I get asked all the time about the pricing structure of cabinets; why, in particular, can one company charge $3,000 for cabinets while another one charges $30,000 for what looks like the same number and types of cabinets. This section is my attempt to answer that question (keep in mind I am only familiar with the New Jersey market and everything I say refers to NJ, but should apply to anywhere in the US and if you do not understand any of the terms used in this section, feel free to click on the Zeek's University link, where most all of the terms are explained, many with pictures.). The price you pay for kitchen cabinets is determined by three main components: The manufacturer, the cabinet construction and the dealer.
The manufacturer is the company that makes the cabinet and is probably the largest component in the price of kitchen cabinets. Like all companies they set their price based on many factors, but in general, the more options a manufacturer offers the more their cabinets will cost. By options, I mean, how many door styles, types of wood, colors, types of cabinets they offer as well as the types of modifications they allow and if they allow custom colors or cabinets--I do not mean how the cabinet is built. What this means is that a manufacturer that is set up to make custom cabinets will charge more money for their cabinets than a manufacturer that sells only stock cabinets, even if you buy cabinets that look and are built exactly like the ones from the stock company. Thus the best way for you to save money on your kitchen cabinets is to create a layout that uses only stock size cabinets and then pick a standard door style, type of wood and color. By doing this, you will be able to buy your cabinets from a cheaper manufacturer (NOTE: this is not the same as buying a cheaper made cabinet--that is the subject of the next section).
How much of a difference, you ask, a lot. A semi-custom manufacturer can easily be twice the cost of a stock manufacturer and a custom manufacturer 4 times more. However, most customers that go with the stock cabinets, also go with the cheaper door styles, colors and upgrade options whereas those going with the higher end manufacturers go with more expensive door styles, colors and cabinet styles thus the differences appear even more dramatic. For me, most of my customers using my best value manufacturers spend $2,000 to $5,000 on their cabinets, my mid range spend $8,000 to $12,000 and my high end spend $10,000 to $20,000.
The cabinet construction is how the cabinet itself is built and is probably the second largest factor in the price you pay. For example, the cabinet can be made of particle board or plywood, the drawers can be dovetail or box with regular guides or full extension guides, the doors can be a standard shaker style or a fancy beaded style, the wood can be a simple maple or more exotic mahogany, the drawer fronts can be flat or decorative, etc. How the cabinets are built is a separate issue from who builds the cabinets. Just because a manufacturer is cheaper does not mean the cabinets are built cheaper. Your layout, door style and color are what limits you to only certain manufacturers, but within each manufacturer there are still many different construction options. Thus if you decide that you want a fancy beaded door style, then you will be limited to buying your cabinets from a manufacturer that makes that particular door style that you like (and it probably will be a mid level or higher manufacturer). Again, the manufacturer alone does not determine how the cabinet is built, only what options you have to choose from. It's like a car, an expensive model might come standard with power windows and cruise control, but a cheaper model offers them as an optional upgrade (does this means it is an inferior power window?), however, if you are looking for a particular color that is not offered on the cheaper model then you will have no choice but to go with the more expensive model.
How much of a difference, up to twice the cost. Let's break it down into the following 6 options (although there are plenty more): (1) dovetail drawers and full extension guides add about $100 per drawer, (2) decorative drawer fronts (also know as 5 piece) are drawer fronts that look like the door, rather than flat, and can add $50 to $100 per drawer, (3) paint colors are typically 10 to 15% more than stain colors & glazes are an additional 10 to 15% more, (4) all plywood construction adds about 15% over particle board, (5) cherry wood is 5 to 15% more than maple which is 5 to 10% more than oak, and (6) a fancy beaded door style can be 30% more than a simple recessed one. Add them all up and a kitchen with the exact same layout from the same manufacturer with upgraded drawers, painted/glazed doors (+30%), plywood construction (+15%) and cherry wood (+15%) with a fancy door style (+30%) can easily be twice the cost of one with regular drawers, stain color, particle board and a standard oak door style. Remember this is the same layout from the same manufacturer, only the construction is different. For me, I don't sell all particle board cabinets, maple or cherry make up 95% of my wood types and most all my customers upgrade the drawers to dovetail with full extension. Thus construction options generally add about 20 to 50% for most of my customers.
The dealer is the store that you buy the cabinets from and surprisingly plays the smallest role in the final price you pay for the cabinets. This may seem crazy since if you go to 2 different dealers you will get 2 completely different prices that can vary by thousands of dollars, however, this is because those 2 dealers priced out your kitchen using different manufacturers and probably different layouts and cabinet construction. If you were to decide on a specific manufacturer, layout, door style and cabinet construction, then went to 2 different dealers that represent that manufacturer the price for the cabinets would probably not vary by more than 20%. This is because the profit margin on kitchen cabinets for dealers is generally in the 25 to 50% range (the less expensive the cabinets, the higher the margin tends to be, the margin difference for 2 dealers using the same manufacturer would be even smaller). Thus when you see an ad from a dealer that claims their cabinets are 40% less then their competitors, they are clearly not comparing cabinets from the same manufacturer and/or same design/layout. Three factors make up the dealer's cost structure and thus how much you will pay for their cabinets: rent, advertising and work force.
A store located in an area where rent is cheaper has lower expenses and thus does not have to mark up their product as much to cover the rent. A big box player, like home depot, probably pays around $20,000 in rent for the space they dedicate to their kitchen showroom, in contrast to a small dealer that pays more like $2,000 to $5,000 a month. Of course rent is small compared to advertising, which can run into the thousands a month. Advertising is very expensive in NJ. A color ad in a typical mailer (like ValPak) runs $500 to $1,000. A store that has full page color ads in several mailers (or several TV or radio ads) can easily spend $5,000 to $10,000 a month. Last is the employee expense, which can be very large or nothing. Employees in NJ are even more expensive then advertising. A brand new kitchen designer (someone right out of college with no experience) can cost $3,000 per month, an experienced one can cost $5,000 to $6,000 per month. Doing kitchen designs are not easy, they involve a high level of computer skills, plus the designer needs to have a very good feel for numbers and the pay is based on a salary plus commission--so the designer is a salesman (and all the negative images that pop up with that title--which explains why designers are always trying to upsell you). Most of the people that enter this field leave it quickly; many don't even like doing it. Simply go to any home depot or lowes, get friendly with some of the kitchen designers and ask them what they want to be doing 5 years from now and most all will say anything other than kitchen design. It's an unfortunate reality of this business, it's hard and expensive to find good help. In fact, because of the cost of employees, many kitchen companies can no longer even sell cheaper cabinets. To justify the time necessary to create a kitchen layout, most companies need the price to be at least $6,000 and many now charge for design services and/or to get copies of the layouts (even at lowes it's hard to get a designer to do a layout for you with their cheapest line any more). So to summarize, a store located in an area where rent is cheaper, does not advertise heavily and is run by the owner (with no employees) will have fewer expenses and be able to sell their cabinets by as much as 20% less and make the same profit. Which, of course is me, my store is in a low rent area, I do not advertise & I run the business myself with no employees. In fact, half the kitchens I sell are under $6,000 and 25% under $3,000 and I still charge nothing for layout services and freely give out copies of all designs I make.
Of course on the other side of the cost equation is revenues. Obviously businesses would not advertise if it did not bring in more business, and more revenues means more customers to share your expenses with, and thus lower prices. However, this business is not like other businesses. The customer's decision on who to buy a kitchen from is not based solely on cost. In fact, I would estimate that the single biggest factor the customer uses in determining who to buy cabinets from is his/her gut feeling as to whether or not he/she is going to get screwed (I know it sounds crude but it is nevertheless true). This industry has a lot of scam artists and just plain poor businesspeople running kitchen stores. In fact, big box players like home depot and lowes only survive because people inherently trust them. Tons of independent stores (like me) can easily beat them on price and blow them away on service, but how do you find the gems among the fakes. Customers know that if a big chain store screws them they can go write letters to the corporate execs or file a complaint with the better business bureau or even sue them and they will be around. If an independent takes your money and disappears you have no recourse and even if you find him and sue him he may not have any money to pay you anyway. In this industry it's not revenues that count but the hit ratio--that's the ratio of the number of customers that actually buy compared to the number that go through the process of creating a layout and design and then don't buy. Designers typically place their customers into 2 classifications: those that were referred and those that weren't. Customers that come based on a referral from a prior customer or contractor the store works with are the golden customers, by being referred from someone they trust, the customer automatically trusts the store (at least to some extent) and is much more likely to buy. Their hit ratio is typically 1 in 3. Whereas a customer that comes in because of an ad in a flyer is not nearly as likely to buy, with a hit ratio of 1 in 8 to 1 in 10. This is why designers always ask how you heard about their store. There are lots of in between classifications too, like customers that came because they saw your store there for so many years, but were not referred (they feel some trust because the store has been there a long time) and customers that find you on referral websites or from the better business bureau, that implies some integrity. Since a designer will spend about 5 to 10 hours with a customer before they buy and 1 to 5 hours for one that doesn't, a store is spending a lot of time and thus money helping people that will never buy from it. Because of all the time a designer spends helping people that never buy, in a typical store a single designer can only handle around $50,000 to $100,000 per month in sales. Thus if a store advertises heavily it will then have to higher more people to handle the extra traffic, and since the people coming in will be non referred customers they will have a lower hit ratio then the regular traffic and cost the store more money to convert into customers. And on top of that you will then have the designers fighting over who gets the referred customers, who are more likely to buy and thus make the designers more money since they are paid on commission. So as you can see increased revenues does not mean the store can spread its costs around more customers and thus sell their products cheaper. Rent is about the only cost that stays constant as sales increase. In this business a store cannot advertise itself to success--it takes years of consistently treating your customers well and building a loyal referral network. Which is why that little store in the middle of nowhere with no apparent customers can be cheaper than that big huge store that is full of customers and advertises everywhere.
Well that pretty much summarizes the cost structure for kitchen cabinets, I hope that helps, and as always feel free to email or call if you have any questions.