Volume 8, Issue 2, March-April  2004

 

Invasion of the Manufacturers
How Tint Shops are Handling This New Dynamic

Corey Kaesar, owner of All-Pro Film, says it hasn’t happened to him, but he sees how it could. Kaesar, a dealer based in Houston, sees a scenario where he may try to approach the regional managers of Home Depot, for instance, in an effort to apply film to their local stores. But after all of this work, a film manufacturer simply calls the chain’s glazing contractor and gets the work. And Kaesar is left out in the cold.

Unfortunately, Kaesar’s story is not just some far-fetched tale of gloom and doom, like a bad movie where aliens attack earth. As a number of dealers and distributors around the country can attest, the manufacturers are indeed moving into the world of film application. And a lot of dealers and distributors aren’t too happy about it.
“It’s shortsighted and it’s eventually going to add confusion to the marketplace,” says Jack Mundy, owner of Ener-Gard Energy Products in Burlington, Ontario. “For the manufacturer to keep the integrity of the supply chain, it must go through the distributor and dealer.”

While most dealers and distributors agree with Mundy, they certainly aren’t unanimous. Many can see both the positives and negatives of manufacturers bidding on retail jobs. They know the process, which has evolved over the past 20 years, can pull jobs away from them. And, when it provides them with business, it can also leave them without adequate pay to cover their costs. Some say there is an upside to subcontracting for manufacturers, namely they do get some work and they can establish better relationships with their suppliers.

The Start of a Trend 
The process of a manufacturer bidding on a retail film job has actually been around for a long time, according to George Lewis, owner of Performance Films Distribution in Columbus, Ohio. He says some manufacturers have been bidding for retail jobs since the early 1980s. 

But things really did not take off until the embassy bombings in Tanzania and Nairobi in 1999. Then the government started bidding out security film application jobs at overseas embassies. The manufacturers were the only ones that could bid and staff these jobs. So they did them—without complaints from distributors and dealers. Then September 11, 2001, happened and the government rushed to have film installations done on high-profile and high-security areas around the country. As they did with the embassies, the manufacturers jumped in, bidding on these application jobs.

“The real wave of security funding started after 9/11,” says Chris Weinhardt, marketing director for Enpro Distributing in Houston. 

Now, says Calvin Hill, owner of Gila Distributing in Canton, Ga., manufacturers have dove even further into the retail level.

“Because of small shops not paying their bills on time, manufacturers are selling direct,” he says. “They are selling to the customer and not to the dealer.”

“When one or two started selling direct, the others had to decide if they wanted to compete or hold to their ethics and not sell film directly,” Hill says. “It became a double-edged sword.” 

Most manufacturers are bidding direct, but only four—Film Technologies International (FTI) in St. Petersburg, Fla., Madico, Inc., in Woburn, Mass., Bekaert Specialty Films (BSF) in Clearwater, Fla., and CPFilms Inc. in Martinsville, Va.—would field questions for this story. BSF says it gets involved in the bidding process when guidelines disqualify dealers or make it hard for them to compete. Like many manufacturers, it then subcontracts the jobs through its dealer network. FTI says it forwards leads to its dealers and does not bid (except for security jobs). Madico says it bids large jobs, sends them to its dealer network and does not profit from the installations. CPFilms says it only bids on jobs under certain circumstances: when dealers don’t have qualifications to bid a project (it bids and uses them as subcontractors), only national accounts when a customers has many locations and needs one point of contact, when a dealer does not have cash flow to bid a project and when the dealer asks it to bid.

After a manufacturer wins a flat glass or security bid, it will subcontract the film application out to one of its loyal dealers or one that has qualified to do the installation by completing certain courses. In regular jobs, where manufacturers bid for office or commercial space to a general contractor, laborers—rather than film applicators—may get the call. 

While not happy with it, dealers have gotten used to manufacturers bidding on flat glass and security jobs. But lately they think they could lose automotive dealers as they see manufacturers courting that segment of the business—a mainstay of many dealers. Some companies are offering pre-shrunk, pre-cut film or film and cutting machines to auto dealers. The dealers can then apply this to cars, both new and used.

“They [the car dealers] can hire an employee to apply film,” Hill says. “Because of the computer-cut systems, it’s not difficult to learn how to apply film. You can train a person much faster than you used to be able to.”
Others don’t think the kits were designed to help only dealers.

“The kits are not meant to target auto dealerships, but the dealers who currently service dealerships and are faced with the same models every day,” says Paul Panarisi, product manager, window films for Madico Inc., which is selling pre-cut, pre-shrunk automotive film.

This movement into all segments of the industry has many dealers screaming, “No Fair!” How can they, as small business often with fewer than five employees, compete with large corporations that manufacture film and sell it around the world?

“If the bidding is at the local level, it becomes unfair competition,” Hill says. “How can a tinter go in there and fight against a manufacturer? There is nothing he can really do. It’s sad for the whole industry.”

Low Balling
Many dealers say they would be open to having manufacturers bid on jobs and subcontracting them out if there was enough money to do a quality installation. But this is often not the case.

“When it comes to commercial jobs, the manufacturers are bidding at the raw manufacturing costs,” Hill says. “We are seeing large jobs sold at prices less than our people would charge for labor alone.” 

Kaesar estimates that a commercial installation that would normally cost as much as $4.50 or even $5.50 per square foot of film is bid for as low as $2 to $2.25 by the manufacturers.

“There is no room for anyone to make money,” he says. “Even if a manufacturer calls us to do those jobs, they are still not worth doing.”

Some manufacturers see this as well.

“I will say that the manufacturers are cutting installation pricing too low,” says Bill Stewart, national sales manager for FTI. “That hurts the dealers that are giving a competitive bid and creates some animosity to the bidding manufacturers by competing dealers.”

A number of dealers say the exact same thing.

“They are basically just paying us for labor,” says Steve Clark, owner of Window Innovations in Sam Ramon, Calif. “Since we aren’t doing bids [as dealers], we can’t factor in the costs to pay the installers and everything else we need to do.”

And those costs are significant. There is overhead, costs for feeding and housing employees if they must travel and liability insurance. Each shop must also carry liability insurance. And the bigger job, the bigger the amount of insurance.

“One job like that can be two times the sales, which can be two times the general liability,” Kaesar says. 

Even if they can cover these costs, Zoilo Centano, owner of Wintech in Costa Mesa, Calif., says there is not enough to properly supervise his film applicators who do these bigger jobs for manufacturers.

“They want installers to do these jobs for us, but they don’t give me enough money to even send a supervisor out to be a liaison between the general contractors and film applicators,” Centano says. “The supervisor coordinates the efforts and makes sure everyone is working properly.”

Most dealers say these low prices are forcing them to cut somewhere, whether it is on supervisors or quality of installers. And, with the importance of some of these jobs, it can only hurt a dealer to cut corners.

“One company wanted me, with my contractor’s license, to take the liability of doing a police station job at 75 cents a square foot,” Centano says. “I walked from the job. I did not want the liability.”

Eventually, the government begins to expect these sorts of discounts across the board.

“It [the government] is getting window film and attachment systems for about half of what it should be paying,” Centano says. “This is primarily due to the over zealousness of the manufacturers.”

While dealers complain that manufacturers undercut them on price, they also admit that they can’t really do many of these bids themselves.

“Window film retailers don’t have the time to bid these huge jobs,” Clark says. “If you look at the big picture, these may have been jobs out of your reach anyway.”

Others agree.

“Typically these [the jobs manufacturers bid] are government-related jobs or national chains where the account has hundreds of thousands of locations and requires the manufacturer to coordinate and complete the jobs,” says Larry Constantin, architectural sales manager for BSF. “More and more companies are focusing on efficiency, so they naturally request that a film manufacturer handle the administration and coordination of these 
installations.”

Job Security
Usually the jobs that cause the most headaches are government security installations. They require dealers to partner with large contractors or, even worse, tackle the stringent General Services Administration (GSA) certification process. Put these together and many small dealers want to stay away from these jobs altogether.
“For the small dealers, there can be problems,” Lewis says. “They don’t want to deal with the paperwork and bonding.”

Then there are other issues. In this day, where dealer loyalty seems fleeting, a number of dealers surprisingly say they do the manufacturer-bidded jobs for other reasons.

“We would still do a lot of the projects [despite cost issues], because it gives you a chance to start relationships with manufacturers,” Clark says.

Others happily do these jobs and say they get them at a high enough price to stay profitable. One of these people is Fern Stone, marketing manager for Window Tint America in Clearwater, Fla. Both of the manufacturers her company works with send her residential and large commercial jobs.

“We have good relationships with our suppliers,” she says.

Then there’s the simple pride issue. While Kaesar is uncomfortable about the idea of manufacturers competing with him for work, he would like to see his manufacturer’s film on large, prestigious buildings.

“We want our manufacturer’s to hang their film,” he says. “We want their film to advertise for us, but we don’t want them to undercut us.”

A Matter of Trust
Bidding on Film Jobs

s dealers, distributors and manufacturers continue grapple over how to bid on local film jobs, it’s readily apparent that there is no easy solution to this problem. While all sides admit that large jobs dealing with the government, like military bases, or national retail chains, like Best Buy or Office Depot, should probably go through manufacturers, the dispute will be probably still revolve around any smaller, more localized jobs and how all jobs are priced. 

To many, manufacturers going into this market may permanently upset the balance of power in the industry, opening up what Lewis says could be a “Pandora’s box” that gives them ultimate control over what dealers get which jobs. Others share this concern.

“When anyone in the industry oversteps the bounds, it eventually weakens the entire industry,” Centano says. 
The question is, will the manufacturers who are more aggressive in pursuing these jobs eventually alienate their dealer base? It seems that unless they pay a fair rate for this film installation, the answer is more than likely yes, according to distributors. But so far, dealers have not said this. Even those like Centano and Kaesar are careful not to be too critical of manufacturer bidding because they have good relationships with their suppliers. Both say they are criticizing the process in general and not their suppliers in particular.

“My suppliers we’re instrumental in getting me started,” Kaesar says. “They take care of us.”

But if the dealers begin to grow vocal about manufacturers bidding on retail jobs without providing adequate compensation, no one knows what will happen for sure.

“Everyone should do what they best,” Lewis says. “The manufacturers should stay in the manufacturing game, the distributors should distribute and the dealers should sell the film. If the manufacturers continue into the other parts of the business, they may win the short game by getting more initial business, but lose the long game by alienating their dealers. Eventually, the dealers are going to wonder why they should trust the manufacturer.”


WINDOW FILM

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