Volume 41,   Issue 3                             March 2006


Steady & Ready
Steady Sums it up for Business in the Industry’s Western Market


“In the not-too-distant past, 
customers would come in, place an order and were 
not too concerned with cost. Today, it’s different. People are holding on to their 
money and really thinking about how they spend it.”
—K.C. Bond

A random sampling of business owners in the industry’s western glass market revealed that overall business has been steady to pretty good of late. Despite the challenges presented in the course of an average day, Western glass shops have demonstrated that they have the leadership, tenacity and foresight it takes to give them true staying power in an environment of constant change. 

Adam Watson, a fourth generation glazier, who has worked in the family business occasionally since he was a child, describes his business over the past year as “steady.” His company, JB Glass, founded in 1985, is a small, family owned and operated full-service glass business serving the residential, commercial and automotive markets of Oregon’s greater north Willamette Valley. 

“Traditionally, the first and fourth quarter of each year is a slow pay period for us,” Watson explains. “However, we sell enough retail (i.e., mirrors, single and double strength glass, plexi-glass and glass cleaner to name a few) during this time to counterbalance this slow period.”

“Still,” continues Watson, “it’s tough to make a profit, especially with costs on the rise in virtually every aspect of our operation from raw materials to labor.” 

Business has also been steady for A & R Junior Glass & Windows. A & R Junior Glass & Windows is a full service glass company that has been serving the greater Los Angeles area for a decade.

“We are open six days a week (Monday through Saturday) and stay busy,” says Bryan Sauceda, who has been with the family-owned and operated business for the past five years. 

“Steady is a fairly accurate portrayal of business along the west coast these days,” agrees Cliff Green, vice president/general manager, Vitro America West. Green, who operates from his division office in Santa Fe Springs, Calif., oversees ACI Distribution operations on the west coast.

Regional Nonresidential Construction
Forecast of Nonresidential Contract Awards By Selected Building Types
(Millions of Square Feet)


California 2001 2002 2003 2004 2005F 2006F 2007F
Manufacturing/Warehouse 35 27 21 26 33 35 31
Office/Hotel/Institutional 73 61 61 67 70 75 73
Store/Mercantile 45 39 38 41 44 42 41

Northwest
(Washington and Oregon) 2001 2002 2003 2004 2005F 2006F 2007F

Manufacturing/Warehouse 11 7 6 8 9 11 10
Office/Hotel/Institutional 28 23 25 24 25 27 28
Store/Mercantile 15 12 14 33 14 13 14

Sources:
History: U.S. Bureau of Census; Forecast: Ducker Research Co. Inc.
The statistical information was provided by the American Architectural Manufacturers Association and the Window & Door Manufacturers Association

“I would describe the current business market in this area as ‘iffy,’” says K.C. Bond, owner of Sunset Glass Company in Bellevue, Wash. Bond is a member of a second generation of owners at Sunset Glass, a mid-sized, family-owned union shop that has been serving the area for more than a half century. 

“Business was strong from 2000 through 2004,” Bond recalls. “However, we were down in 2005 and my guess is 2006 will be about the same as last year. I think business is down because of the recent natural disasters, rising energy costs and an uncertain economy. In the not too distant past, customers would come in, place an order and were not too concerned with cost. Today, it’s different. People are holding on to their money and really thinking about how they spend it.”

Green says the new energy codes coupled with the increasing price of energy are driving up demand for more energy efficient glass types and this is good for business.

Bond also hopes that the new energy bill recently signed into law will help business pick up because customers will receive an additional incentive to change their single pane windows to double pane. While the new energy incentive is a good selling point for residential replacement windows, Sauceda doesn’t believe it will make much of an impact on his business.

For AAA Kartak Glass & Closets business has been strong. AAA Kartak Glass & Closets, which turns 50 this year, is a mid-sized glazing company serving the western Washington state area and specializing in shower doors, mirrors storefronts and closets. 

“There has been tremendous job growth and work in both the residential and commercial markets in our area,” explains company president Kevin Kartak. “Building contractors simply cannot keep up with the demand and the overflow is keeping us challenged as well.” 

“We have been very, very busy,” he continues. “We grew by 30 percent last year alone and that’s just too much in one year. Personally, I prefer ‘steady.’”

For A-1 Glass & Mirror 2005 was its best year in terms of new account growth. A-1 Glass & Mirror has been serving the greater Beaverton, Ore. area since 1956. Charlie De Kruyf, who has been in the industry for more than 20 years, has only owned the company since 2000.

“Referral work is starting to kick in, walk-in traffic is up and contractor work is increasing,” says De Kruyf. “It’s pretty good right now.”

Intermountain Glass Company in Bothell, Wash., also had a very good year last year. However, owner Don Clayton thinks 2006 is going to be a little different for his more than 25-year strong company.

“The struggling economy, high gas prices, increase in raw materials, surcharges and slowing growth in the greater Seattle area will make it more difficult to maintain the profit margins we have enjoyed in years past,” says Clayton. 

Top Trends

Being able to respond to market trends is a key ingredient in helping these shops to remain competitive.

“The biggest trend we’re seeing right now is heavy frameless shower door enclosures,” notes Bond. “We have seen such an increase in the past year, nearly triple, that we took out a separate advertisement in the yellow pages for heavy shower doors. This is one product where people like the look and are willing to pay for it.”

“Heavy shower door enclosures are definitely a very hot and competitive trend right now,” says De Kruyf, whose revenue in this segment of his business has tripled over the past six years. “We have seen an increase in customers wanting to upgrade to frameless shower doors. Years ago, customers sought out the least expensive shower door. Today, they want the frameless shower doors and are willing to pay for it. This is becoming a niche area for us and we build our own doors to help satisfy the demand.” 

“The frameless shower enclosure market in our area is going strong,” concurs Bob Gross, president of Grandview Glass & Metal, a fabricator of glass and metal products in Ontario, Calif. “Here, we’ve also seen an increase in demand for panic devices [for safety and security] on doors and our monolithic 20-minute fire-rated door.”

“Providing a stable work 
environment and steady work 
for employees should be a top priority for every business owner ... 
the reward for that effort comes later ... in the form of a productive, efficient
  workforce, higher retention, better service and future growth.” 
—Don Clayton

“Technology in automation in the fabricating and handling of glass throughout the shop floor has increased tremendously over the past five years,” Green explains. “These new advances [in technology] have allowed for more efficient and precise ways of cutting, seaming, breaking out, fabricating, tempering and insulating of glass. Processes that have traditionally taken numerous individuals to perform have been greatly streamlined.”

Diversity Makes A Difference

Most shop managers agreed that the ability to offer a wide array of products and services enables them to draw in a steady stream of business year round.

“If it has to do with flat glass we can do it—large or small—simple or complex,” Bond says. “We do a lot of specialty work in the residential market and we can get to the work we quote on right away; that’s attractive to customers. Most customers don’t want to wait six to eight weeks for a project to get started.” 

“There are very few true ‘full service’ glass businesses in the industry today,” explains Watson. “Being such has helped us to weather the ups and downs of the industry. Having a solid reputation for quality and service, a strong customer base and a high volume of repeat business also helps.” 

De Kruyf agrees. “There are so few real full service glass shops left, that being one gives us a competitive edge,” he adds. “We don’t do it all, but we compliment our specialty services with a diverse blend of other services that enables us to serve a number of markets.”

Coping with Challenges

Every industry has its share of challenges and the glass industry is no exception. It’s the ability to deal with the daily challenges successfully that helps make the difference in the success or failure of a particular business.

“Liability insurance is our greatest challenge in Washington ...
 I come to work thinking about it everyday.” 
—Kevin Kartak

“Liability insurance is our greatest challenge in Washington state,” explains Kartak. “General contractors are demanding more sophisticated insurance from their subcontractors and the insurance market is not wanting and, in some cases, not able, to provide it. The catalyst for our current insurance predicament has been a slew of attorneys from California who have had success in our state with frivolous lawsuits involving the commercial condominium market. This costs local insurance companies millions of dollars in payouts. Our state legislature did not respond kindly to our insurance industry and insurance companies have left the state in droves. Currently, we’re left with only a very few. Finding a company that wants to provide the insurance we need to obtain work in this market segment is difficult in and of itself. When I do find one who can provide the type of insurance we need to bid on the work, it’s at premium.” 

“We have one of the best safety records in the state and low claims, but it hasn’t helped; the insurance market is running scared,” continues Kartak, whose insurance rates have quadrupled over the past four years. “This issue alone has single-handedly closed down businesses and made it very difficult for anyone thinking about entering the field. I come to work thinking about it everyday.” 

“Insurance is absolutely a big problem in our state and for each and every one of us in this business,” Clayton concurs. “Liability and medical insurance and workman’s compensation are all very expensive. Medical insurance is an important benefit to employees and affordable medical insurance simply isn’t available in our state.”

State law prohibits shopping for medical insurance outside the state, but Clayton hopes lobbyists are successful in getting that law changed.

“The biggest hurdle we had to overcome recently was in converting 48 years of paper transactions to a new computer system,” says Bond. “Any company converting from paper to the computer understands it’s a tough transition, but it has made life much easier and more efficient.” 

“The high cost of worker’s compensation is definitely a thorn in everyone’s side out here [in California],” Green points out. “Our company has taken a giant leap forward in attempting to address this high cost of worker’s compensation by promoting more safety training and awareness. However, the glass industry as a whole needs to employ more preventative maintenance to compensate for these high costs.”

Western States Civilian Labor Force
(in thousands)

State December December Net       % 
          2004          2005          Change Change
California 17,630.4 18,038.1 407.7 2.3
Oregon 1858.4 1861.1 2.7 0.1
Washington 3271.4 3325.9 54.5 1.7
Source: U.S. Department of Labor, Bureau of Labor Statistics

Unemployed in the Western States
(Seasonally adjusted, in thousands)

State December December Net       % 
         2004         2005        Change Change

California 1,050.6 920.5 -130.1 -12.4
Oregon 130.2 106.6 -23.6 -18.1
Washington 193.4 176.5 -16.9 -8.8
Source: U.S. Department of Labor, Bureau of Labor Statistics

Unemployment Rates in Western States
(Seasonally adjusted, in percent)

State December December Net 
         2004         2005        Change

California 6.0 5.1 -0.9 
Oregon 7.0 5.7 -1.3 
Washington 5.9 5.3 -0.6
Source: U.S. Department of Labor, Bureau of Labor Statistics



Gross agrees. “Workman’s compensation is a big issue. While it may have come down by some 50 percent it’s still pretty high.” Gross credits Governor Arnold Schwarzenegger for helping to make a difference in this area for businesses in California.

“Another challenge from a fabricator’s standpoint is the impact on our business by offshore imports,” adds Green. “We have been feeling the effects from a variety of glass products from Asia over the recent years, and now glass processing equipment is becoming a factor, all of which influences downward pricing pressure.”

Watson says rising costs or “surcharges,” as it is commonly referred to, are, perhaps, the biggest problem impacting his ability to make a profit today. 
“The cost to manufacture glass and aluminum has risen significantly over the past several years and we are all affected by these increases.” 

“Surcharges are skyrocketing because the costs to produce the materials continue to increase,” says De Kruyf. “Just a few years back, surcharges were about 1 percent. Today, it’s up to 15 percent in some categories.”

“Oldcastle Glass explained it best,” Bond points out. “They provided us with an energy index that clearly outlined what they had to pay on raw glass and it really brought it home. From case goods to fabricated products, it’s simply costing more to do business and these costs ultimately have to be passed along to the customer. Customers often ask, ‘Why is glass so darn expensive?’ When I show them the index and explain the fact that rising energy costs play a very important role in the production of glass it makes more sense to the customer. Passing along the surcharges has nothing to do with profit, it’s just covering our costs.”

“We can’t afford to absorb the additional costs to manufacture the product any more than the manufacturers,” adds Sauceda. “Therefore, our only option is to pass those costs along to the end user—the customer.”

Another challenge for Clayton is bringing in new business and increasing sales and volume to provide steady work for his employees and remain a viable operation. “Providing a stable work environment and steady work for employees should be a top priority for every business owner,” Clayton notes. “The reward for that effort comes later and in the form of a productive, efficient workforce, higher retention, better service and future growth.” 

Reputation and Retention Matters

Most of the glass shops interviewed for this article had a long and proud history of service in their communities. All understood the value of having a well-trained, experienced and dedicated workforce and put forth the time, training and necessary resources to attract and retain good workers.

“Being an established business in the heart of downtown Bellevue and having a solid core of experienced and dedicated employees who work together as a team has made the difference in our ability to weather the extremes of the economy and the industry,” says Bond. “We have a long history in an upscale community and I think we have the best location in the state of Washington ... but no parking.”

“Finding dependable, quality people is a real problem in our industry,” explains De Kruyf. “Having been an employee and working my way from the bottom up, I have dedicated the time and resources it takes to attract and retain good employees because it is the caliber of your employees that can make or break your business.” 

“A well-trained and diversified workforce is an important aspect of our operation, especially since we are a full service company,” adds Clayton. “Our staff members have the knowledge and experience to handle just about anything that has to do with glass and/or windows and doors ... carpentry, glazing, schematics, drawings and a little bit of everything else in-between.” 

“Reputation goes a long way and it is ultimately the source of your referrals,” says Clayton. “When you stand proudly behind what you do your service and quality commitment will radiate throughout your entire organization.” 

Like Clayton and the others who were interviewed for this article, most of Sauceda’s business comes from past customers and referrals. 

“We work closely with a handful of contractors who use us for customized showers because of our quality work and competitive prices,” Sauceda explains. “Our glazing subcontractor services are on the rise due to our relationships with local contractors.” 

“You simply don’t stay in business for a half century without strong relationships and a good reputation for your products and services,” adds Kartak. 
“We have made it a point to be very active in our community,” notes Watson. “It pays off.”

Service Sells

“It’s the service that sets a company apart from the others,” Sauceda points out. “Quality products and competitive prices are important, but it’s the service that truly makes the difference.”

“Quality and customer service are vital to any business operation,” adds De Kruyf. “The only thing we have to offer above the others is service. When work is plentiful, everyone is busy. When work is limited, quality rises to the top. We have found that customers often prefer quality and service above price. We always go the extra mile for the customer because it pays off in the long run.” 

Watson agrees, providing good service is the key to keeping customers happy—and coming back.


Peggy Georgi is a contributing
 writer to USGlass magazine.


USG
© Copyright 2006 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.