More Insights on 2012

 

Keith Juhola

 

ODL Inc.

 

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?

We probably weren’t drinking the industry Kool-Aid. We didn’t think there was anything to drive growth in 2011. We don’t really believe that the true drivers of activity in our industry are present.

Our outlook for 2012 is a repeat of 2011. There will be some growth in housing starts but mostly multifamily. Single-family growth will be pretty flat. Remodeling, however, may be pretty strong and we’ll see some growth there.

Remodeling has grown month-on-month every month for last 23 months. While tough to put a nice, easy pin on what that means for our business, it’s difficult to ignore. There are a lot of people doing remodeling out there who are not looking to sell or buy new home.

I think we’ll see moderate growth in single-family home starts, tempered by whether or not we flush through more foreclosures. That will continue to pressure down single-family home starts. With the continued increase and growth of rent, multi-family [construction] may see double-digit growth.

Our strategic initiatives focus on those things. Get our arms around remodeling and multifamily, and defend what we have in single-family.
We measure everything. We’re data driven at ODL. We want to make sure we’re making decisions based on data and not gut, which can be a bad habit in our industry. We know that if we want to stay on top of things and ahead of the market, we’ve got to pioneer these segments.

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

I think the biggest hurdle is going to be, “How am I going to grow next year? Where am I going to find that growth?” The cupboard is pretty bare.

I think the biggest struggle for most folks, especially small to medium companies, is identifying and targeting those growth segments—remodeling and multifamily. How does a $5 million to $25 million [in sales] company do that? They probably lack the resources. How are they able to leverage the knowledge that remodeling is going to grow? Everyone says remodeling is going to grow, but how do you get at it?
We’re seeing inflation beginning to creep up a little. With that creeping into the equation, we’re seeing more and more price creep from our suppliers. We’re trying to hold off those price increases to our customers. They are still extremely resistant. If you create a price increase, you create an opportunity for you competitor to go in and say, “Well, our increase isn’t as much.”

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’re still in the early-adoption phase. The folks who are jumping on energy efficiency at consumer level are the early-adopter level.
We’re seeing more and more consumers asking for energy efficiency and the way we’re connecting that to sales is by talking about the payback. The consumer appreciates that the payback time is reasonable. If you say you’ll get the payback in 2 years to 5 years, most people will say, “OK, that makes sense.”

What I’ve seen that will drive [energy efficiency adoption] more is municipal code requirements. We’ve got Energy Star and EPA driving changes, with a climate zone approach. Anytime I’ve seen a spike in sales, it’s because a county has said, “You will not build without meeting these requirements.”

Federal standards [are laid out], then state codes follow along. In last 18 months, every municipality that’s taken energy efficiency seriously, we’ve seen sales spike.

In terms of the retail channel, big boxes—they’re pushing energy efficiency message pretty strong. Consumers are asking for it. More and more consumers are at least educated enough to ask for energy efficient products.

We as manufacturers and our distributors and the big box—we’re tired of double inventorying products. We’ve got the energy efficiency and the non-energy efficiency versions. It’s just bad business. We’ve got to get out of that.

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?

Lending has a huge impact. Look what happened between 2003 and 2007. Tightening up the standard dampens buying activity but probably keeps buyers out of market who should be out of market.

The two biggest demographic groups are Baby Boomers and Gen Xers and both those folks just can’t get access to easy cash.
What I have seen is folks who are able to take advantage of lower interest rates and free up some cash, they do use that money for remodeling. That is what I think is driving remodeling activity. Rather than a three-year time horizon, it’s a ten-year. People are saying, “I am going to be here a while and I want to differentiate my house from my neighbors’ houses.”

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

Innovation is a huge part of who we are. We view ourselves as being a leader in that respect. That space on the front door is ours. The door is the canvass upon which we paint. We’re always looking to innovate there.

We have a couple of new products coming out next year. Not just a new design of glass. They’re definitely different. Our market research has always driven us to be more regional.

We’ve always believed that folks chose to pass on decorative glass don’t make that decision because of price—it’s got to match their personal style and regional preference.

We’ve done research on where our holes are. We’ve got expensive glass, and inexpensive glass. We’ve got some [designs] that have been around 20 years and others that are so cutting-edge they’ve only been available for a couple of years.

Anything that has a Craftsman style to it sells well anywhere. It’s the new neutral of sorts. People seem to be remodeling to look more Craftsman-y. Those elements sell well for us.

From the designs of glass perspective, we’re coming out with four new patterns, two of which are distinctly regional. One has Fleur-de-Lis pattern and another has an extremely Southwest design. The reason why we came up with those is because we think that southeast will be a stable-to-growing market in many places next year.

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

We’re at a good place. That’s the benefit of working for a small, family-owned company. We go through long, dark nights of the soul anytime we have to lay someone off.

We had to reduce our workforce but we’ve gone through the worst. We can comfortably absorb any additional downturn. We’re forecasting growth because we think we’re smarter than the average bear. But our worst case, best case and any likely case projections we can accommodate with our existing headcount.

We’ll also be hiring a few people around key initiatives. We need to continue to keep building our bench. We are going to grow and we’re going to grow through internal promotion. We need to create opportunities for people we have and it’s important to identify those people who are the next level of leaders. It’s an internal scorecard we use to measure ourselves. It’s important for us to do that.

Do you have anything else to add?

I’m surprised we’re not talking more about the role of tools and technology coming into the industry. It seems like more and more customers are asking for iPads, all configured to take the place of catalogs and brochures.

With technology, they can put something together [for consumers] right there on the spot. We have a couple of customers who are playing around with variations of click-and-order ways of entering/ordering stuff—clicking through the choices so you punch out a configured front door with price and lead time.

We make all of our photos available to customers in a variety of resolutions. They can either build [a technology solution or app] themselves, or we can build for them. We’ve also done custom price books for our customers. They give us information on their rates and charges so they have a very easy-to-quote point and click system for putting in entry way.

We talk all the time about our role in this process—how do we take the suite of tools, all the things we have and do, and turn that into a tool for our customers? How do we make that a tool our customers can use?

 

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