New York – For the custom-installation industry as a whole, the impact of the steep decline in new-home construction came gradually.
First, installers who partnered mainly with production-home builders felt the sting of the housing-market bubble. Then the drop-off in housing starts began to hurt installers focused on high-end homes, whose lengthy construction cycles only delayed the inevitable. Many affluent consumers, who kept the high end of the market afloat, put off purchases or scaled back their purchases because of steep stock-market declines and financial market instability.
The housing-market’s disaster left installers and suppliers scrambling to generate new business. Installers have refocused on retrofits, diversified into light commercial, added lighting controls and energy-saving home-automation, and taken on smaller jobs to survive, among other things. Some suppliers responded by widening distribution, reducing terms and credit lines, easing minimum order requirements, discounting, and providing dealers with materials that will help them upsell in a down market.
TWICE asked a panel of industry executives to analyze the industry’s current challenges and how the industry has responded. The veterans were also asked about installation, marketing and distribution trends.
Respondents: Nine participants, who responded by email, were:
Key points: Based on their responses, these key points emerged:
--The custom industry downturn has been broad-based, with the possible exception of MDU projects and very-high-end custom homes that often involve an architect and are built over two or more years.
--A steep drop-off in high-end homes built on spec, this year’s steep stock-market decline, and the credit crunch have made this housing-market downturn different from any in recent memory.
--Installers have adopted multiple survival strategies, including a focus on retrofits, diversification into light commercial, adding lighting controls, taking on smaller jobs, networking with architects and real-estate agents, and mining prospects from opened building permits and existing housing sales. Many installers have gone out of business.
--Some suppliers have responded to the market challenge by widening their distribution, including adding on-line sales channels, lowering their accounts-payable exposure by reducing terms and credit lines, reducing inventories to cut carrying costs, easing minimum order requirements to make it easier for dealers to purchase, and offering quantity and bundled-product discounts.
--A growing share of installations incorporate iPods, networked PCs, distributed audio and video over Cat5 cables, integrated control of multiple home systems, and lighting control.
-- Wireless control of home systems is gaining greater share, but distribution of audio over wireless or powerlines is still in its infancy.
For more insight into the issues addressed by the veterans, click on the four topics below: