I would not think about buying cabinetry in those terms. What is your budget, and what cabinets can you afford, and how much help do you need putting a design together. That's how you think about it.

It sounds like you are concerned with someone's profit margin being too big. Well you know, they have to put food on the table too, and this is how they make their living. What if where you worked your employer said, "I think you are making too much profit in your job, we will look for someone to replace you who makes less, regardless if they bring less to the job than you do. Or we will ask you to take less salary for the same or more work."

Decide your budget, decide how much help you need to design your kitchen, and don't think about profit margins. BTW, the biggest gobbler of profit margins are the big box stores like Lowes and Home Depot. You are paying 100% or more over their cost - that is for them to be middlemen and for their enormous overhead and marketing costs.

Thanks M Miller.

I didn't realize that the big box stores actually make the largest profit margins.

Yes, I realize that people need to make a living and put food on their table. But, for someone who doesn't need a lot of hand holding or design services, I guess I think profit margins are awfully large from some of these above quoted standard profit margins.

Let's say, using my 10K example, that a kitchen design/cabinet firm (that is not charging extra for design services) had a client (like me) who knows exactly what she wants and has a layout planned and in mind. So, measuring and then ordering the cabinets I want takes maybe a total of 10 hours. That's $300 to $400 per hour. A lot as far as I am concerned.

". That's $300 to $400 per hour. A lot as far as I am concerned."

Again, irrelevant. If the $300.00-$400.00 an hour vendor is the best value what difference does it make?

I think what you're really asking is if you're getting a fair price. A fair price is one that is in line with what the rest of the industry is offering. Unless you're buying the actual business rather than their product, their cost structure should not enter your calculations.

Shop around. Get a feel for what's on offer and how much it costs. Then decide what is valuable to you. For me, price was only one variable and not the most important. My reno was a full gut and I knew that care for relationships and attention to detail were going to be the most important factors. Obviously I had a budget. But when I realized that I couldn't get what I wanted for the price I could pay, I waited another year until I could afford it.

BTW, the biggest gobbler of profit margins are the big box stores like Lowes and Home Depot. You are paying 100% or more over their cost - that is for them to be middlemen and for their enormous overhead and marketing costs.

This is simply incorrect. Lowe's runs at a gross profit margin of about 32% and Home Depot runs at a gross profit margin of about 34%. This is public information that they have to file with the SEC in their form 10-k. Just search "Lowe's 10-k" and check for yourself.

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So I am going to push back on this idea that markup is none of your business. Certainly if you are in a commercial transaction then a business should not have to open their books up to you. However, if you are paying for design services separately and your KD is pushing certain cabinets on you then it is completely reasonable to question the profit margin of the cabinets the KD is pushing, as that may have direct and significant influence on the veracity of the professional advice you are paying for.

ETA: We can distinguish business relationships as those at arm's length and those with trust (fiduciary or standard of due care). If you engage an experienced designer to produce a design for a fee, then there is some element of trust there and their design must be in your interest (You have to pay the design fee whether or not you buy the cabinets). If you are buying cabinets from a KD and the design services are included in the sales transaction (you don't have to pay the fee even if you don't buy the cabinets) then it is arms's length and buyer beware.

bry911:

" However, if you are paying for design services separately and your KD is pushing certain cabinets on you then it is completely reasonable to question the profit margin of the cabinets the KD is pushing, as that may have direct and significant influence on the veracity of the professional advice you are paying for."

How is this argument not the logical fallacy of relevance, ad hominem circumstantial please?

I would shop around and not think about that part of it. We got 8 quotes from all different types of vendors before ordering our cabinetry.

How is this argument not the logical fallacy of relevance, ad hominem circumstantial please?

A logical fallacy is not necessarily wrong, it is just not a basis for refutation. For example, from your link...

Salesman: This car gets better than average gas mileage and is one of the most reliable cars according to Consumer Reports.

Will: I doubt it—you obviously just want to sell me that car.

That is a logical fallacy, as just because he wants to sell you a car doesn't mean the statement is false. However, that doesn't mean the sentiment is wrong. His goal of selling a car is a great basis to question the veracity of his statements but his goal of selling a car, doesn't make everything he says a lie. If Will had said, "I don't trust your statement - you obviously just want to sell me that car." that would not be a logical fallacy.

Next, let's talk about conflict of interest... A conflict of interest is always logically fallacious. Just because I stand to benefit substantially from the advice I am giving doesn't mean it is not the best advice for you. A realtor trying to sell their client their own home is a conflict of interest, however, that doesn't mean the realtors home is not the best home for their client. It just means that they can't be free from bias.

In this case, no one said that the KD's design wasn't the best design because there is a conflict of interest, but it is certainly a basis to doubt the independence of that design.

Finally, on to real life. We know that people always have a bias to their own benefit. If you sell two cabinet brands that are of equal quality and price, one gives you a 30% markup and one gives you a 40% markup you will believe that the 40% markup is a better product. We do this on a subconscious level, so we are not even aware of that bias towards more benefit. We just find little reasons to like the more profitable brand and little reasons to dislike the less profitable brand. Oddly enough, most people become aware of these rationalizations if the brands switch profit margins, you will say to yourself, "well that is a silly reason to prefer one over the other, I think I will give the other brand a fair shake," or maybe, "I have been unfair to this brand this whole time, I should prefer them for a while to even things out."

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So understanding the conflicts of interest will not remove them but it does let the client make an informed decision and keeps the KD out of trouble later on. From an indemnification perspective, if you design for a fee it would be better to disclose your markup on the cabinets you sell. It eliminates most of the breach of duty claims.

"Lowe's runs at a gross profit margin of about 32% and Home Depot runs at a gross profit margin of about 34%. This is public information that they have to file with the SEC in their form 10-k."

We are talking about kitchen cabinets in this thread. And, as ProSource Memphis mentions, gross margins should not be confused with net profit. To look at Lowe's and Home Depot's gross profit margins reported in their SEC filings across thousands of skus, and apply that specifically to what profit they are making on the cabinetry they sell is not a correct conclusion. Lowe's gross profit on, e.g., AA batteries, is likely less than 1%, but by your logic it's 32%. I stand by my statement that tor cabinetry, 100%, and it may even be more than that.

Julieste,

If you are confident in knowing what you want and how to design it, then I suggest you go to an independent cabinet dealer, like my business, give them a prepared cabinet and molding list along with your product selection (brand, door, wood, finish...etc) and ask for the best price if you place your order today and pay in full with cash or check. You will agree to sign and approve the order and the factory acknowledgment. You will also agree to be there (at the store) when the cabinets arrive and accept shipment directly from the factory's semi-truck in to your vehicle or take home delivery by the manufacturer if they offer that. You accept full responsibility to check for concealed damage within 24 hours of receiving the cabinets. If you do that, you're bound to get the best pricing. But that is putting a lot on you....and if you're willing to do the leg work, then by all means....

Suppose a KD has a 35% gross profit margin, that means that a cabinet they sell for $100 will cost $65. They will make $35 from that single cabinet (which is actually a 53.85% markup).

Suppose over a period of time they grow their business and are in a favorable negotiating position and demand a 20% discount on their cabinets. That same cabinet will now cost the KD $52, now suppose the KD passes on that discount dollar for dollar to the customer, so a $13 discount for the KD = a $13 discount for the customer. That customer will now pay $87 instead of $100 for the cabinet but the KD will have a gross profit margin of 40% (a markup on cost of 67%).

This is why margins can be deceptive. Even though your price went down their profit margin went up. Let's assume that Home Depot and Lowe's actually have a 100% markup (50% gross profit margin), that doesn't mean you are paying a higher price or that they are making windfall profits. They could simply be negotiating a better price from the manufacturer and passing some or all of that savings on to you.

I ran the kitchen dept at a home depot and I can assure you they are not working with 32% or more margins. Far less.

I'm also going to be a bit mean which is against my nature.

What business is it of yours how much I sell my cabinets for vs what they cost me? If you have done your own measurements and your own plan and have the confidence that you know the proper way to design and layout a kitchen, then hand your list to someone at a big box store or Ikea and complete your sale. End of discussion.

Now if you want a proper design, an in home measure, a few layouts to contemplate and instructions for installing your kitchen along with floor plans, rough ins, lighting layouts, installation, notes, molding diagrams, in home delivery then go to a kitchen showroom and find a designer you can relate to. Most of us do not have a "fee" to design or measure but we do a lot of work and a lot of legwork to get you the best space and the best deals. We will also speak with your installer should they have questions.

Questioning margins, markups, etc etc.... you won't get answers - I for one would not reveal that - it is proprietary information to the business I am in at the time.

Best of luck to you. I hope your kitchen comes out great!

Julieste, It sounds like you are sensitive to the cabinet pricing and are looking for a way to get a nice kitchen at the most reasonable cost. As others have discussed, there are many costs imbedded in the sticker price beyond the basic cabinet. But with some forethought I agree with you that there are ways to get the most bang for your kitchen spend.

If your kitchen is of a relatively simple and straight forward design and you are confident in your design acumen, you could possibly save cabinet cost by searching for a cabinet maker or dealer who is in a less costly part of town or in a small town where overhead is reduced. Your contractor may know of such sources (mine did). Or seek out a cabinet maker who has a modest showroom and few employees and who does no advertising and thus keeps his overhead low. You might find such an artisan through a specialty wood dealer or woodworker’s club or Etsy or classifieds in a country newspaper. Then you can do the planning and your contractor can do the installation.

There are also sales at builder supply houses where you can find cabs at substantial mark down (I found some wonderful cherry cabinets at half off this way). Of course you will have to compromise on style, quality, and choices available. Then there is “Cabinets to Go” and such places where you are responsible for assembly. My friend bought hers there and they recommended a brilliant freelancer woodworker who set them up, installed them, Finished them in a beautiful enamel, and made other pieces at very reasonable cost to get her more of a ‘custom’ look. I was shocked at how little she paid for her kitchen. Of course, These ideas work best when your kitchen plan isn’t too elaborate and your expectations are with in scope and you are able to provide some skill and ‘procurement’ expertise.

Good luck!

If the cabinets in question are custom designed...custom made....supervised through production and installation..by the designer..then the numbers make sense...BUT this will be a result that is not to be compared or in the same category as Home Depot cabinets...

Home depot cabinets are not necessarily bad..if you go that route then your contractor will have to take on the added job of getting all the trims and added things needed for construction coordinating delivery...making changes if what you want is not in stock..etc....solving problems and supervising installation..and consulting more with you as process begins and questions come up..this will add to his cost and put more stress on you ... this is why people always ask what is your budget?....will you or can you be this involved?

I appreciate all of these detailed and thoughtful responses. In part, my question arose because, yes, I want to stick to a budget. But, it also arose because I have spend a lot of time researching how to deign a kitchen in the limited space I have, I know what I want as far as layout, I've got a design worked out, I got feedback on it here, and I am a pretty hands-on -person who does her homework whenever making a major purchase and decision like this. I know that I am probably on the extreme end of customers who does not need a lot of hand holding. There are others who will want all of the hand-holding and assistance; that's not me. So I guess it does boil down to why I should pay more when I require much less service.

Thanks all.

M Miller is correct!!!

wrong for cabinets...

"Lowe's runs at a gross profit margin of about 32% and Home Depot runs at a gross profit margin of about 34%. This is public information that they have to file with the SEC in their form 10-k."

correct for cabinets...

"I stand by my statement that tor cabinetry, 100% - or more,"

I am a designer and factory dealer of kitchen and bath cabinetry. One of my cabinet lines falls right in line with quality and pricing of most Lowes and Home Depot lines. Only difference is due to "Big Box Store" volume, I have a higher multiplier and pay more for the same product. I have been head-to-head with them and their pricing fell within 1 or 2 points of mine. They most certainly mark their cabinets up more than 100%.

Now for julieste...

Unknow to most there are more moving parts and variable factors in completing a successful kitchen job than any other part of a home. Outside the work that is physically done in the house, pulling off an issue free cabinet job is far more labor intensive than people will ever realize. Your Kitchen guy works hard, do not begrudge him his living buy questioning his salary. But if you have done your research and know what just you want and don’t need your hand held then a big box or direct supplier that can pair you with a qualified, licensed & insured installer might be for you. Keep in mind, you may be researched and smart, but no offence you lack experience. Nothing beats experience. When you hit the snag or flaw in your plan that big box or direct from factory store is not going to stand behind your work... you are. You might just get what you pay for and then pay for it again.

I’ve owned a kitchen and bath store for eleven years, and came across this thread while having a conversation with one of our cabinet reps today, since we disagreed about what the average markup would be on cabinets. He thought I’m at the higher end, while I thought he might be confusing markup and margin.

What I do know is my regular price is about 15% less than Home Depot's for the same line of cabinets. They will occasionally run sales, in which case I have to lower my price to match — assuming the customer gives me that opportunity — but if HD is buying at a lower price (not always the case in this industry), they’re definitely marking up more than me.

Now to address two things from above.

1) Not that this matters to any buyer, because they want the best value they can find — which isn't always the lowest price — but I have a lot more costs than Cost Of Goods Sold. Gross Margin is Total Revenue minus COGS, but operating expenses have to come out of that. I offer an array of products, all of which sell at different markups based on competition, so my Gross Margin is around 30%.

Let’s add up the other costs. There are two components to rent: the lease and the Common Area Maintenance. My lease is excellent since the space was empty, but my CAM is terrible because I’m 20% of the building’s square footage, so I cover 20% of the landlord’s operating expenses. I believe I’m around $5,500 for total rent.. Add to that $3,500 for advertising, $3,750 for one employee — I wish I could pay more — plus $750-ish for his payroll taxes and unemployment benefits. Maybe $500 for utilities, plus whatever office expenses are. And interest on my home equity line for the hundreds of thousands of dollars I spent to transform a dilapidated space into a showroom with dozens of displays.

Add it up and my monthly costs are about $13K.

Now back to the 30% Gross Margin. Divide $13K by three, then multiply by ten, and that’s my breakeven per month — $43K. Anything less and I lose money, anything more and I’ve earned a profit (which for the owner is the same as a salary). Let’s say it would be really cool if I could add $5K a month to my wife’s income. That means I have to increase my sales by $16K each month to earn $5K prior to taxes; but if I wanted $5K take home, I’d have to earn another $5K in sales. So we’re up to $65K monthly in sales to contribute to the family at not much more money than my employee. That’s about five to six kitchen sales per month if it’s just cabinets. That is far from a monthly occurrence for me, though I do sell other products.

If I lower my Gross Margins, I would need to sell more products per month to break even. Yet I believe I tend to be toward the lower end of pricing for like-to-like quality versus other stores, so I feel the pricing is fair. Consequently, I probably wouldn’t offer a discount to someone suggesting their job would take less time, because I know a lot more about what can go wrong. I’ve saved clients from the mistakes of Home Depot designers, so the odds are high that I would be saving that homeowner from unknown items on the one kitchen they’ve designed to date. Yes, it’s possible their job might turn out to be less time, but that just averages out against another client that took a few hours more.

2) Someone suggested dealers have different profit margins for different brands.. That’s not true for me, and I doubt it’s true for most others. You pay more for Cabinet X over Cabinet Y because Cabinet X’s boxes cost more, not because I marked them up higher. I have different markup percentages for flooring or doors or counters versus cabinets, but I never change my markup percentage for different brands within the same product line.

Foothills, VERY well said! I could have written that myself! In fact, I always tell people, my years of experience can very well save a homeowner in costly mistakes that slow down a project. Back in the early days of box stores, when they handed out "designs" I could rip apart each one that was brought into my showroom. If not clearance mistakes, it was just awful design. Box stores were and are known for packing in as many cabinets as they can. I believe I heard once that they got commission spiffs per cabinet. Good design was not the priority. A business owner with skin in the game, cares about your kitchen and that you love it!

I love what I do, and I've made a living for 40 years doing it I have a nice house in the burbs and two cars in the driveway. But no one gets rich in the kitchen industry unless maybe they are 100% high end. Even, then, they better know what they are doing, because a $200K kitchen gone wrong, could be very costly to a business. The bigger they are, the harder they fall.

Foothills, I never discount that much either, our price is set right for us and the market. We are inline with box stores and like you, most times we are slightly lower. People don't get that. They think because HD/Lowes buys in VOLUME, they MUST be cheaper. Those box stores pay more for materials than dealers because the cabinet industry knows they are a necessary evil. And the box stores don't really want to be in the cabinet business either....it's a huge liability for them. So the manufacturers worked out deals with them. They'll take back cabinet returns for any reason (dealers are not allowed to do this!). For that, box stores pay a higher price for the cabinets than I do. I remember when I first told my husband we pay less, he didn't believe me...and he's my husband!

Setting aside all the math, as a contractor or dealer, when any potential customer starts questioning your markup, margins, how often you have sexual relations with your spouse, or any other subject that is absolutely none of their business, run from them as fast as you can.

These people are giving you notice that they are going to be nothing but trouble.

"Proprietary business information is not open for discussion."