Demand is good. Very good. Fenestration now has the nice problem to solve of managing high demand. As other sectors struggle, ours continues to perform well. Systems companies are reporting business back to pre-COVID levels or even higher in some cases. Installer order books that aren’t being troubled by the terrible communication of the Green Homes Grant are filling up weeks, if not months in advance. Fabricators are taking on order processors to get through the glut of work.
There appear to be lots of business being done, work being installed, and all being well, good profits being made. Long may it continue for as long as possible.
Why then, when business activity is high, are we talking about price increases? Specifically, double-digit increases from the top of the glass supply chain and other parts of fenestration?
Don’t rock the boat
Things are going well right now if you set aside the debacle of the Green Homes Grant upending some order books. As the saying goes, if it not broke, don’t fix it, and right now the industry needs no further tinkering where it’s not required. So its been concerning me that people have been talking to me about proposed steep price increases on the glass and composite door front.
10% increases are being implemented on glass and composite doors within the next few weeks. Installers are going to bear the brunt of these steep increases, just as they are enjoying a relatively calm and profitable period of trading. Double-digit increases I have found to be rare. Usually, they fall in the low to mid-single-digit increases. Sometimes a bit of negotiation by the installers sees that whittled down even further. But 10% is very significant and will make a material difference to the prices that are passed on to the homeowner at the end of the supply chain.
With all the issues our industry is having to navigate right now, is this really the time to be putting 10% on some of our most popular products? Fabricators on social media have been boasting about record weeks and months, about staff returning from furlough, with some hiring extra to cope with demand. You would assume that profits have been healthy since we got back to work.
I appreciate that manufacturers have invested in tons of PPE, shielding equipment for offices, setting people up working from home etc, but I would argue that to rock installers with such a large increase at a time when the rebuilding of businesses is still continuing and the outlook towards the end of the year looks less rosy than initially thought is the wrong move at the wrong time. Yes, prices do need to rise, but it needs to be in a more controlled and gradual manner. I would argue that 2021 would have been the time to have the conversation, not now. Not just after lockdown.
On social media a couple of weeks ago I asked this question:
How is everyone's glass supply right now? Good? Bad?— glazingblogger (@glazingblogger) July 16, 2020
That wasn’t just a random question. It got a lot of replies. The picture out there when it comes to quality and customer service is patchy. What became apparent during our last live video broadcast on social media last Friday evening is that the communication between the entire supply chain has broken down as we have come under strain from homeowner demand. If the industry doesn’t have good communication with itself, then service and quality are going to breakdown. Its absolutely vital that emails are answered, phones are picked up, delivery updates are issued etc. Without that, the next ring of the supply chain suffers, and that trickles all the way down.
Its become clear over the past few weeks that installers, as are fabricators too, are becoming frustrated with current service levels. So, to then ask installers to pay 10% for something they may already not be happy with isn’t going to be received well at all. Indeed, at our place, we got notification of a large price increase soon to be implemented and we have already lodged our dissatisfaction with what is being proposed. Had it been more reasonable then it would have been a different matter. As it is, we await a response.
A time and place
Sterling versus the Euro and Dollar have both done OK in the last month or two. Pound v Dollar has done quite well in fact as the US economy begins to fall back economically again, the virus continues to spread uncontrolled and in less than 100 days there is an election that could get very messy towards the end. Oil remains lower than pre-crisis, recovering some ground after it fell into negative pricing. The furlough scheme continues to pay 80% of the wages of workers still using the scheme, meaning businesses only have to pay a maximum of 20% of the wage of furloughed workers. There is much working in favour of our suppliers right now on the price front, keeping them low. I was told freight duty and other such taxes have risen on the flipside to this, by how much I’m not sure but it would have to have risen a long way to have negated all of the above.
What I’m struggling to put together are the record order books, presumably good profit margins, certain costs being reduced or covered by external support, yet the need for such a large increase. Are things as good as we’re told? Or is this a move to make up lost ground? Or is it perhaps preparations for what could be a very messy end to the year. Remember, Brexit ends on December 31st and there is no trade deal as of yet. New predictions of a rough second wave for the UK don’t inspire confidence, higher unemployment rates are predicted soon and there is the situation across the pond which always has ramifications around the world.
Whatever the reason is, now is not the time. The start of 2021 would have been better timing. The industry will have had a chance to take stock and catch its breath. A more realistic long term view of demand and sentiment would be clearer. The landscape after Brexit would be known, and its effects with or without a trade deal with the EU would be too. Demand is likely to have returned to a more manageable level at this point, with installers perhaps more receptive of price increases at this time, rather than now. I would have also staged these increases in two halves. 5% at the start of 2021, with the other 5% around September 2021. Allowing prices to increase more gradually over a longer period of time.
Right now, our sector faces a huge number of issues, most of which aren’t going away any time soon. For me, this simply isn’t the time to be increasing prices by so much so quickly.
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Large price increases will affect our business significantly as we have a work in progress that with planning and the associated building work, usually takes from 6-9 months to the point where we are ordering the glass. We will be unable to recoup any increases from Customers. Because of our high average order values, clients also usually take 4-12 weeks to make decisions and how many clients do you know that want to pay more than the original quoted price despite their own lethargy in making decisions, no matter the 28 day clauses we put on our quotations? Still let’s… Read more »