A major composite door manufacturer added nearly 10% to their prices today, as the industry struggles to keep pace with demand and global shortages of almost everything are causing real pain for anyone who manufactures anything.
It won’t be the last, and I am sure many more will be coming from all directions in the coming weeks and months. It is against this backdrop that installation companies in the fenestration arena must now add contingency costs to each and every contract.
Installation companies must prepare
The pattern of price increases has been with us for months now. This is nothing new. Hopefully, installers have been proactive rather than reactive and have been putting an additional percentage on top of their material costs to cover themselves for any out-of-the-blue price increases that they weren’t expecting. If not, then I would urge all installers to start this right now.
At the moment, the manufacturing stage of the supply chain is not able to give any sort of guarantees on their prices. They can get hit with price increases at short notice by their own suppliers, which then filter down to installers quickly. There are factors at play outside our direct control, like transport, lack of raw materials at the start of the chain, global demand etc. A fabricator cannot control those factors, so when they get hit we all get hit and often when we don’t expect it.
By adding a few per cent to the material cost the installer is able to protect themselves against any price increases they weren’t expecting. It doesn’t have to be huge, perhaps somewhere between 5-10%. That small amount can make the difference between maintaining a decent margin or letting prices eat into it. If installers don’t do this, then there is a genuine risk of losing margin at short notice.
Installation companies must also pass on whatever increases are given to them by their suppliers. It’s becoming quite clear that the public can stomach higher prices. Prices that arguably should have risen a long time ago to reflect inflation and a more realistic price point. There is no advantage to installers absorbing any and all increases and let all that margin ebb away. This is very much the time to make good money whilst business is so good. Remember that every installer is being hit with increases, so everyone is in the same boat.
No sign of slowing down
There is absolutely no sign at all that demand is beginning to level off or slow down. If anything it continues to grow. I know at our places we are now having to book sales leads more than a fortnight in advance and are having to spread them fairly far apart to ensure we have time to actually get quotes out to customers. Many I speak to expect demand to keep on rising through the year, especially during the summer months where homeowners traditionally become more active in the home improvement market.
Therefore it is logical to assume that continued record demand is only going to drive prices higher and higher in the months to come. The global picture is very much the same. In most parts of the world that are opening up, construction, infrastructure and home improvements are also top of the list of priorities right now. Indeed, there is a story from Bloomberg today on the global materials shortage, which in short says the entire planet is running out of almost everything. That is only going to do one thing to prices.
With prices rising the way they are, installers of all sizes should be moving away from selling on price and focus more on the quality of the product and what design features and other unique elements can make the biggest improvement to a client’s home. Everyone’s prices are rising fast, along with lead times. We’re all in the same boat on that one so there is little valuable mileage in using that as a sales tactic right now.
It’s also time for installers to make sure they are honest with their clients and explain the situation on price and lead times in full clarity and at the start of the process. We are clear with our clients at our business from the very start that we have a very long lead time at the moment (15 weeks and rising) and that any quotations given may not be the same in price if they sit on their hands and come back to us in a months time. It is communicated to them that the sooner they make a decision, whoever it is with, then the sooner they can lock that price in and the sooner we can start to give an estimated fitting date. Even then, it is caveated by the potential for delays in deliveries and missing products. Most homeowners are very understanding of the situation and are prepared to wait. It is when they are kept in the dark that things start to go south.
But to end of my main point, installation companies need to be looking after themselves right now and ensure that each contract has some contingency money built in to protect against swift price increases. Don’t let margins be eaten away when they don’t have to be.
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