While fabricators overall have a positive perspective for the upcoming year, it appears they are a little more cautious than their predictions for 2016, according to Stone World’s annual purchasing plan survey conducted by the Market Research Department at BNP Media (Stone World’s parent company). The survey polled fabricators from small-, medium- and large-sized shops located across the U.S., and three-quarters of the respondents have high hopes for 2017 — with sales revenues expected to grow next year by an average of 17%. While this is a 10% drop from the 86% who believed last year would show growth, it is still a hopeful sign that 2017 will be a good year for many.
The recent survey showed a total of 76% expect sales revenue to increase in 2017. Another 23% said it would remain the same (up 9% from 2016’s predictions), and 2% believe that there would be a decrease in sales revenue. The mean average of 17% growth has also been the mean for the past three years.
There are a combination of factors attributing to the positive market perception, including increased construction, better housing market and the improving economy. Additionally, several fabricators believe their increase in marketing/sales efforts and a surge in quartz sales are also contributing to more business.
“Continued low interest rates, increased commercial projects and additional tooling are allowing us to increase production,” was cited by one fabricator. And another said, “Building/remodeling will continue, and we are hoping that the market will eliminate a good number of hack fabricators, creating more opportunities for reputable companies.”
There was a positive response among fabricators participating in the Stone World survey when asked about the direction of the stone market in the next five to 10 years. A total of 83% believe the market will continue to increase by an average of 19%, while only 78% of last year’s respondents said it would increase. A total of 17% said the stone market will stay the same during the next five to 10 years, and no one believes there will be no expansion, as opposed to the 6% of last year’s respondents.
Among those who did express long-term optimism, there were a variety of explanations for why they believe the stone market will continue growing during the next five to 10 years. Economic development, economic growth due to corporate tax reductions and a rise in the construction/housing market were among the general sentiments. “I think the current building and remodeling trends will continue on their steady increase in the years to come,” said one respondent. “There’s not a compatible material in the market to hinder stone counter sales,” said another.
Some additional reasons for continued growth included:
- Increased demand for stone and quartz
- New construction and more commercial business is using more and more natural stone
- It is becoming an industry standard to put stone in new homes
- People realize other surfaces are not as durable
Investing in technology
When it comes to equipment, fabricators have intentions of making larger investments in 2017. A total of 73% of respondents said that they will be buying new machinery for their fabrication shop, which is a 4% jump from last year.
Hand tools continue to be the most popular equipment on the purchase plan in 2017 (48%), followed by material handling and transportation equipment in a close second (45%). A total of 29% of fabricators polled plan to invest in polishing machines, and 21% say they will be buying CNC stoneworking centers. A total of 20% will be investing in digital/electronic templating, 17% in bridge saws and 15% saw/waterjets. Only 6% of respondents said they do not have plans to purchase any equipment in the coming year, compared to 12% last year.
Statistics show the average spending on hand tools in 2017 is expected to be $14,769, while responding companies anticipate investing $49,350 in material handling and transportation equipment and $76,778 in polishing machines.
Following investments in equipment, personnel remains a high priority for fabricators, with 35% planning to invest in their staff. Marketing and the actual fabrication facilities themselves also rank high, with 32% of respondents planning to invest in each.
Along the lines of personnel, Stone World’s survey included a new question this year. We asked fabricators if they offer performance-related incentives to their employees, and the response was an overwhelming 85%. While a total of 59% said they give monetary rewards, 39% offer insurance, 24% provide a 401K and 20% offer non-monetary rewards such as extra vacation time.
Minimal spending cuts are going to be made in 2017, according to respondents. The biggest area will be marketing at 20%, which is interesting because other respondents consider this an important area of investment.
Looking back on 2016
The majority of respondents (71%) expect their gross annual sales to increase in 2017, which is a noticeable increase from the 67% in 2016. Approximately a third of respondents’ companies gross annual sales are expected to be anywhere from $1 million to less than $3 million in 2017, while 30% of respondents expect the sales to be $3 million or higher.
Participants in the Stone World survey who reported gross annual sales of more than $1 million jumped from 55% in 2015 to 65% in 2016. This broke down as 35% selling between $1 and $2.9 million, 12% between $3 and $4.9 million and 18% selling $5 million or more.
Differing from the past three years, over half of respondents (61%) indicated competition in the stone industry has increased over the last year. Competition from low-end fabricators remains the greatest challenge for many fabricators at 56%, which is 9% more than last year. Additionally, 26% of respondents feel smaller margins on current products and services rank among the biggest challenges, while another 11% cite competition from alternative countertop materials, such as Corian, concrete and wood.
The results of last year’s survey showed over three-quarters of respondents fabricate both natural stone and quartz surfacing. The percentage jumped from 78% in 2014 to 88% in 2015. This year, we were curious how many fabricators are cutting other material such as sintered compact stone or porcelain. Two-in-five respondents (42%) indicated they are cutting Dekton, Lapitec and porcelain slabs in addition to natural stone and quartz surfacing.
Of those responding to the Stone World fabricator survey, 23% have five employees or less, 50% have a staff of six to 20 employees, 14% have 21 to 50 employees and 13% have more than 50. The majority of those polled (42%) have been in business between 11 and 20 years. The largest percentage of fabricators polled (36%) are located in the south, while 21% were from the Northeast, 23% from the Midwest and 20% from the West.