However, other than energy efficiency, there is another aspect of the window and door industry that offers fenestration and hardware manufacturers the opportunity to stand out from competitors—high barriers to entry, intensive focus on innovation and new product development and the avoidance of the low margins associated with commodity products. This product feature is security.
In a way, high energy efficiency falls second to security in the eyes of the consumer. Energy efficiency captures more attention in sales and marketing campaigns, and there have been no government programs supporting security. However, end consumers only focus on energy efficiency once they believe that the products they are considering already offer an extremely high level of security. It is incumbent on the manufacturers of high security products to make sure that consumers fully understand the heightened level of security being offered before they begin comparing other product features.
There are an estimated 2.1 million burglaries in the U.S. each year, accounting for roughly 2.5 percent of all U.S. homes. The FBI reports that the highest burglary rates in the U.S. among large cities occur in Memphis, TN, Cleveland, OH, Toledo, OH, St. Louis, MO, and Detroit, MI. In the international market, England, New Zealand, Mexico and Denmark suffer an even higher percentage of homes burglarized than the U.S., according to the International Crime Victimization Survey. Estonia, Bulgaria, Australia, Ireland and Italy closely trail the U.S. Certain international cities are also very hard hit, including Phnom Penh, Cambodia; Lima, Peru and Istanbul, Turkey, where a stunning 5-15 percent of homes are burglarized each year.
Here in the U.S., there are numerous examples of fenestration products being installed without proper attention to security. A passenger on the “L” train in Chicago will see that numerous businesses have made use of natural daylighting by installing commercial skylights in the roof of their buildings. Some of these skylights, however, are now unattractively girded by chain link fences topped with razor wire. One could safely guess that this isn’t what the product looked like in the manufacturer’s brochure. These companies have likely suffered one or more break-ins through their skylights.
Retrofit solutions like this indicate an increased willingness on the part of customers to pay for high security solutions. The individual that sold the skylight in the first place could probably have captured a high margin sale for additional security features. Instead, that solution was provided by the fence manufacturer, who also captured the sale. As goes the old adage about selling holes rather than drills, manufacturers of fenestration products for homes and businesses must sell a secure home or business, not just windows, doors and skylights.
The good news is that a very large and lucrative market awaits companies that provide security products. Morgan Stanley estimates that the global mechanical security products category, which includes locksets and other products, is roughly $22 billion in size. Like the overall window and door industry, the mechanical security products segment is highly fragmented. The top five manufacturers control just under half of the total market segment. This leaves ample opportunities for companies to grow both organically and through acquisitions.
The fastest growing, highest margin and most interesting segment of the security products segment is the intersection of security products and the concept of the “connected home.” A connected home makes use of the home’s broadband connection to allow remote control and monitoring of doors, locks, HVAC systems, lighting, appliances and a list of other applications that grows daily. With 75-80 percent of homes now estimated to have a broadband connection, an industry analyst that recently attended an important security conference said that interest in broadband integrated services for the home has “gone through the roof.” For fenestration and hardware manufacturers willing to gear up for this challenge and deliver a strong message about high security, this represents a significant opportunity in the years ahead.