You're Going To Need To Start Charging Your Customers More

In my last post I talked about the industry embarking on a period of disruptive evolution. You can read that post in full right here. As part of the evolution, I mentioned that we are going to have to get used to a future where we charge home owners more for our goods. And those charges stem right back up the supply chain.

Fabricators are going to have to charge more to installers, and systems companies are going to have to start to charge more to fabricators. And right down at the end, where installer meets home owner, installers are going to have to pass those charges on. Why? Firstly, because they have no choice, the price increases are going to keep on coming and they cannot afford to let any more margin go. Secondly, perhaps the industry should be charging more for our goods now anyway.

Maintain margin or close your doors

All companies in this industry are in business to do one thing: make a profit. Increasingly however, that is something becoming harder and harder to do in recent years. Be it material price increases, wage increases, investment, pensions and everything in between, it is very much hard work to maintain any sort of decent profit margin in the industry right now.

Material price increases has been the one in focus of late. Sterling’s drop in value after the EU vote has been one of the reasons for the various price increases. Most have been blamed on that, although some have used it as an opportunity to cash in and make a few extra quid. That’s the free market. But we have to remember that whether you’re an installer, fabricator, systems company, ancillaries company or a glass business, margins have to be made. My only beef is that a bit of honesty wouldn’t go amiss when companies try to explain in long wordy letters why their prices are going up.

Still, if we aren’t making a profit, we might as well close our doors. We’re not charities. We’re not non-profit organisations. We’re companies, who hire staff, to make money for ourselves and provide what we all hope to be a decent living for those we hire too. In order to do that, the end user has to pay for it. Companies at all levels of our supply chain cannot absorb every single price increase, whether we agree with them or not. There’s very little we can do about it. But we can pass on at least some of it to the home owner.

Perhaps we should be charging more…

Is it time for prices to go up across the board?

It’s to time get rid of the notion that price increases blamed on Brexit are ever going to be reversed, because they’re not. The only two companies to my knowledge to operate an open and flexible pricing policy are Brisant and ERA. No one else is going to reverse their increases, Brexit or no Brexit. The prices we’re at now are going to stay where they are or only continue to go up. This is the new normal, we all best get used to it.

Whether we like it or not, this is the new normal. But, perhaps it’s as it should be. The retail prices of our windows and doors haven’t really risen properly all that much in the last 15-20 years. Consider the price of a family car, a holiday, a kitchen. These are all products and parts of consumerism that have risen as the population has become more affluent. Yet windows and doors? Never really moved anywhere north. The insane competition in the “value” part of the market has helped keep price artificially low for much longer than they should have.

There are more premium parts of the market now that didn’t exist even a decade ago, with prices higher than the average retail quote, but in general, I reckon prices are a good 10-20% lower than they should be. That might sound a bit steep on the face of it, but if you think if prices had been allowed to naturally rise each year by only a couple of percent, this is where they would have been anyway.

Instead, after being kept artificially low by under-cutting, all the price pressure is coming in at once now, and companies can’t shoulder all the burden. From here on in, prices should rise year on year by a small amount, just 1-2% each year. These increases would help pay for things like pension contributions, wage rises, material cost increases, investment back into the company etc. And small enough for home owners to not really notice.

Still, all of the above is likely to fall on deaf ears to those who believe under-cutting, hard-selling and price matching is still the right way to go about sales in an industry that in parts is struggling. There will always be those companies determined to cut the quality out of the product, save a few quid, rid themselves of any decent margin just to win an order.