The Changing Shape of the Industry
In the last 18 months the mix of shaped white to foiled products has changed dramatically explains Leon Day, managing director of Universal Arches. He goes on to highlight a shift in buying patterns that is also impacting on all four corners of the industry.
As a bending specialist that accounts for around 70% of the UK market we’re in a unique position that we are not constrained to one single PVCu system and have shaped profiles from over 100 systems over the years. We in fact see the industry as a whole and are able to assess several trends when we analyse our sales history and order intake.
It doesn’t need me to highlight the fact that over the last few years the share of foiled products has gone from around 10% to around 30%, depending upon whose statistics you employ to support your evidence. We’re now following in the footsteps of our European counterparts who for many years have offered a wide range of woodgrains and coloured finishes. Several realistic woodgrains are available from stock from the systems companies along with a number of colour options such as anthracite grey and Chartwell Green and the numbers are increasing.
But our core market has always been in white products, yet our sales mix in the last 18 months has quite simply transformed from 7% in foiled finishes to 35%. There has been the impact of new customers to a degree, but given our share of the bending sector as a whole, this is a clear and defined trend.
However, our recent sales analysis has unearthed some other interesting sales trends, most notably the loss of some of our small fabricating companies, who only order a couple of shaped frames a year, to the large fabricators who are growing quickly. The expectation 10-15 years ago was the emergence of the superfabricator and for a number of variables this proposition was never realised until now. Our largest customers are growing quickly in terms of what they order from us and the same can be said for others in the industry such as hardware companies who are experiencing larger sales volumes from these big customers and the loss of the smaller ones.
Inevitably with the demise in some quarters of the smaller fabricators we’ll find that margins are affected as the profitability of sales from these smaller fabricators will be far higher that that of the larger fabricators, many of which have the commercial acumen to employ professional buyers. Margin erosion could be a real issue for the industry as its very structure begins to change and pricing strategies will no doubt be scrutinised and reviewed.
But for us it also means that our distribution costs are lower as we are able to send more product to the larger companies in a single delivery and have less reliance on one-off orders to the smaller fabricators. But we hope to have a happy balance of customers in terms of size from a commercial risk perspective.
The dynamics are clearly changing in the industry and the control once exercised by the systems companies has seemingly diminished and has been left firmly in the hands of the larger fabricators who now have the resources, expertise and capability to make the superfabricator proposition a reality. There are companies in the USA who manufacture in excess of 10,000 frames a week, but how long will it be before this is realised in the UK? I dare say within the next decade during which time we’ll see a lot of smaller fabricators ceasing fabrication as they don’t have the resources to compete and are enticed by the bigger fabricators.
Smaller fabricators need money for capital investment in machinery and the 30% market share of the foiled finishes means that they have to carry considerable stock, which will in turn strangle cash flow. As more new finishes come out, so to will the minimum value of stock required for these companies to operate, though the systems companies have exercised common sense in some instances by selling single lengths of foiled product.
There’s a definite shift in power within the industry going on, which could affect us all in many ways. The product mix is changing as the adoption in new foils is on the up, while the growth in the large fabricators at the expense of the smaller ones will see an impact in margins, whether you are a systems company, glass manufacturer or component supplier.
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