Volume 17, Issue - November/December 2013

The 2014 Report
What to Expect Over the Next Year

Want to see the future of your business? Sorry, but Miss Cleo can’t help you with this one. There’s no hotline or crystal ball in this world that can tell you if 2014 will be a boon-or-bust year for your company. Luckily, there are several non-psychic methods of forecasting upcoming conditions for the window film industry.

What exactly do you need to know to gear up for 2014? With a multitude of reports about various segments and indicators, how are you supposed to know which ones to trust?

Well, put down that phone and put away your credit card. The next year is shaping up to be a big one. With a rebounding construction market and increasing demand for automotive add-ons, window film and related markets, such as specialty graphics, energy films and wraps, could see a monster year in 2014.

To help you prepare, we gathered the most relevant industry indicators so you can envision what business will look like in the coming year without the crystal ball.

Architectural Segment
Consistent Growth Expected
Outlook: Steady growth is anticipated throughout the year.
General strengthening in the housing market over the past 18 months is translating into increased spending on home improvements, according to the Leading Indicator of Remodeling Activity (LIRA) released by the Remodeling Futures Program at the Joint Center for Housing Studies (JCHS) of Harvard University. Remodeling contractors have been reporting improving market conditions for the past four quarters, and are seeing strength in future market indicators.

“Homeowners are more comfortable investing in their homes right now,” says Eric S. Belsky, managing director of JCHS. “Consumer confidence scores are back to pre-recession levels, and since recent homebuyers are traditionally the most active in the home improvement market, the growth in sales of existing homes is providing more opportunities for these improvement projects.

“Yet, with housing starts leveling off in the second quarter and financing costs beginning to edge up, we may be seeing the beginning of more measured growth in the residential markets,” says Kermit Baker, director of the Remodeling Futures Program at the Joint Center. “Given normal timing patterns, this suggests that the pace of growth for home improvement spending should begin to moderate as we move into 2014.”

Housing starts are only increasing at a rate of less than one percent from month to month, however, this number of starts was still up 19 percent over the previous year.

“Remodelers are feeling optimistic about the home improvement market during what has turned out to be an uneven recovery,” says National Association of Home Builders (NAHB) Remodelers chairman Bill Shaw, GMR, GMB, CGP, a remodeler from Houston. “Not only do remodelers have projects booked for the next few months, but they also have more work coming in the door.”

“Remodelers’ positive sentiment is directly related to increased demand for their services. Rising home prices are making remodeling jobs possible for more homeowners while existing home sales provide additional momentum as homeowners prepare their homes or market,” says NAHB chief economist David Crowe.

Construction projects are also increasing. According to a midyear update to the 2013 Construction Outlook from McGraw Hill Construction, overall new construction starts are expected to climb six percent by the end of 2013, which bodes well for continued growth into 2014. The report anticipates 15 percent growth in commercial building, a 28 percent increase in single-family housing and 23 percent more money for multi-family homes.

“The recovery for construction continues to unfold in a selective manner, proceeding against the backdrop of the sluggish U.S. economy,” says Robert A. Murray, vice president of economic affairs for McGraw Hill Construction. “While the degree of uncertainty affecting the economy seems to have eased a bit from last year, tight government financing continues to exert a dampening effect on both the economy and the construction industry. On the positive side for construction, the demand for housing remains strong, market fundamentals for commercial building are strengthening, and lending standards for commercial real estate loans continue to ease gradually. On balance, the recovery for construction is making progress, but at a single-digit pace given the mix of pluses and minuses by major sector.”

This is excellent news for the window film industry. More buildings typically means more glass on which to apply film, and new starts means that window film companies can bid early on these projects as they are being built, rather than waiting for older dwellings to seek a retrofit solution.

Automotive Segment
PPF Reaching Market
Heights, Window Film Will Hold Strong
Outlook: Big growth potential in this segment for 2014. Booming paint protection film growth and steady window film sales are likely to continue into 2014.

According to the izmocars 2013 Auto Accessories Add-On Sales Midyear Trend Report, protection products, which is inclusive of paint protection film, is the number three add-on service by volume and the number one service by revenue and profit. Additionally, window tint serves as the number six service by volume, the 10th service by revenue and eighth service by profit.

“Strong vehicle sales continued into the first half of 2013, with 7.8 million light vehicle unites sold, a 7.5-percent increase year-over-year. And, the trend within that trend that has perhaps the biggest impact on accessories sales continues to ramp up: truck sales are up by double digits. Plus, the length of vehicle ownership continues to hit record levels, a key driver of the popularity of accessories and aftermarket products that enhance vehicle longevity and make it more enjoyable to drive for the long term,” reads the report.

“Combined, these macro trends are driving consumers to prioritize accessories that enhance convenience, increase the utility functions of their vehicles and protect their investment … Paint protection products performed well, clinching the number one spot in total retail sales and dealer profits … The perennially popular window tint category remained in the top 10 of all categories, including volume, revenue and profit.”

The report further states, “Paint protection in the protection product category ranked highly with consumers in the Midwest, Northeast and West.” In fact, by region, protection products were number two in the Midwest and number five in the Northeast and West. Window tint was number one in the South.

Specialty Graphics
Crossing Over in 2014
Outlook: 2014 is the year to cross over into specialty markets.

According to Dan Marx, vice president of markets and technologies for the Specialty Graphics Imaging Association (SGIA), window films usage in the specialty markets is, “a strong growth area.”

From the SGIA’s 2013 Market Trends and Product Specialties Benchmarking Report, Marx says, “78.5 percent of sign and graphics shops currently produce ‘window displays,’ which in many cases would include window films.”

He adds that, “71.9 percent produce ‘vehicle graphics,’ which often include perforated window films. Both of these are considered growth areas by those who produce products into them.

One increasing trend Marx notes is that, “60.7 percent of sign and graphics producers currently report working with interior decorators, designers and architects. This is also seen as the top growth market.”

Additionally, Marx notes that the association is seeing increasing use of printed and unprinted window films being used in retail display, corporate branding and environmental graphics.

“The wide range of window film products on the market today, mixed with the creative spirit of designers and architects, has provided new looks and visual effects for windows, and whole new areas of possibility for the use of these films,” Marx states.

Small Business Ownership
Cautiously Optimistic
Outlook: As the old adage goes, slow and steady wins the race

Wells Fargo recently conducted a survey of small businesses which showed optimism at an all-time high, not seen since 2008.

A major driver of this improvement is business owner optimism around availability now and in the future. While it’s well below pre-recession levels, the index score is the highest it has been in five years,” according to a statement from Wells Fargo.

According to the survey, 28 percent of small business owners say they expect credit to be very or somewhat easy to obtain over the next year. Further, 57 percent say they have seen an overall improvement in the housing market in their areas.

Capital spending is increasing as well, according to Wells Fargo. The most recent survey shows 25 percent of small business owners have increased capital spending over the past year, and 26 percent say they plan to increase spending in the next 12 months. However, following the government shutdown, Wells Fargo also reported that small businesses saw a drop a confidence. Taxes, regulations and interest rates were among the concerns cited by business owners.

Weather Conditions
Inching Up a Few Degrees
Outlook: The summer will be warmer and there’s a chance for severe storms in several regions.

According to the 2014 Old Farmer’s Almanac, the upcoming year could play host to the perfect conditions for window film. Below, we’ve compiled a list of the almanac’s forecasted weather predictions for each region, broken down by specific metro areas, for the peak window film season and including any relevant hurricane/tropical strom warnings.

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