I think every single one of us who works in UK fenestration in any part of the supply chain has been exposed to some level of price increase. There has been a raft of them since June 24th, the day after the EU referendum, as the value of Sterling has fallen and costs to import materials for our industry has risen.
On the face of it, increases in costs are bad. That’s the assumption. If it costs us more, then it will cost the home owner more. But before red mists descend in sales and accounting department, consider this: glazing industry inflation has been little to nothing for years and years. Isn’t it about time prices started to steadily rise?
Industry inflation long overdue
I think this is one of very few industries where prices have risen by the absolute minimum when you compare us to other industries.
One of the best examples is the typical family car. Something along the lines of a Ford Mondeo, or a Skoda Octavia, a decent family car, can now cost north of £20,000. My Audi A3 Sportback is £24,000 when I bought it a couple of years ago from new. But when you look at what cars of this type will have cost 20 years ago, they would have been nowhere near these prices. Quite rightly, the price of this product has risen over time.
Other products have risen with inflation too. A high quality kitchen will set you back five figures. Bathrooms of a high quality aren’t far behind either.
Yet, the price of a house full of windows and doors now, will be very similar to a house full of windows and doors 15-20 years ago. It’s ridiculous when you think about it. Some inflation on prices I think is long overdue, and thanks to Brexit and the fall in Sterling, now might be the ideal time to do it.
Control in the wrong place
I was speaking to a good industry friend of mine the other day, and he raised a good point. He said that in other glazing markets, such as the US and Europe, the price is dictated by those at the start of the supply chain, so the systems companies. They say what the price of product is, and the rest of the supply chain deals with it.
In the UK, the price of our goods are influenced far too much by those who sell it to the home owner, primarily the direct sales people. The old fashioned ones will sell their windows and doors at what they can haggle them for. Usually at uneconomically low prices. Then, their fabricators or their in-house production have to make those products at a price to maintain a contract profit margin, and that effects rattles it’s way up to the systems company. It’s unfair control and is not a profitable way to do business.
It is down to syscos and fabricators to decide what prices of windows and doors should be, without negative influence from the installer part of the market. If our industry operated in this way, we would see the whole sector move upwards in price in unison, leaving no gaps for the unscrupulous to undercut, and we would then see prices to home owners rise to what they really should be, given that it 2016 and not 1996.
Profit margin is not a dirty word, and the reason why our industry has sometimes found it a problem to make a decent profit margin is because the installation part of the market, thanks to poorly trained sales people, have kept prices depressed just to get a sale. Keeping any sort of natural inflation at bay. All this serves to do is to erode margins and eventually leave a company to go bust.
This is why this latest raft of price increases isn’t a bad thing. It doesn’t even matter what the reason is, be it Brexit, Sterling or any other reason. The fact that they’re rising by a good few percent isn’t a bad thing, given how little prices have risen to home owners during the past two decades.
Whether installers decide to pass this increase on or not remains to be seen. Some will, making sure their own margins are preserved. Some won’t in an attempt to undercut their competition, but erode their margins.
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