Your browser is out-of-date!

Update your browser to view this website correctly. Update my browser now


Custom Industry Sees Signs Of Life

The custom-install industry, like the rest of the economy, is showing signs of life, but no one expects a hockey-stick growth curve. In fact, the custom turnaround, like the turnaround in the broader economy, will probably be more gradual than we’re comfortable with.

That’s the message I got from marketing executives during the July 23 Vend-o-palooza trade show hosted here by distributor AVAD for area installers, who were treated to a barbeque, door prizes and autographs by Yankee star Robinson Cano to lift their spirits.

“The last three months have stabilized some,” said AVAD marketing EVP Wally Whinna. AVAD’s May sales were up 8.3 percent over April, and June sales were up 6 percent over May. And July started off well, he said. He expects continued single-digit growth over the next few months, given the continued increase in phone calls from installers inquiring about product prices and availability as they put bids together.

Installers have begun to sign more contracts for future projects. Fewer installers are closing their doors. At the same time, new installation shops are popping up, run by ex-employees of installation companies that have downsized.

Still, Whinna estimates the total volume of products selling through the custom channel is down about 20 percent year over year. And that has led installers and distributors to make changes in the way they do business. More installers are expanding their retrofit business and segueing into the commercial market to offset lost sales in the residential new-construction segment. “Dealers are learning to market to previous customers, and some are doing home shows. They’re reaching out for business rather than waiting for word-of-mouth referrals,” he said.

Like Whinna, Jeff Zemanek, Lutron’s North American residential sales director, sees stirrings of life. The industry, he believes, “bottomed out in the first half,” and more installers are now getting signed proposals. Many of these installers had been living off revenues from ongoing installations whose contracts were inked before the fourth quarter of 2008. Between that quarter and the first half of 2009, he said, “very few new contracts” were signed.

Sizable revenues from the newly signed contracts, however, might not begin rolling in for some months, up to nine months if the new home is very large. These installers might not be able to survive very long unless they drum up enough retrofit business in the interim to carry them through, Zemanek said.

Although installers are signing contracts again, Zemanek estimated that 30 percent of installers are “one job away” from going out of business. “If they don’t get that job, they’ll be gone. And half of those installers probably won’t get that job.” The installer base probably shrank about 15 percent in the past year and a half, he noted.

Many dealers have begun to look at the commercial market for that next job, AVAD’s Whinna said. AVAD surveyed dealers at last year’s CEDIA Expo and found that 20 percent are either in custom or want to be. As a result, AVAD added commercial products in all of its outlets nationwide about 90 days ago, and it hosts commercial-market seminars for its residential installers.

Like many surviving installers, AVAD has adjusted to the times.