In recent years, the automatic door industry has become somewhat stagnant in terms of new technological developments. Combined with tough economic conditions and increased competition in developed markets, manufacturers have been forced to find new and creative ways to increase revenues. This has led them to target service contracts. In North America and Western Europe, for example, some leading door manufacturers have begun to substantially drop product prices. In some cases vendors are even taking losses on products in the short-term to win the longer-term service business.
Although this strategy is popular in North America and Western Europe, implementing this sales method in other regions/countries could prove difficult. For instance, in China, many products sold are of lower quality when compared to the developed markets of the United States and Western Europe. If the product breaks, often times it is cheaper to replace the product than to pay someone to service it. The way for manufacturers to overcome this issue is to show end-users the advantages of purchasing longer-lasting, higher-end products with less downtime.
What does this mean for the industry? It is important for the manufacturers who are involved in the pedestrian door market to recognize this trend and to decide to either continue to focus on growing their revenue with product sales in Europe and the United States or decide to shift their focus to service contracts. IHS expects to see major players in the market continue to put more energy into securing service revenues as profit margins on products continue to decrease. The speed at which this will occur will be dependent on whether manufacturers have the necessary infrastructure in place to support service teams across different regions.
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