Right now, I feel like the industry is facing a crossroads moment. With an economy in the balance, and a UK fenestration sector that has undergone some quite extreme product diversification, in which direction should installers and fabricators go?
For me, the future of fenestration lies in the world of bespoke, high end, premium range products. The type of products that look great in stunning homes that feature in all the premium home renovation websites and magazines. That’s not to say the “value” part of the market is going to disappear in the coming months and years, but it will be a part of the market where it will become harder to make decent margins.
An informed home owner
The internet has been one of the primary drivers when it comes to information reaching a home owner. Our industry, on the most part, has become smarter in recent years and really squeezed every inch out of the power of the internet to educate and inspire home owners about the plethora of new and innovative window and door products.
In recent years, thanks to this, home owners have been one of the fundamental factors in driving diversification in our industry. It’s not just been fabricators forcing diversification on a general public who doesn’t want options or change. This is an important factor
So, if you’re an installer that is currently pondering in which direction to take your business in 2017, what do you do? It’s an easy marketing option to travel down the “value” route, advertising budget window and door options in the hope of picking up some simple, uncomplicated sales. Or do you choose a more bespoke, personalised service with newer, aesthetically and energy efficiently more advanced. You’ll likely pick up more complicated contracts that require more man hours and skill. I know which one I would go for. Most certainly the latter of those two routes.
I can use our own company as some sort of barometer. We’re based in Wakefield, West Yorkshire. Not the wealthiest part of the world, but in terms of our client base, it has always been of a certain type. Our local reputation for high quality and good service also means people know they will pay more to buy from us. That puts some people off. But at the start of this year we had a meeting where I wanted to aim specifically at the really high end projects. I wanted to move us away from competing with local, smaller competition for contracts like two shiny White windows and the odd basic back door. There’s not much margin in those types of works any more. I wanted to aim at the architects, the self-builders, the luxury homes and similar other contracts. We had the products and suppliers to service those homes. We just had to get our own arses in gear to really attack that part of the market and make it happen.
I am pleased to say that it seems to have paid off. Throughout the year we have been lucky enough to work in some incredibly nice homes, installing variations of our products that have been specified in often the most bespoke, custom way possible. It has meant that our average order value has increased significantly this year, especially in the last few months. On a personal level, I have had my own best sales year by nearly £100k. Something I am fairly chuffed about. But I put that down to the types of contracts we have been signing up this year. And we’ve not really stopped. In the past 5 working days we have signed up two £24k contracts and a £15.5k contract. That’s over £60k of new, very high end work (not including all the other smaller value contracts in between) in the final few days before Christmas. Seriously bucking our trend when compared to previous years. We’ve also been given the verbal go ahead by three home owners wanting solid roof glazed extensions, all wanting to sign up in the New Year. We’ve grown strongly this year, and I put it down to our hard work in promoting our high end options to home owners looking for a seriously high quality installation.
True growth potential
The key factors of our successful 2016 story above are the products we use, and crucially, the profits we have been able to make on the back of those contracts. The higher end of our rapidly diversifying market is where the real growth potential is in our sector.
Right now, it’s becoming harder and harder to make money off the back of two basic White windows or cheap entrance doors. Glass, hardware and profile prices are all on the up. And no matter what happens in the medium term, those rising costs are going to eat into what little margin there is left. That is why at our place we are putting our efforts into the bigger, bespoke projects. We won’t totally walk away from the minor business, but we know what type of work we would much prefer if we had the choice.
The trouble is, there is still a generation of installers, run by an old guard of people that will always be happy to pocket enough cash to cover bills and the weekend beer. It those companies with that archaic attitude to new ideas and new products that are most at risk from going under in the next few years in my opinion. As other installers around them spot the growing opportunities in the higher end of the market, they risk losing what market share they have left. If you’re not innovating, you’re dying, as they say.
The true growth potential in our market is at the higher end of our market. And right now, judging be installer confidence in our market in the latest CPA report, home owners are happy to pay more for a better, bespoke, better build quality in their new windows and doors. Even into 2017 and 2018, even if we start to see inflation creep up to the 2% Government target, and prices nudge up one or two percent, I don’t think it will be enough to dampen home owner’s spirits for windows and doors that they can get excited about. If they’re going to be spending many thousands of pounds, a few extra tens of pounds probably won’t stop that purchase from happening.
Diversity will continue
I cannot see a period on the horizon where diversification in our industry will slow down. Competition is very high at the moment, and manufacturers are always looking for that one extra innovation over their rivals to try and gain an upper edge. That will keep driving diversification.
Installers will also keep that trend up. They will be looking to their suppliers to give them the tools and the products they need to secure a sale and steal market share from their competitors. New products that get home owners excited will help make that happen.
The important thing to remember from all of this is that we are all in business to make money. No one is doing this for the good of their health. Profit is not a dirty word and it has to be made. And right now, the best profit margins lie in the higher end of our market, with very high quality products that command a higher price that home owners are happy to pay. The basic end of our market will continue to feel the squeeze as prices rise and home owners become less interested in the standard stock of products that are becoming less and less relevant as the years go by.
These are just my opinions on where I think the market is going to be going in the short and medium term. All thoughts on this post and any others are welcome via the comments section below.
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