Volume 8, Issue 6, November/December 2004
Price Wars: Dealers Finding Stiffer
Competition in Many Places
by Leslie Shaver
Dan’s Melkowits’ universe was a lot quieter two years ago. He was one of a few film dealers in Ocean and Monmouth Counties, N.J.—about a 45-minute drive from New York City. Many of his customers had high-powered jobs in the city and could afford to spend good money to get their windows filmed. At that time, Melkowits earned about $6.50 to $7.50 per square foot for a window film application.
But times have changed.
A flood of new competition streaming into the area threatens the existence of Melkowitz’s business, PDQ Window Tinting. These new dealers have come in offering to do film jobs for as little as $4 a square foot. Not only has this taken Melkowits market, but it’s also forced him and the other shops in his area to adjust their prices.
“The competition is low-balling us,” Melkowits said. “Everyone is out to cut everyone else’s throat and no one really cares. It’s been a problem for two years and now it’s just preposterous.”
Melkowits isn’t the only one facing this problem. Talk to film applicators in Florida, California and many other places around the country and they will tell you the same thing: prices have dropped. In some cases, a new crop of film applicators have pushed their way into many markets around the country by charging low prices. In other cases, established companies have moved into new places, offering film at lower prices than the local companies. When this happens, a film dealer only has a few options: cut prices, find new ways to differentiate itself or perish. So far it seems most successful applicators have chosen the second course, but that still doesn’t guarantee success.
If anyone can sympathize with Melkowits, it’s Rocky Burcham, owner of Solar Control Glass Tinting in San Ramon, Calif. When Burcham started his company back in 1986, he was one of three window film dealers in the Bay Area. Since that time, competitors have moved into the area. Now six other companies are established there. Still, Burcham managed to make a good profit on installations, charging $5 per square foot for dual reflective film, $8 or $9 per square foot for ceramic film and $12 per square foot for high performance film.
Things changed when a Los Angeles-based film dealership started advertising in Bay Area phone books.
“They’re looking at new construction,” Burcham said. “The only new construction is going up in Northern California.”
The Los Angeles-based company usually keeps an owner, a sales person and an installer in the Bay Area, according to Burcham. When it goes on large marketing campaigns, it can bring cheaper workers up from Los Angeles.
“When they go door to door and do big marketing campaigns, they will bring other guys up [from Southern California],” he said. “Then they get a big building and have ten guys working on it.”
Burcham suspects the company rents apartments to house workers
“Because workers are so cheap in the valley (near San Diego and Los Angeles), they can haul the workers up here, house them in the summer and charge real cheap prices,” Burcham said. “Then they put them in one apartment and take them back out in the winter.”
Burcham could lower his prices, but there’s a problem: supporting a full-time work force is very pricey in the Bay Area, which is one of the most expensive places to live in the country. To pay for his employees’ living wages, Burcham must charge higher prices. So, when outsiders come in with lower overhead and charging lower prices, Burcham is at a severe disadvantage.
“When it’s a big project or a big building, they can bid really low because their labor is so low,” he said. “We can’t do that because our guys live here. That’s what the difference is. We need our guys everyday, even in the wintertime.”
Dealing With Newcomers
In Florida, film dealers there are facing problems that Burcham and Melkowits know well. David Dewer with The EnerGsave Company in Miami said his company has had to cut its prices about 10 percent over the past half year because of an influx of new dealers streaming into the market.
“A lot of people use second-quality films,” he said. “That results in them offering a lower price.”
Vincent Ceraulo, owner of Southern Glass Protection Inc. in Sunrise, Fla., also sees a lot of these people flooding his market.
“There’s a lot of do-it-yourself guys—the owner-operators with the truck and the cell phone,” he said. “You get a lot of guys using substandard films and not educating consumers. They give the least amount of explanation as possible to customers about what they’re installing and what they’re doing.”
Ceraulo thinks the sluggish economy may be to blame for the increased competition. The theory: people get laid off or fed up with working for others, and they look for opportunities where they can control their own fate. With film offering low cash barriers to entry, it can be an intriguing option for someone looking to start his own business.
Burcham thinks this theory is plausible.
“There’s been a large influx of start-up guys,” he said. “I don’t know whether you blame it on the economy or maybe more people are pushing into film because it’s so easy to get into.”
Even though Melkowits saw a lot of workers lose their jobs in the New York metro area, he insists this wasn’t a reason for the influx of new installers in his area. Instead he thinks the affluence in his area is the draw for new installers.
Others share this opinion.
“There are a lot of high-end homes around Dan,” said Bob Aresenault, sales manager for SGT Distribution in Saugus, Mass., which is Melkowits’s distributor.
“There’s a beach and shoreline. It makes sense [that other dealers would come into that market].”
If new dealers aren’t moving into these areas from other regions, the suspicion among many film dealers is that employees at local film companies see a chance to make good money and start their own companies.
But this doesn’t automatically mean they are good businessmen, said Jim Rassmussen, owner of Nevada Window Tinting in Las Vegas.
“Tinters think they are businessmen,” he said “It’s similar to the auto industry where mechanics are running a dealership and they think they can manage a business. They think that just because you put a sign on the door people will show up. That’s the biggest misconception with small business. Film is a relatively inexpensive business to get into and tinters think they know more than the guy behind the desk signing checks.”
Still, former employees starting new business can be problematic for shop owners. So shops will do different things to avoid this. Melkowits handles it by not hiring film applicators. Instead, he sends excess jobs to a nearby competitor. The competitor will do the same for him.
Les Shaver is a contributing editor for Window Film magazine.
Rocky Burcham, owner of Solar Control Glass Tinting in San Ramon, Calif., is proud of the associations he has with interior designers. Using a program from CPFilms in Martinsville, Va., he has developed relationships with a number of designers in the Bay Area. When the designers go in and design a home’s furnishings, they will often recommend that customers go to Burcham for his film services.
But when a rival company moved into his area and started cutting the prices on its film installations, both Burcham and his interior-design partners felt the customer’s wrath.
“The designers get a nice customer in a nice expensive home,” he said. “We then go out and sell them a product that’s about $5,000. Then, our competitors come in at $3,000. Right off the bat, there’s a $2,000 difference for the same film.”
The homeowner’s next call is to the designer.
“They’re coming in at such a ridiculously low price, that it makes the homeowner question the interior designer,” Burcham said. “Now the interior designer has lost a customer.”
And, Burcham sometimes loses a valuable business partners. “Now the interior designer says that will be the last time this they’ll ever use us again,” he said. “We have lost some interior designers that way.”
This is Part 1 of 2. For more on combating the issues addressed here, see our next issue of Window Film magazine.
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