Volume 6, Issue 3, May - June 2002
Weathering the Storm
Film Industry Endures Economic Hardships
by Leslie Shaver
“You have got to get our there and hustle. My salesmen are out there cold-calling.”
—Eddie Russell, Sunset Glass Tinting
Stock prices were soaring, employees at high-tech firms were rolling in cash and almost everyone had money to spend, but “it” was in the back of everyone’s mind. By the end of 2000 it happened—stock prices crashed and the dreaded economic downturn on everyone’s mind became a reality. In March 2001, the United States officially fell into recession (though this would not come to light until later in the year). But this turned out to be a minor blip compared to what would happen in September, when deadly terrorist attacks brought the nation’s economy to a halt.
Like most industries, the window film business was not immune to these events and their side effects. For better or worse, the industry felt the ripples from 9/11 and the recession.
Now, as 2002 swings into gear and the nation recovers, Window Film magazine looks at exactly how 2002 has affected the film industry.
The “R” Word
To most analysts, the recession of 2001 was mild one. While the economy definitely slipped from its blistering pace of the late ‘90s, it did not hit the depths of recessions in the 1970s and early 1990s. While most in the film industry agreed that the recession of 2001 was mild, that does mean it did not affect dealers, distributors and manufacturers.
George Lewis, owner of Performance Films Distribution in Dublin, Ohio, noticed that his business began to slide around November 2000 after he set records earlier in the year.
Customers “were watching the election on the news and no one came in for film,” he said.
It did not help that many dealers were also resting on their laurels at this time. “Everybody had a great year and they relaxed,” he said. “Our business hit a brick wall, too.”
In 2001, Pete Santoro, owner of GIS Distributing in Kansas City, Mo., noticed a drop-off in the amount of film sold for flat glass jobs. “There were not as many large or medium commercial flat glass jobs done,” he said. “It was down for the year. Businesses put off flat glass jobs when the economy was shaky.”
Eddy Russell, owner of Sunset Glass Tinting in Houston, agreed.
“I think that people were not leasing as much space,” Russell said. “And when that happens, building managers don’t buy security film.”
This is because film is not an essential product to many people.
“Some of our dealers told us that window film was one of the ‘luxuries’ that home- and business-owners who were hit by the recession tended to forgo,” said Jeffrey Plummer, vice president of sales and marketing for Bekaert Specialty Films LLC of Clearwater, Fla.
“Because of this, many of our dealers had to work harder to keep their sales going,” Plummer said.
Dealers said some of the same things.
“People are reluctant to spend money on their homes when the economy is poor,” Russell said. “And there were not as many people coming down from Dallas and buying big houses,” he said.
One reason for this may be the highly publicized collapse of Enron. Russell felt the effects of the energy giant’s collapse on a number of levels. He was contracted to put film in every window of the Enron Building. While he says his company is still putting some film in the building, things have dropped off.
The collapse of Enron also put a dark cloud over the whole city of Houston.
“Enron was a huge employer and those guys [Enron employees] were making big money,” he said. “Now they are unemployed—there are 4,000 out of work. It’s a tough time right now.”
While some film dealers did feel the effects of the recession, no one interviewed for this article had their businesses threatened by the recession alone.
Most of these dealers attribute this success to one thing—increased exposure. The best example of this may be Lewis. Once he noticed business dropping off after the 2000 election, Lewis renewed his commitment to sales by hiring three more salespeople.
“Instead of waiting for phone calls, we went out and got business,” he said.
This strategy proved to very successful. His sales were up 25 percent in 2001.
Calvin Hill, owner of Gila Distributing in Canton, Ga., thinks dealers would be well- served by following Lewis’s model.
“In general, dealers that sat on their rear ends and waited for the phone to ring did poorly [during the recession],” he said. “The dealers who did targeted marketing were very successful.”
This opinion was not only heard from distributors.
“It [the recession] has not affected our business,” said Steve Pesce, owner of NY Window Film in Long Island, N.Y. “I attribute this to an increased advertising budget. Our competitors contracted their budgets and we have taken advantage of this.”
Even Russell, whose market suffered from the Enron collapse, is trying to get his company’s name out there even more.
“You have got to get out there and hustle,” he said. “My salesmen are out there cold- calling. We are pounding the pavement.”
While the September 11terrorist attacks led to a surge in security film, everywhere, even in malls, it first brought the economy to a temporary halt.
Since September 11
While the recession could be considered “mild,” what happened on 9/11 certainly was not. The terror attacks brought the nation to a halt.
“It was simply not possible for people to worry about getting a car or home tinted when compared to the horrific loss of life and uncertainty that followed,” Plummer said. “Though we service literally several thousand dealers from our 15 company-owned distribution centers, it was as though someone had turned off a switch for several weeks in mid-September as our dealers and their customers struggled to come out of the shock of the attacks on our country.”
Because of geography, Pesce in New York City, and Tommy Silva, who owns T & T Tinting Specialists, a dealership in Honolulu, felt the effects of 9/11 more than most.
Pesce felt repercussions because of his proximity to the World Trade Towers; Silva’s case is a little different.
Once the planes were grounded on September 11, the tourism-driven economy in Hawaii came to a halt.
“It [the Hawaiian economy] did take a dive after 9/11,” Silva said. “Nobody wanted to fly. The trickle down was quick. The hotels in Waikiki were at 12- to 15-percent occupancy and closing towers. The cruise ships went out of business and declared bankruptcy.”
This left more than 37,000 citizens of Waikiki out of work.
“People were not spending,” Silva said.
With his customers in the hotel industry canceling or postponing jobs and customers staying out of his shop, Silva had to improvise to keep his business afloat. Fortunately, he did not have to lay off employees to do this.
“We changed our pay and commission structure and re-negotiated our lease,” Silva said. “We also took people from the automotive side and moved them over to commercial and residential.”
Unlike, Pesce and Russell, economic realities forced Silva to slash his advertising budget.
“We pulled back our advertising. It was not worth spending the money when people were not listening,” he said.
Paul Porch, owner of Preferred Window Tinting in New Orleans, can empathize with Silva. New Orleans, a city that is fueled by tourism, also slowed down after the attacks.
“Our restaurant and hotel customers did not want to spend money,” he said. “The hotel industry is probably about 15 percent of our business.”
Keeping the Cash Flowing
Since September 11, many window-film businesses have worked 24-7 with large crews to apply security film to all those who now are requesting it.
While Pesce was much closer to the terrorist attacks than Porch or Silva, the effects were not as great on his business. Once the attacks happened, his biggest problems were with cash flow.
“Everybody stopped paying after 9/11,” he said. “We learned to be tighter on receivables than we had been, but we had a backlog that carried us through October, November and December.”
Eventually, Pesce did collect his receivables and business came back around for Porch and even Silva.
“The number of phone calls is picking back up,” Silva said. “Tax-return season has given people more money to spend.”
Like many film dealers, Pesce, Porch and Silva are getting more inquiries about security film after 9/11.
“We have begun branching out into other markets—heavy-commercial, schools and government facilities,” Porch said. “We saw the writing on the wall. It’s a strong opportunity right now. A lot of projects are out there for bid because the government is really looking at safety and security.”
Silva experienced some of the same.
“The security film part of the business got busier,” he said. “Military contracts picked up. They found money that they had not had in the past.”
Being in New York City, Pesce also received his share of phone calls after 9/11.
“The week after 9/11, we received 20 calls for security film,” he said. “We closed two immediately and more since then.”
Pesce says he is working with the security directors of some large corporations and they seem to be enthusiastic about the potential of security film.
“Its not a question of when it [terrorism] is over, it is a question of will it happen again,” he said.
But not everyone sees this happening.
Dave McFadyen, president of American Window Tinting in Denver, has not noticed a spike in his company’s security film sales after 9/11.
“There are a couple of Air Force bases installing film,” McFadyen said, “but businesses still think since they are in the middle of country, no one will get them. Hopefully, they are right.”
Others have noticed this trend.
“People think it was an isolated incident,” said Rob Martin, North American sales agent for Hanita Films of Israel. “They minimize it or blow it off because it is something that happens in a population center.”
One final unlikely effect 9/11 had on the industry may have been on the auto film side. After 9/11, many car manufacturers introduced low financing deals, which brought consumers back in their showrooms. Conventional wisdom says this is good for the film industry.
“Due to the mild winter and low interest rates, the automotive portion of the film industry has been solid,” Santoro said.
“Our auto-tinting dealers tell us that the ‘zero percent financing’ helped to keep the new car work flowing,” Plummer said.
Despite the economy, crews like this one remain busy. Most expect the economy to recover completely in 2002.
Without another major terrorist attack or an unexpected dip in the economy, most people interviewed for this story think their businesses will have better years in 2002 than they did in 2001.
“People who were waiting [to buy film] in the fourth quarter are now calling,” McFadyen said. “They are now more confident that they will have a job.”
This is the trend in other segments, as well.
“This year the commercial business has come back,” Santoro said. “Companies might put off film work for a little while, but they eventually do it. Commercial tinting has at least partially been up this year because businesses put off tinting when the economy was shaky.”
“Many of our dealers involved with commercial window tinting say their backlogs are growing again,” Plummer said.
Now that the customers are coming back, a number of industry professionals think that those companies that kept their names out there during bad times will profit.
“People who did well when the economy was bad will be reaping big rewards,” Hill said. “People who sat around will get business as the weather gets warmer, but their business will not increase at the rate of those who have gotten their names out there.”
Dealers can also help themselves by working with other members of the industry, according to Plummer.
“Simply putting in a little more time trying to grow another part of the business, such as expanding into residential tinting, can be very profitable,” he said. “I would encourage all dealers, regardless of who they buy their films from, to tap into their supplier for advice and utilize the excellent support materials that are available.”
Like most other industries, only the fittest survive in the film business. And when a year like 2001 happens, it is easy to see who those are.
“A lot of people have no desire to grow their businesses beyond a certain point,” Hill said. “This recession shook a lot of those people out. This happens in all industries, but perhaps even more so in ours.” WF
Leslie Shaver is a contributing editor for Window Film magazine.
© Copyright 2002 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.