lota faucet directly from Lota but the website is clearly set up to support direct sales in the future. Lota has also established a strong U.S.-based customer service and warranty operation to support its faucets sold by importers in the U.S. and Canada. This was a very smart strategic move since it lifts the cost of providing after-sales support from the companies that sell Lota products to the public, making Lota more attractive as a supplier to U.S.-based faucet importers. It also sets Lota up nicely to begin introducing Lota branded products into the U.S. with the marketing and support infrastructure already in place and operating smoothly. It should help Lota avoid the customer service issues that beset its competitors like
We think all of this preparation can only be the run-up to a launch of a Lota brand in the U.S. It's hard to tell whether Lota will try to establish its own brand name like brand by the Japanese building products conglomerate, LIXIL. Lota is aggressive and very well capitalized, so however it decides to enter the U.S. retail faucet market, it is almost certain to succeed. And, most probably to the detriment of one or more existing Asian Marketeers who will most probably be squeezed out sooner or later.
Competition from China-Based E-tailers
An even more significant threat to Asia-Marketeers may be from China's super-competitive internet retailers.
China is the world's largest e-commerce market. By some estimates, over 70% of China's non-food retail purchases are through the internet. So far, the Chinese have been content just to provide products to North American-based retailers who understand how to market to consumers in the U.S. and Canada. But, Chinese e-tailers increasingly are looking to expand into Europe and North America where the competition is weaker and profit margins more robust.
The complex infrastructure required for world-wide e-marketing is already in place. Paypal®, AliPay,® and other cross-national payment services have made international retail transactions secure and simple. Transnational banks already routinely handle currency conversions in amounts down to a few cents. And, UPS and FedEx parcel shipping operations and China Post's exception and highly competitive air mail service have made worldwide small-package delivery inexpensive and quick. The average delivery time from mainland China to the American Midwest is now just 15 days, express delivery is 3-5 days, making direct purchase from China and Taiwan commercially viable.
Jingdong Corp., a leading Chinese Internet retailer (jd.com), has done very well with its English-language website since its debut in 2012, despite almost no advertising. LightInTheBox Holdings started out selling discounted wedding gowns in 2008 and is still heavily skewed toward women's wear but has steadily broadened its offerings to include items such as faucets and bathwares at very favorable prices. It has recently established a fulfillment center in the U.S. for even faster delivery to North American customers.
AliExpress.com, an English-language, Amazon-like e-tail shopping mall is already a phenomenal success less than three years after launching. It's parent, Alibaba Group, controlled by founder Ma Yun (aka Jack Ma), is an experienced e-commerce leviathan that according to the Wall Street Journal, already handles 80% of China's internet retailing. Its gross sales in 2013 were $248 billion (US), one-third more than was spent at Amazon and e-Bay combined.
We are already seeing faucets identical to those sold by Asian Marketeers at deep discounts on Chinese e-tail sites. The Reston Wall Mount Waterfall Faucet sold by for $229.00 is available from LightInTheBox.com for $129.00 and from FaucetSuperDeal.com for $111.99. A very similar faucet from Wenzhou Watermate Sanitary Wares Co., Ltd. sells for $70.00 on AliExpress.
All of these China-based e-tailers are just getting started and have a lot to learn about selling in the North American market. For example, none of them offer a warranty of any kind other than a promise to replace the faucet if defective on delivery and none of their faucets have been tested or certified as complying with U.S. or Canadian standards and, therefore, cannot be legally installed in North America. But, they will get better and if they can hold their prices, they may put some Asia Marketeers out of business in fairly short order.
How does that concern you, the faucet buyer? Simple, if the company you bought your discount faucet from goes out of business, then your warranty, such as it is, is worthless and any possibility of replacement or repair parts disappears with the company. Just ask owners of faucets how much of a problem that can be.