More Insights on 2012

 

 

 

Jason Funk

 

Western Window Systems

 

Phoenix, Ariz.

 

 

As Window & Door prepared its annual forecast issue, industry executives shared their thoughts and predictions for the coming year in much more depth than could be gathered together in one article. In "More Insights on 2012," we present their detailed answers to questions about the coming year.

 

First, let’s start with the most general question for a forecast piece. What do you expect 2012? Will 2012 finally be “the year” we start seeing some turnaround, or is recovery further off than that?

While feedback from most economists and most within the industry is that 2012 is going to be very tough economically, with the rapid growth our company has experienced in the last 7-8 months we believe (and have experienced) that there is definitely signs of life in the national economy. While the free-wheeling construction boom of 4-5 years ago will most likely never return, we are finding that people are still very much building and remodeling homes and commercial projects.

We have found that if you are successfully able to position your company and your products to connect with the customers that are still working, you can be successful. This requires a great amount of research, a talented sales force, marketing and branding focus, excellent quality and execution, etc. However, we believe that companies that can prioritize and excel in these core values will see 2012 as a positive year for company growth and economic recovery.

What do you expect the biggest challenges for the industry will be in 2012?

I think for the broader industry as a whole a major challenge is still going to be downsizing the scale of their business model to keep up with a shrinking market. Many window and doors companies used the boom of revenue years ago to purchase and acquire other companies, buildings, equipment, etc.  When construction permits and the economy as a whole dried up, window and doors companies struggled to keep all of their factories and business acquisitions busy when the workload had shrunk so dramatically. I believe many of these businesses are still in recovery mode and that is why you continue to see large numbers of plants shutting down.
The industry must readjust to the market, and then competition will heat up as companies try to differentiate. However, growth forecasting is still unrealistic for many companies that are still in “downsizing” mode.

What will new construction look like in 2012?

We believe that new construction (i.e. home “starts”) will be similar to what we saw in 2011. While we may see a slight uptick in starts, this is not terribly common in election years. Thus, companies cannot rely on a boom of new home starts to fix their problem. Instead, they need to find ways to strengthen their business and their appeal to consumers. We have been able to do that successfully at Western. While we don’t anticipate a growth in starts for 2012, we are still forecasting about 40 percent growth for our company.  Differentiation, marketing, quality, new markets, etc.—all of these factors must play into the equation for companies to be successful.

What about remodeling/replacement work? What is likely to drive business in this segment?

Remodeling and replacement work is still driven by relationships. This particular business is very homeowner driven—meaning window and door companies must find a way to connect with the average homeowner. Relevant factors to this buyer include increased energy efficiency, tax credits, remodel products, improved functionality, brand equity, etc. While advertising and direct marketing to these consumers can be effective, what will differentiate companies and allow them to really grow in these segments is direct relationships.

At Western we have developed some products that have some of our signature features (i.e. promotion of indoor/outdoor living), but are tailored with design features and different hardware that enable them to be used effortlessly in remodel applications. While products like this are important, the reality is that these homeowners must connect and feel comfortable with their salesperson if they are to even consider buying any products. Thus, we believe the bottom line for attaining remodel work is relationships, and a company that puts a premium on connecting with their customers.

What’s going to be happening with energy efficiency in the coming year? Is the industry focus on ramped-up Energy Star requirements? Are retail channels gaining traction with “whole home performance” efforts? Is the industry chasing triple panes and other means of better energy performance numbers?

We believe the push toward energy efficiency will not cease. While it certainly has lost steam with expiring tax credits and other factors, there is no doubt that the industry as a whole will continue to move toward stricter energy requirements.

While our product often falls into a luxury modern niche, we have had great success in getting architects to embrace a “whole-home performance” concept. Often times they fall in love with the look and design that a product like ours can help them achieve, but they realize that the energy specs are never going to be as low as some competing (and often lower quality) product lines. For this reason, they aggressively work to bring down the total energy calcs of the “building envelope” that allows them to hit an energy spec mandated for the entire home. Our Western team works to become experts on the variables that an architect can change to help them achieve this effect yet still allow them to use a unique, desirable product like ours.

On a (hopefully) positive note, do you see any particular product segments or geographic regions outperforming the industry as a whole?

We can’t really identify product segments or geographic regions that are outperforming the industry as a whole, mostly because our growth seems to be coming from every territory. We will grow at 40 percent this year over our sales numbers from 2010, and that growth is coming from most every territory Western sells into.

Instead, to us the positive note is creative and effective business models that are helping some companies defy the market. Western has been able to aggressively gain market share in our niche market, but also successfully expand into two to three additional target markets that are helping our sales grow.

While each market is different (and requires different marketing, logistics, strategy, etc.), we have found that a high-quality product that is effectively marketed can have outstanding crossover appeal. Thus, companies should not look for a region or product to help them grow—instead they should look at making their current products better and working to help their existing customers understand why their product is the one worth selecting.

How much of an impact does lending (or lack thereof) have on the business? The National Association of Home Builders is making financing-related discussions one of its top priorities this year—are they on the mark?

I think it does have some effect, as tighter financing stipulations make access to investment funds and capital more difficult to come by, which in turn slows construction. In turn, less liquidity in construction makes financing and payment terms that much more critical as companies must do all they can to limit their debt liabilities and accounts payable.

Western has stayed firm on our standard payment terms and has been very successful in getting our customers to work within them. We have seen that if you can create enough of a demand for your product, even customers with less cash and tighter financing will find ways to purchase your product. Again, we believe the solution is not loosening financing terms but instead adding value that makes tighter terms “worth it” for the consumer.

For those who are buying, what window and door products are they selecting? What features are important?

As general rule of thumb, our customers are buying our products in such large numbers mostly because they value the quality and custom feature Western is known for. While we are famous for building doors and windows taller and wider than most all competitors, we are just as known for their ease of operation and overall quality.

In a more specific sense, customers love our ability to open up entire walls of their homes, be it with bi-fold or multi-slide doors, and expand their living areas from the indoors to the outdoors. We also have added two or three new custom products this year that were all driven by custom consumers that want to work with a manufacturer they can trust.

Is your company likely to be hiring, laying off, or maintaining the status quo in 2012?

Western has hired more than 20 employees in the last two months alone. Our company is growing at such a rapid rate, we anticipate that we will be making additional hires all throughout 2012. Even when the economy was down, Western continued to invest infrastructure, both in our manufacturing equipment and in the talent of our employee team. 

These investments are reaping fantastic rewards as our company continues to grow as a result of the ways each person or piece of equipment has improved our company. Western will continue to invest in growth in 2012 as our marketing and growth plan continues to unfold.

Do you have anything else to add?

Western is currently defying industry trends and growing at a phenomenal rate when most other competitors are closing plants or laying off employees.  While it would be romantic to say we have some magic formula, the hard reality is that we have a great team of talented individuals working together to make our company and our products second to none. Western has created a company culture in which every member of the team is important to the company as a whole. This has created a company in which most every employee takes deep pride in our products, our vision, and our future.

This culture has brought forth tremendous ideas from our team members that have benefited our company greatly. For this reason, Western is thrilled to talk to anyone from the window and door industry that is looking to work with a growing company in which their skillset, opinion, and experience really matter to the senior leadership. We want talented individuals. If this sounds like a company you want to work for, we would love to speak with you!
 

Window & Door's "More Insights on 2012" also features questions and answers about the coming year from the following people: