The greatest roller coaster ride for a decade
Industry landscape could change forever as companies face a crisis on one hand, and booming order books on the other, according to industry advisor Andrew Scott.
Business leaders are still reeling from the commercial effects of the coronavirus pandemic and, as the industry gets back to work, we are already counting the cost as several firms collapse or consider restructuring options.
Meanwhile, Insight Data recently reported that 12% of fabricators and installers in the UK (more than 1,000 firms) were considered high or very high risk by a credit reference agency prior to the Covid-19 lockdown.
Yet, despite the doom and gloom, many companies across the industry are seeing stronger-than-expected demand. Indeed, many installers are reporting record levels of sales leads and orders.
Analysing Google Trends paints an interesting picture: the search engine tracks demand for key search terms and, despite the pandemic and economic uncertainly, demand for home improvement products has skyrocketed. Phrases such as ‘double glazing’ are back to pre-Covid levels while ‘conservatory’ and ‘patio doors’ are at all-time record highs.
The surge in demand from consumers is feeding through the entire supply chain as installers, fabricators and component suppliers find themselves busier than expected. But is it a flash in the pan, or will it continue? This is the million-dollar question.
With entire families at home together on lockdown for months, it is no real surprise that sectors such as home improvement, gardens, and lifestyle are top of the shopping list. Combined with unusually good weather during the lockdown period, it is the perfect storm to stimulate demand.
Pessimists will point to economic data and rising unemployment, and conclude it’s simply fair weather before a storm hits.
However, several other factors are at play. In the short term, overseas holidays are off the agenda until next year. In the longer term, a shift in working patterns seems inevitable as more people work from home, creating demand for more space and better environments.
What’s more, unlike the 2008/9 recession, the current crisis was not the result of a financial crash, which means lender capital and liquidity is still available, so consumer finance has been largely unaffected.
Of course, a buoyant market doesn’t mean all companies succeed equally. The lockdown period has taken its toll, and despite government support and initiatives many companies across the industry are feeling the pressure.
We may be looking at a watershed moment for the industry.
Those companies in a strong financial position, and who invest in their brand and marketing, will capture market share and could see significant growth.
Many of these organisations are already re-evaluating their business and marketing strategy. Digital transformation and routes to market, including D2C (direct to consumer) have moved up the agenda, while several companies are already actively seeking acquisitions.
Conversely, we can expect to see significant collateral damage with companies that are highly geared, lack investment, or have weak marketing or digital presence. Size won’t matter; there will be casualties in both large and small companies across the supply-chain.
For such companies, urgent action is required; either to recapitalise through debt restructuring, bring in an equity investor or, in the case for many businesses, sell the company before it is too late.
And there is no shortage of buyers. Indeed, Kevin Ellis, chairman of PwC predicts a boom in M&A activity in the months ahead.
Of course, even financially strong companies can fail. According to BrandZ, the world’s leading organisation for tracking global brands and their brand equity, it is the organisations with the strongest brands that bounce back fastest and accelerate ahead of others during a recession.
Consumers gravitate towards brands they recognise and trust, especially in uncertain times. This means companies with strong brands that continue marketing typically gain market share at the expense of weaker brands.
A word of caution though: while an acceleration towards digital is inevitable, few brands are built entirely online. Indeed, the online giant Amazon is also one of the biggest advertisers on ITV.
The glass and glazing industry is on a roller coaster ride. For some, they will want to jump off and dive for cover. For others, they’ll hold on for dear life. But for a few, it is the start of a new journey as opportunities present themselves.
Having the right business and marketing strategy will be crucial as our industry faces rapid transformation.