It feels like our industry has been in a constant state of flux in the past few years when it comes to price increases. Every couple of months or so all parts of our supply chain get hit with price increases. Whether you’re an installer, fabricator, systems company, glass maker, hardware supplier or anything else in between, the cost of selling our goods down the supply chain is getting more and more expensive.
The outlook doesn’t look great either. I have been looking at some of the external factors that determine the price of our products and the signs are that we’re only going to get more increases in the coming months.
Commodities and currencies
The biggest external factors that determine what our goods cost are currency and commodity prices. Recently I wrote about the rocketing cost of aluminum in recent weeks. You can catch up on that post by clicking here. The dramatic rise in aluminium, caused by US sanctions on Russians and Russian companies heavily involved in the production and exporting of aluminium, meant that many aluminium companies associated with the window and door sector have had to look at their prices as supply issues mount and volatile pricing hit margins. The cost has receded from it’s highs, but not so far back as to the levels pre-sanctions, and remains high still.
It’s not just aluminium but oil too. The very thing that PVC is made from and the very thing that is used to transport all goods around the world. That has hit a four year high on the back of increasing demand and what is a very dangerous situation in the Middle East. All of this hits us at the pumps and then pushes the cost of all goods and services upwards.
On the currency front, although it’s not been major media news, but Sterling has dropped 8 cents against the Dollar in the space of about two weeks. That is a pretty steep drop.
In fairness, the Euro has also taken a steep leg down against the Dollar as well in the last two weeks, so the Pound is not on it’s own. This does look like a Dollar-heavy movement, with a sprinkling of UK and European steam running out. Nevertheless, there are plenty of UK fenestration manufacturers who will buy their materials in Dollars and will find that importing their goods is going to cost them a bit more. The more agile companies out there should have hedged when Sterling hit a high a few weeks ago.
The reason why I’m mentioning this was the last time our currency fell in a big way was after the Brexit vote and I am sure we all remember the almost immediate reaction by some manufacturers to implement swingeing price increases even as the dust was only just settling. It would not surprise me to see the same thing happen again soon.
Point is, the environment out there at the moment is a perfect storm of conditions that will put pressure on the companies at the very start of our supply chain. It may not be that long until installers start to see it. Weeks perhaps, maybe a couple of months?
Can home owners take it?
I have long maintained that the prices of our goods have been severely under-priced for many years. When you look at the cost of other big ticket items and home improvement works they have risen steadily over time. The price of a family car is a good example of costs rising in time. Yet, a house full of windows and doors hasn’t really risen at the same pace.
There has been some degree of creeping upwards in the last couple of years. The largest after the Brexit vote of course. But whilst they seemed steep at the time, in relation to the last ten to fifteen years, there is much upwards movement to go. No one likes price increases in reality. It means we all have to pay more, and ultimately it’s the home owner that has to pay more for their windows and doors when that time comes around. But as installers, an indeed a whole industry, we have to make money. We are not a charity. We are not in this for the good of our health. We run businesses to make money and to make profit. That is not a bad thing.
So, if there are some more price increases to come our way, I’m not sure that this is such a bad thing. We have to take a wider view of this when the issue of price comes along. If prices are going up, ask why. If there is genuine pressure further up the supply chain and that burden has to be shared, then so be it. Money has to be made. Bills have to be paid and profit margins have to be maintained.
Can home owners take it? It’s a tough question. Some home owners will be struggling, some will not. Inflation is now starting to fall and wage growth is now starting to pick up, so the issue of a lack of disposable income appears to be slowly coming to an end. That’s a good thing for big ticket sectors like the window and door industry. So long as that trend carries on for a while, then yes, I think home owners, at least some, can take it.
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