IBS is Like Anything
It’s What you Make of It
by Michael Collins
The International Builders’ Show (IBS) always represents
an interesting microcosm of the overall building products industry, and
this year was no exception. While the atmosphere seemed somewhat more
upbeat than last year, no one is claiming that we are on our way back
to 2 million housing starts. My conversations with door and window manufacturers
revealed a primarily optimistic mood. Like many of the manufacturing businesses
in this industry, the show has “right-sized” in response to prevailing
conditions. Many manufacturers have shuttered excess production capacity
and reduced their operations into the smallest, most efficient amount
of space. The show, too, has come to occupy a much smaller footprint as
well over the past several years. While this certainly makes the show
more manageable to navigate, it is a reflection that many small and medium
companies have been acquired or have gone out of business.
Some Notable Absences
There were numerous large, perennial participants that chose not to exhibit.
That is always a regrettable, if understandable, decision for companies
to make. It would appear that for a manufacturer to take a smaller booth
but maintain a meaningful presence at the show sends a much better message
than pulling out of the show altogether. The risk-reward payoff may not
be there on a large double-decker booth, but surely a smaller booth could
be made to create an acceptable level of value. A few small- and medium-sized
competitors of the larger companies that did not exhibit remarked that
the absence of the larger companies hurts them, rather than helping eliminate
competition. Their presence at the show creates an additional amount of
attendees that is likely to pass by the booths of a variety of door and
to say, companies are very cautious when it comes to new product development
in a downturn like this."
Lemonade out of Lemons
The final important way in which I believe the show is like the overall
industry is that, to a large extent, they are both what you make of them.
In reaching out to a wide variety of door and window companies to set
meetings at the show, it was very interesting to get their feedback regarding
the current market. Groups that shared their outlook on the market were
roughly evenly split between positive and negative predictions. Numerous
groups reported that they were coming out of a strong 2012 and were optimistic
that 2011 would be another growth year, albeit possibly at a slower pace.
Many companies that struggled in 2011 have a hard time believing that
anyone prospered last year. However, many companies were able to push
on a variety of levels and have a strong year. Some of these proactive
steps included Business Management 101 tactics, such as geographic expansion,
bringing out products that customers are unable to locate elsewhere and
adding highly productive dealers, distributors and manufacturers’ representatives.
Needless to say, companies are very cautious when it comes to new product
development in a downturn like this. However, the safest new product development
available is that which is driven by requests from customers. In most
cases in this industry, dealer and distributor customers are the ones
with the eyes and ears that reach through to the true end consumer.
When our company first entered this industry segment, we were surprised
at the number of manufacturers that were unsure of the split in their
revenues that were driven, for example, by new construction or repair
and remodeling. A focused series of calls to good customers with the question
of what they are hearing that their customers need can only produce positive
results for a company. Perhaps the need won’t be a new product, but faster
delivery or more product configuration options. The point is that the
companies that reported at the Builders’ Show that they are doing well
in this market are those that ask the right questions of their customers
and find new and efficient ways to capitalize on what they learn.
Michael Collins is an investment banker with Jordan Knauff and
Co. He specializes in mergers and acquisitions in the door and window
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