View From The Trenches

Word came down this week that the world’s largest installation company was purchasing yet another notable regional chain, this one centered in the Bay State. Anyone could read or hear the howls of unhappiness coming from others that decry the relentless expansion into the American market of this international company. Well, for once, at least they bought a brand name that actually fits what they are … a giant. The real question is, are we dealing with a jolly green one or a surly goliath in the middle of a growth spurt?

Americans are a funny group. They love big! Just ask any Texan about size. Let’s face it: it matters. This country has embraced certain corporate entities due to their products, pricing and of their ubiquitous locations, meaning they are everywhere. They shop at Wal-Mart, buy hardware at Home Depot and eat at McDonald’s. Yet while many profess affection for “the little guy,” many consumers have little concern, much less the real knowledge, of the effects and how much economic, even personal, choice is being limited by the growth of these “über companies”

How many small businesses have closed along with corresponding jobs lost as box stores open and provide such one-sided competition against its neighboring shopkeepers? That is just the tip of the iceberg because so many other less-visible industries and services are being acquired, consolidated and even consumed by a handful of corporations. Do you know that four companies control 80 percent of beef processing? How many cell phone providers are there? Only two—AT&T and Verizon—have the lion’s share. My favorite example of acquisitions comes from something I read about ten years ago. The funeral home industry was being divided. At that time two companies were in the process of buying up local funeral parlors and between the two had acquired almost 80 percent of a once very necessary but extremely local service. It was being done very discreetly. The local name would be retained outwardly but all other resources, products, services and, of course, pricing would be dictated by a distant home office. We in the auto glass industry are seeing a wee bit of that same model when some of these regional chains are acquired.

One word that has been bandied around the past few years in auto glass anytime Belron makes a purchase is “monopoly.” If you’re expecting a government agency to step in and halt the purchase of one these regional chains, it is my personal opinion that hell may freeze over first. The reality simply is that it won’t happen.

How many local hardware stores close when a Home Depot opens nearby? When Wal-Mart decides to build in an area, count the number of small retailers and drug stores that close as well. Right now, large supermarket chains fear the competition Wal-Mart brings when they add food to their superstores. In short, governments have had little success trying to protect local businesses when a large discount operation wants to open up in an area.

Auto glass is a bit different. At best, it is a craft, at worse an unregulated service. At McDonald’s, you should be able to purchase and eat a Big Mac that has the sameness to it anywhere in this country (I’m not sure how much of that is an asset). A box of Cheerios is still a box of oat cereal whether you buy it at Wal-Mart, Safeway, a 7-Eleven or your corner bodega. The quality and pricing of a windshield install, however, can vary by shop, even more so by installer. This truism is ironically proclaimed as an advertising sales point by our largest provider whose installer pay plan is performance based.

The real danger that exists from Belron’s unchecked growth in our industry is coming from two directions. Its position as the third-party administrator of glass claims for its insurer clients should be labeled at minimum as dominate. By its own admission, Safelite Solutions counts 18 of the top 20 insurer as clients meaning that a Belron employee usually has first contact with an insured when filing a new glass claim. If the Federal Trade Commission had an iota of regulatory zeal, this unbalanced situation should have addressed years ago. Since it hasn’t, little is expected.

Will its glass production and distribution side draw any attention by regulators? Service is one of only a few glass wholesalers that have a national presence. Don’t think that Belron does not use that arm for strategic purposes. Then again any independent glass chain or shop that conducts business with them also should realize who they are in bed with. It is sort of like having a tiger for a pet. Never become overconfident with it. You may become its lunch one day.

With an estimated 15,000 glass concerns nationally, Belron’s Pac-Man-esque acquisition appetite most likely will go unchecked as well as unnoticed by regulators. I surmise that as the trend of higher deductibles grows and more consumers actually shop for auto glass services, Safelite is looking to become the Starbucks of our industry by increasing its national footprint. It seems to be solidifying control of several Northeast markets and extending its influence in the Midwest and South. It is not clear at this time if Belron will bring all acquisitions under the Safelite name or allow existing brands to co-exist for a time. You can be sure, however, that management philosophies and installer metrics will be consistent throughout the empire.

At this point, Belron seems very satisfied to pick the most profitable and lowest-hanging fruit off the auto glass tree: the insurance sector. They are also a company most able to serve any national fleet account as well. However, as the American public moves away from insurer-directed and -paid auto glass, Belron can and will compete in the marketplace. It has done so successfully in certain Canadian provinces where it may be limited by regional insurance regulations.

Belron has evolved into the Jennifer Aniston of the auto glass industry. It creates buzz and conjecture with every move it makes, however, Jen is far easier on the eyes. With that said, the industry better realize that Belron resembles the Pac-Man character more. It is on a mission to dominate and it’s gobbling up the competition. If this goes unchecked and all real threats to its supremacy are rendered harmless, insurers and the American public will realize that the strategy Belron has followed was no game at all. There will be a price to pay and we will pay for it.