It’s August, which usually means a slow news month. But you cannot help but feel as though there are some very dark clouds gathering over certain parts of the window industry right now.

Share prices sliding for some of our biggest publicly traded companies. Profit warnings from national installers. Entu on the brink. Reports that sales are down at some of the industry’s biggest companies anywhere between 5-15%. It has not been a good few months if you’re one of the biggest in our sector.

That being said, talk to many small to medium sized installers and fabricators and they will tell you something very different. Sales are healthy, margins are good, and all the signs are that 2017 will be better than the year previous. So why the stark difference?

I believe the industry is approaching a rather serious crisis point and it’s approaching it very quickly, and depending on which part of the market you sit at, you’ll either do very well or you need to start thinking about your future.

Bad business model karma

I have long written about all the things that are bad with the old way of selling to home owners in this industry. The residential market has changed quite drastically in the last decade or so. Home owners have become much more discerning when it comes to purchasing new windows and doors, and quite rightly so. The internet has helped. And now we have a much more educated, wise and wary residential market that knows when they’re being taken for a ride.

Yet, many retail companies have continued to run a business model that includes door to door lead generation, heavy discounting and hard-sell tactics. All of which home owners are shunning and won’t entertain. They know to dismiss them. As a result, according to reports, sales at some of the biggest national retailers who also use these antiquated business models and sales tactics are being slammed. Many have said that if selling like this continues, these sorts of companies will fall by the wayside.

Add to that a whole raft of price increases in the past year or so, and karma has bitten back hard. With sales dropping and material prices increasing, margins are being eroded and revenues are falling fast at some businesses. This effect travels further up the supply chain, to those who supply the major regional and national installers with their materials. If their customers struggle, they struggle too.

The Epwin Group trading update last week was an example of that. They supply to a lot of companies, and some of those are the very ones struggling on the sales side. When their customers suffer, they suffer too. Hence we saw their share price plummet almost 20% in s single day. With all the stories circulating inside the industry right now, this is perhaps the most important.

For many of our largest companies and groups, we are approaching a pivotal moment. Business models have to change. The way large installers approach their sales has to change. For some, such as Entu, the damage is probably already done. For some, there is time to change, but it has to be now. To continue the status quo, bury heads in sand and assume that things will revert back to the old ways would be plain stupid.

DGB Business

Early changers are benefitting

The environment in which we all operate has now changed, and changed for good. As much as many would like, prices are never coming back down. Price increases that were blamed on Brexit and Sterling falls are never going to be reversed. We are all going to have to get used to charging more for our goods, and when you look at the wider picture that’s probably how it should be. Our prices are hardly different to what they were a couple of decades ago. It’s probably time home owners started paying more for what we sell. For the SME’s in our industry, those who work in smaller scales and can adapt their products to warrant higher prices, this is easier to manage. For the larger companies who operate on volume on lesser quality products this is where it is going to hurt.

But it is those early adopters of change. Those who saw that best way to survive and indeed thrive was by seeking out a higher end offering. A more bespoke service for home owners where shiny white plastics wasn’t the only choice available to them.

Many small to medium sized installers and fabricators identified quite a few years ago that niche products, higher end offerings were the way to attract new customers, more discerning customers and improve profit margins. Many SME installers also operate a much more laid back approach to sales, which given the higher end nature of products now being sold, is the right thing to do. You wouldn’t expect home owners to make instant decisions on home improvement products which can often cost into five figures.

Speak to SME installers and fabricators today and they will tell you that business is good. Sales and revenues strong, lead levels good. In total contrast to the commentary surrounding the biggest in our industry. Often the “shiny white” part of our industry.

Question is, is it too late for the bigger companies to change? We all know the trouble Entu is in. KPMG are trying their best to save the group, but the last update didn’t inspire confidence, and the talk at the moment is that it’s probably now too late. According to reports and industry commentary the biggest installers are suffering too. I also doubt their ability to ever change their ways. They will always sell the way they always have. And home owners will continue to resist that way of sales in the years to come, which means sales from tele-canvassing and door-knocking will continue to fall. I also believe that we are edging closer to laws being introduced that will ban the use of cold calling both via phone and door-step. The more companies abuse the rules, ignore them or find ways round them, the more likely the whole practise might be banned.

Personally, I believe that we’re only a few years away from seeing the landscape of our industry changing forever, driven by changing consumer habits. That will affect the very biggest suppliers too, as they supply those who may be hit worst by big changes in consumer spending. This is how serious I believe the situation to be right now. I believe that we are now at the start of what could be a very disruptive evolution of our industry. I know that sounds dramatic, but take a minute or two to read the trading updates of some of our biggest. Take a look at the share prices of our publicly traded companies. Look at what is happening at Entu.

The movement is already happening. It could be a very dramatic few weeks and months coming up in UK fenestration.

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