Seeing Success in Diversification
American Vision Windows started selling windows, but the business has evolved in recent years, diversifying with the addition of a broad array of product lines. The expansion in product offerings, however, hasn’t changed the company’s focus—American Vision remains a home improvement company, working with owners to increase the energy efficiency and value of their homes.
|From left, American Vision's Chris Perez, vice president, Bill Herren, CEO, and Al Alfieri, president.|
The Simi Valley, Calif.-based company—with two other California locations, in Orange and Santa Clara, and one location in Mesa, Ariz.—provides an array of products, including windows, window fashions, texture coatings, entry doors, patio doors and home automation. Its more recent additions include garage doors and a solar business. “We are dealing with home improvement customers, and windows and doors are part of a larger project,” says CEO Bill Herren, who founded American Vision with his wife Kathleen in 1999.
“We’re working to revolutionize home improvement, while creating jobs and opportunity,” adds Al Alfieri, president. The company now operates three distinct divisions in addition to its windows business: American Vision Solar, American Vision Garages, and American Vision Interiors, for window coverings and wall treatments.
“We are providing our home improvement customers with something they need,” says Alfieri. “We’ve diversified our product mix in a way that benefits them.”
|American Vision’s Simi Valley, Calif., location|
The 2008 housing crash was the catalyst for much of American Vision’s product diversification. “Everything changed overnight,” Herren says. “We knew the home improvement business would take a hit, but I don’t think any could have predicted a bottom like we have seen. The housing industry is fundamentally in a depression.” In order to make it through the down economy, companies needed to redefine themselves, he continues. “The companies of tomorrow need to find new ways to survive. Garage doors, solar, mini blinds—they are helping us do it.”
The addition of the new products was a natural move for the company—many customers looking to replace their windows are looking to improve their home in other ways. “When you’re installing new windows, you’re ripping out shutters and blinds. Customers will ask you if you offer those products as well,” Herren says. “We can introduce options, and discount products that are tied together.”
|A house built within American Vision's Simi Valley showroom, above, displays many of its products. A variety of its window coverings, below, are showcased on the facility's exterior windows.|
PRODUCT DIVERSITY CHALLENGES
The company’s vast product line is on display at its large showroom in Simi Valley. Upon entering the large warehouse space, potential customers first come to a house, built within the showroom to display windows, doors and other building products, from the smallest detail to the largest. “Customers can choose the window they want, and see actual examples of installation,” Herren says.
Visitors to the showroom pass walls of installed windows, racks of exterior doors, several examples of full garage doors, and a long line of the company’s interior window covering options, installed over the actual exterior windows to the showroom. American Vision’s line of non-window products offers numerous growth opportunities for the company. “These products make a valuable percentage of our revenue. I don’t know where we would be without it,” Herren reports.
He emphasizes, however, that, despite the diversification the company’s main focus, and main revenue stream, remains on windows. “We are not a window treatment company. We are not a solar company. American Vision is still a window company,” Herren notes. “If you get caught up being all things for all people, your window sales will go down.”
The company maintains its window focus while maximizing the success of its subsidiary product divisions by focusing on the customer. The biggest obstacle for American Vision’s diverse product platform is ensuring customers aren’t overwhelmed, Herren says. “We train our sales representatives. We need to educate them to ensure they don’t overwhelm the customer. Some customers just want to do windows, and you can’t risk the window sale by pushing other products. It’s all learning how to present it to the customers.”
|Garage doors are one of the more recent additions to the American Vision product line.|
In addition to customer considerations, the company had to consider its new vendors. While the company has strong vendor relationships with its window and door suppliers, company officials had their work cut out for them when cultivating new vendor relationships for its new product lines. “A major part of our brand is our customer care. Our repeats and referrals are in the 50 percent range, which demonstrates that,” says Alfieri. “We had to find vendors—stakeholders, we like to call them—that have the same principles we do.”
“Our customers saved us during the recession. They are crusading for us,” Herren says. Customers have the ability to make or break a company, and American Vision seeks vendors that have the same commitment to the customer.
The company conducts interviews with potential vendors, and will terminate vendor relationships if customer care is not up to American Vision’s level. “In addition to [product] quality and workmanship, we need to establish vendor relationships that benefit the customers,” says Chris Perez, vice president, American Vision Solar.
While American Vision Solar fits into the company’s overall home improvement mission, the division does represent a greater departure from the company’s window focus, and required additional education and training for employees. Not only did American Vision need to train its installers and sales representatives about the new products, the company needed to train an administrative staff to handle items like rebates and agreements with the utility companies. In 2008, American Vision began pursuing solar. By 2009, the division was up and running, “with the product knowledge and vendor relationships and special licenses,” Herren says.
The news during the last year of vanishing solar subsidies has some in the industry concerned. However, “solar is a viable thing for our customers,” Herren says. “Our solar division is based in the belief that everything is moving toward alternative energy.” Homeowners still have access to tax rebates and incentives—California, for example, offers the California Solar Initiative that will provide incentives through 2016 for existing residential homes. Even without rebates or subsidies, the energy cost savings make it “a wise decision for some homeowners,” Perez says. “In both scenarios, homeowners are going to be making money.”
“If there is one thing we know, it’s that the cost of electricity is going up, and will continue to go up,” Herren says. “You’re not going to get rich quick with your solar panels, but you are going to get rich steadily. … It’s basic math.”
Adding solar to a home “makes you into a small business,” says Herren, who installed a solar array on his family home. “You own a utility company at home—my little business always makes money. … With the cost of electricity on the rise, your energy savings are going to go up, because [the solar system] is never not going to produce energy.”
Solar isn’t for every customer—their home needs to be oriented toward the sun, and they need to have the correct utility demands. “The type of customer matters,” Herren says. “We’re typically looking at higher usage customers who will see the maximum savings. For them, solar is a great deal.”
Two solar programs are available for customers: a lease program, or a power purchase agreement (PPA). With a lease program, customers pay a monthly lease for the solar array, along with any additional electricity required beyond what the solar array provides. With a PPA, homeowners pay a flat rate for the power their solar system generates. “The owner leases the equipment on the roof. It’s easier for many owners, as they are not facing upfront costs,” Perez says. Both the lease and the PPA can be transferred to a new homeowner, if the customer sells the house.
|Windows, on display at the Simi Valley showroom, still remain a mainstay of American Vision's business.|
About half of the American Vision’s business remains in windows, he reports, but the new product divisions align with American Vision’s mission of increasing home performance and value. “The mantra for California and the rest of the country is, ‘how can we shrink operating costs [of buildings,’” explains Perez. “Solar, LED lights, energy efficiency windows are all part of the solution.”
Diversifying into these new businesses have kept employees on the job, Herren also emphasizes. “These divisions support our company philosophy. If a customer is interested in raising the value of their home, one product might be solar—another might be a new garage door,” he says. “But most importantly, these divisions are creating jobs in a recession. Our revenue may be staying the same, but we are keeping jobs or creating jobs.”