10 Trends Shaping the Vinyl Industry

Meeting higher standards will be essential to success
From higher energy performance standards to continued consolidation, to moving past its reputation as the "cheap" window option, Window & Door looks at the 10 trends likely to shape the vinyl industry moving forward.

Agree with the 30/30 provisions or not, you have to admit the stimulus bill sure pulled the window and door industry out of its economic coma. Manufacturers, suppliers and dealers from all over the country are buzzing about innovation and whether or not the requirements will stimulate demand in the way in which it’s intended.

Since we now have your attention, we thought we’d take a look at the major forces that seem to be shaping the vinyl window and door industry. We talked to representatives from all links of the vinyl supply chain to see what perks them up in terms of opportunities, and what keeps them awake at night when considering the coming months and years. We found some areas of overwhelming agreement, as well as some vast differences of opinion. Some in the industry see big changes coming, while others predict a slower, continued evolution. All of these forces affect the vinyl industry, and some concern the window and door industry as a whole. In no particular order, we present the 10 trends that are likely to shape the vinyl industry going forward, and what the competitive landscape will probably look like on the other side of this economic ditch.

Energy efficiency will be driver
It's a near certainty that energy efficiency will be driving the vinyl products forward through the entire next stage of the industry’s development. The American Recovery and Reinvestment Act, President Obama’s stimulus bill that marches to the tune of $789 billion, delivered a jolt to the industry’s lifeline with a $1,500 maximum tax credit for energy efficient windows and doors. This was an eyebrow-raising increase from previous energy-inspired tax credits of $200 for qualifying windows and $500 for qualifying doors. The fine print this time, however, is that Energy Star products would not necessarily qualify for the credit—products will have to have tighter U-value and SHGC numbers.

Industry reaction to these stricter standards is split, but many vinyl manufacturers see the 30/30 provisions as the new baseline for energy efficiency. “The new tax stimulus plan shines a positive light on the benefits of energy efficient windows,” says Sid Spear, vice president of marketing and sales for Simonton Windows. “By increasing the tax credit available to homeowners for windows replaced with specific energy efficiency standards, the government is helping educate consumers on the value of these products in the home.”

“For the companies that can meet or exceed these expectations, the customer is getting educated on their products,” says Steven Abramson, president of Pace Windows & Doors, a Rochester, N.Y., dealer and manufacturer. “The windows have to hit those numbers for the write-off—there’s no fluff. They either meet it or they don’t.”

Not long after the stimulus bill hit the streets, the Department of Energy released its proposal for new, tougher criteria for the Energy Star program. The performance criteria are similar to what’s outlined in the stimulus bill, particularly for the Northern zone of the country. DOE officials have postponed making decisions about Phase 2 of this new Energy Star program roll-out, but many industry observers believe the requirements will only get tougher as the program matures. “I believe the recent government tax credit has set the bar at .30 U-value and SHGC and it will only go lower from there in the future,” says Wayne Gorell, president and CEO of Gorell Windows & Doors. “Energy Star can’t go back from this, so they will have to tighten the standards further.”

And so the performance race begins. Vinyl manufacturers that do not have products that meet the bar set by the stimulus bill and Energy Star will likely make adjustments to their product lines to tap into this pool of potential buyers, and companies that already have products that meet the requirements will be looking to the future and pushing for additional energy efficiency improvements, representatives say. “Many companies are playing catch up,” says Chris Pickering, vice president of marketing for Ply Gem Windows. “The stimulus package requirements are great for the home improvement industry… We’re excited about all of the new developments in glass that are ahead of us.”
“We manufacturers should be pushed toward continuous improvement,” says Chuck Scalzott, chief operating officer for Vytex Windows. “Too many companies have provided sub-standard products for years and now that we are trying to improve our industry, they cry foul. When our products achieved the new proposed Energy Star criteria, we looked for the next step. Before the [stimulus] bill was signed, we had already begun the search for our next and more energy efficient glass product. If we don’t continually push ourselves and our glass, spacer and gas suppliers to improve, we’ll never get near energy independence.”

Though not all vinyl manufacturers agree with the performance standards coming down the pike, many see them accelerating both product development and sales. “The vinyl industry will need to undergo tremendous change at an accelerated rate to compete,” says Peter Yuhas, national sales manager for Window City, a Toronto-based manufacturer. Many report the new tax credits have already stimulated demand. “In less than a week from the bill signing and information getting to dealers and homeowners, my dealers are getting excited because the phone is ringing again,” says Scalzott.

Still, some are hesitant to get dollar signs in their eyes just yet—consumers still need access to credit. “Now we’re faced with the financing issue,” says Michael Foit, co-founder of dealer Apex Energy Solutions. “They still have to get the financing, even with the tax credit.” 

Where did everyone go?
The economy itself has already done a number on the competitive landscape of the vinyl industry. Many companies that rode the housing boom wave found themselves overleveraged and not diversified when the builder market started to dry up in 2007. Now, the vinyl industry is shedding capacity and consolidating as it seeks out marketplace equilibrium. “The companies that will emerge as the winners are the ones that were financially conservative and made the decisions to invest in the right equipment,” says Mike Sugrue, vice president of Winchester Industries, maker of Bristol windows. “Looking at Republic [Windows & Doors, a now-defunct manufacturer that was based in Chicago], they had a building that was the Taj Mahal. They put their money into things that were frivolous. If you come here to Winchester, you see a manufacturing facility with very little glitz.”
Buy-outs, closures and consolidations will continue to cleanse the system for some time, industry officials say.

“Excess capacity in all aspects of our industry—from manufacturers to fabricators to distributors to contractors—makes it inevitable that consolidations will continue,” says Mark Savan, president of Simonton Windows. “Those companies and individuals having the best value proposition will survive.”
While much consolidation will happen as a result of the economic downturn, some additional streamlining may come at the hands of the new energy efficiency demands being put on the industry. “Change will be expensive and will affect the entire supply chain,” says Window City’s Yuhas. “Most manufacturers are not positioned properly to absorb the expense. While the current market consolidation has been mostly fueled by decreased sales, there will be an additional shrinkage due to the inability of several manufacturers to invest properly in technology.”

Shades of green
Rather than a threat or opportunity, “green is a reality,” says Gary Delman, president of Sunrise Windows. “So we’re focusing more and more energy on what we can do to protect our environment. That’s a great opportunity for us.”

Although vinyl has hit some speed bumps in terms of its green message, suppliers, manufacturers and dealers are working hard to educate consumers, building owners and architects. “People don’t give vinyl the credit it’s due,” says Abramson. “There are different grades of wood and aluminum too.”
Vinyl’s ability to meet the government’s request for higher performing products is also likely to promote the industry’s green attributes. “When looking at the value proposition that our energy efficiency products bring to market, it’s clear to me that green is an opportunity,” says Sid Spear, vice president of marketing and sales for Simonton Windows. “The new tax stimulus plan … is a tip of the hat by the government to the importance of green.”

Vinyl faces a marketing and education challenge with end users who are considering other window frame materials and glass packages, but the industry as a whole has to sing its praises compared to other energy upgrades decision makers can pursue. “There’s very little you can do for your home that is more impactful on a day-to-day basis than replacing old windows with new, energy-efficient windows,” says Simonton's Savan.

For most vinyl products, going green means getting vocal about product attributes that already exist, as well as highlighting the company’s own sustainability efforts. “Any press is good press and if you have an opportunity to show that you are environmentally responsible, then you need to show it and prove it,” says Steve Dillon, corporate marketing director for Veka Inc.

Done right, the green game can also ease some of the price pressure plaguing certain segments of the vinyl industry. “A majority of Americans would purchase a green product, even if slightly higher in price, because this movement is something we hear about every day on TV, radio, newspapers and magazines,” says Vytex’s Scalzott.

Diminished expectations for new construction 
Many vinyl players are still shrugging their shoulders in terms of predicting how and when the market will rebound. “It’s hard to see what the recovery will look like,” says John Vatcher of Weathervane Windows. “We haven’t seen the bottom. We’re still on a downward trajectory and there’s no signs when it will end.”

New construction is not likely to return to its previous levels, Vatcher says, and when the new construction market does tick up again, houses will likely be smaller in size, which means fewer windows. “The reality is that everybody’s going to be fighting for a piece of a smaller pie,” he says.
Others agree with this new construction prediction. “Smaller homes with more energy efficient, multi-use interior space will replace larger spacious homes,” says Robert Borkoski, Veka' s marketing media manager. “This will translate into more energy efficient, but less window units per dwelling.”

This is why the remodeling and replacement bandwagon has been an attractive wagon on which to hop. “Given that people are not able to move, history tells us folks tend to renovate when unable to relocate,” say Doug Cook, president of Feldco, a Chicago-based dealer. “Hopefully the credit crunch will ease a bit, allowing customers access to capital to get work completed.”

Some believe the stimulus bill will indeed get the remodeling market motoring again. “I think it’s a great incentive,” says Pace’s Abramson. “I’m still not happy with the morale of the country, but this is good for us. Remodeling should grow, even this year.” 

Internet revolution
Most consumers won’t even buy a book without checking the reviews online so vinyl manufacturers and dealers will have to continue to live up to consumers’ expectations based on their Web research. “If you go into a Cadillac dealership, you expect to be treated a little different than if you were buying a Chevy,” says Winchester’s Sugrue.

More than ever before, consumers know exactly what they’re buying and they’re getting better at deciphering how products line up against each other. “They may say I can’t afford your product, but they never say it’s not worth the money,” Sugrue says.

“There’s more information about R-value and U-value and about green products in general, than there ever has been in the history of the world,” says Foit. “There’s lots of bad information as well, but homeowners are asking the right questions.” The readily available e-information gives buyers a sense of empowerment and a baseline education going into the sales appointments, he continues. “It’s guys in their late 20s and 30s that are killing us with these questions,” he says. “They’ll sit on the Internet until the wee hours getting information and they don’t want to be lied to.”

The Internet has allowed potential buyers access into the technology and terminology of the vinyl industry, which keeps sales people on their toes. “We’ve been in this business for 25 years and now we’re replacing replacement windows,” says Sugrue. “People are saying that they don’t ever want to do this project again so this time they’re replacing with top-of-the-line products.”

“Even with our killer visuals on our laptops [used during sales presentations], I’m so surprised when homeowner come back with questions about solar heat gain coefficients and visual light transmittance,” says Foit. “There are window salesmen who don’t even know what that is.”

Size does(n’t) matter
Although large national manufacturers are peddling fast to slough off excess capacity, small and medium manufacturers may be challenged to keep pace with new energy performance standards. So which is the bigger challenge?

“Demand continues to decline and smaller manufacturers are going to find it difficult to manage overhead and comply with new regulations,” says Feldco’s Cook. “New Federal requirements, a tough credit market and declining demand make it a tough path to go for the smaller players.”

Alternately, Vatcher sees the outlook for regional players like Weathervane as being pretty positive. “We think when we emerge from this market, we’ll be in a stronger position,” he says. Part of this stronger position will come from larger manufacturers tripping on their own toes. “They never got the ROI and they’re leveraged heavily,” he points out. As a result of bigger companies’ closures and cutbacks, smaller manufacturers are picking up dealer/distributor customers. “We’ve signed up quite a few new dealers. Most of them are down too, so it hasn’t meant a heck of a lot of business, but we think it will be going forward.”

Some contend that smaller and mid-sized vinyl manufacturers are actually quite necessary in the overall marketplace to move quickly in response to the government’s energy efficiency demands. “The healthy fabricators in this group will lead the way through innovation and service,” says Alan Funovits, Veka's corporate director of sales. “Many of these companies also focus in niche markets that may not be able to be serviced by large national fabricators. Small and mid-sized fabricators may also be more nimble and able to address market requirements as they change through regulations and economics.”

Privately-held and family-run companies may also have a leg up on bigger conglomerates in their ability to remain nimble in the quickly-changing marketplace. “Since we don’t have stockholders, we’re able to make decisions based on what’s good for the homeowner and good for the marketplace, not what we think will be perceived well by someone not in the industry,” says Sugrue.  

Alliances in distribution
With all the turmoil in the marketplace, one trend that may shape vinyl players is their willingness to form strong partnerships along the supply chain. Suppliers, manufacturers and dealers alike are not only concerned with their own financial health, but the health of their channel alliances as well. “We’re hearing from dealers right now that they want to find a company that’s in this industry for the long haul,” says Sugrue. “They don’t want one that’s going to be bought or called out by the bank. The industry is looking for stability. They’re placing a premium now on customer service because they haven’t been getting it for a long time.”

Working together to provide that heightened customer experience for which end users pine will give partnering vinyl companies a competitive advantage, contends Sunrise’s Delman. “Those suppliers that align their businesses to provide this level of service will more than likely be the companies that emerge as the winners in our industry,” he says. “Those that don’t will obviously struggle.”

Partnerships are particularly important because window suppliers are not just competing with each other for business—they’re competing against other home improvement options like hardwood flooring, countertops and roofing, says Simonton’s Savan. “It’s a simply a fact that our entire industry has already changed,” he says. “We may never again see the building bonanza that was experienced five years ago. Competition is fierce in all aspects of manufacturing and selling products—on every level.”

Some vinyl manufacturers, including Simonton, are shifting to a more holistic view of product development that stretches into both ends of the supply chain. “We’re rising to the challenge of being a strong partner for our customers,” says Savan. “We’re taking a consumer products focus in the development of our new products. We’re working to appeal to consumers with our product advancements so that it makes it easier for our customers to sell our products.”

Further, most believe that it’ll take teamwork to help clear up confusion in the marketplace about what vinyl products can offer in terms of performance. “We have to make sure the homeowners clearly understand what they’re getting,” says Foit. “We need an alliance. You can have a great manufacturer making a great product and if the dealers aren’t properly trained or if it’s priced too high, then the end user suffers. Let’s work together to sell more of these things, and the end customer will benefit.”
Making sure the messaging stays consistent is another area vinyl industry observers see channel partnership playing an important role moving forward. “Partnerships between manufacturers and distribution channels are especially critical during these economically challenging times,” says Simonton’s Spear. “Both manufacturers and distributors need to be prudent as to where they invest marketing, advertising and lead generation dollars. Working together on joint efforts can oftentimes bring stronger results than if we were to work alone.” 

Innovate for survival
Even the companies doing cartwheels over the new energy performance standards know it’s never safe to rest on your innovation laurels. Energy standards may get even tougher, consumers are demanding more aesthetic options and structural elements will need to continue to make the grade. “I said in 1998 that triple-paned was the future—the more energy you could squeeze out of a window, the better off you’d be,” says Foit. “The response I got from homeowners and other competitors back then was ridicule. They’d make comments like, ‘This isn’t Alaska,” and ‘This is overkill.’ Back in those days, if it tilted in to clean and you never had to paint it, you had a lot of whiz-bang. But that was never enough for us.”

Price as a competitive advantage is unlikely to hold as the vinyl industry matures. Players who have driven sales volume with low prices and taken a pass on innovation are going to find themselves too far behind to compete in the next phase of the industry’s development, some say. “In effect, they’ve actually cut their own throats by lowering price and using the ‘me too’ window,” says Sugrue. “The bottom line is that, whether structural or U-value wise or even testing on the glass package, the vinyl folks have just pounded the product out there and lowered the price. They’re no longer going to be able to do that.”

Although some worried in years past that new composite technologies, including fiberglass, might present a significant threat to PVC windows, the lack of traction in the marketplace has most fabricators staying the course with vinyl-based frame materials. “Fiberglass is still too expensive to go mainstream,” says Mark Gallant, vice president of corporate marketing for Atrium Companies Inc. “Labor per unit is high. No one is particularly enamored with mechanically-fastened joints [and] frame and sash lineal production generally run slow.”

Even if fiberglass does see increased adoption in the future, Sugrue doesn’t see it—or any other alternative material—as a threat to vinyl’s current foothold. “It’ll force vinyl to get better,” he contends. “It’ll force the vinyl industry to get better at what we do and get better at trying to tell our story.” Veka’s Dillon agrees that fiberglass does not present a threat to PVC, but adds that “we cannot lose sight of the fact that there is always something better, and it might be right around the corner.”

With incremental improvements in appearance and performance, Apex’s Foit believes vinyl will be the market leader for years to come. “When vinyl catches up in terms of color and making the window look more elegant, I think that vinyl-based technology will ride for 25 years.” 

Marketing basics
The jury is still out as to whether or not vinyl windows will ever make it to the household brand recognition level as, say, fast food restaurants or cars or high-def televisions. Some believe that the sizeable investment required to take on a window job will create a ripe opportunity for branding efforts. “Brand names provide a comfort level to people,” says Gary Pember, Simonton's vice president of marketing. “When selecting a brand name product, you have a higher expectation because of the reputation that comes with that brand name.”

Still, others in the vinyl industry contend that regional reputations will win out over national branding initiatives. “I bet if you ask 10 people on the street, less than half of them can even name a window manufacturer,” say Gorell. “Ask the same 10 to name a car or a soup or a hotel and they will do it 10 out of 10. Our industry does not rely or function on brands.”

Whether looking for nationally-recognized brands or the reputation that comes with time and successful transactions, buyers are demanding consistency, says Sugrue. This means that fancy home show displays and expensive advertising campaigns will be no substitute for good products backed up with good service. “Homeowners, no matter what the product is, are going to start looking for the tried and true,” he says.

And where manufacturers are focusing on taking products to the next level, the dealers and distributors selling vinyl windows will likely have to retool their thinking in terms of sales and marketing approaches, says Apex’s Foit. “A lot of these Walmart mentality people are getting their come-uppance,” he says. “They’ve been selling cheap products with outdated sales techniques, and that 20th century thinking is catching up with them.”

Who you callin’ cheap?
The competition in the vinyl market and the recent standards pushing for even greater performance will give vinyl manufacturers and dealers the opportunity to stand up in front of consumers and prove, once and for all, that PVC is not the “cheap” alternative to other materials. “The vinyl industry has settled for being viewed as second best and in most cases that is simply not true,” says Window City’s Yuhas. “Vinyl windows have fewer restrictions [than wood] because of the material properties allowing more design flexibility along with tighter tolerances and increased thermal efficiency. So as performance requirements increase, the vinyl industry is better positioned to adapt its products to meet the higher requirements.”

Where some companies were too busy selling product during the boom, and consequently may be behind the curve on aesthetic features, others stayed focused on keeping vinyl products visually on par with other options such as wood. “We’ve added SDLs and a number of decorative options,” says Weathervane’s Vacher. “We offer painted windows in a wide range of colors.”

Some contend that kicking out a vinyl window as quickly as possible may not be the priority moving into the future. “I hope that our memories of 2007 [through] … possibly 2010 are not short-term,” say Joe Vespa, president of Superseal Manufacturing. “We must learn from our over-exuberance during the 1980s and 1990s to mass produce product for the sake of processing a window in 45 seconds. Our industry must take hold of being innovative and creating products that will be long lasting and energy efficient for many years.”

 

Contact Christina Lewellen, senior editor, at clewellen@glass.org.