Let us Look into how the Elevator Industry Works. In this Post I will discuss the following details about the Elevator Industry.
- Overview of the Elevator Industry.
- What is the Revenue Model of the Elevator and Escalator Industry?
- Who are the Top Buyers / Customers in the Elevator Industry?
- What a customer generally looks at while Buying an Elevator (Consumer Behavior)?
- Supply Chain in Elevator and Escalator Industry.
- Government Regulations in the Elevator and Escalator Industry.
- Conclusion
1. Overview of the Elevator Industry
Elevator Industry Comprises of 3 Main Products and Services. New Elevators, Modernization of the Elevators and Maintenance of the Existing Elevators.
For New Elevators The Largest Market is China and India is at a Distant Second. Also the New Elevator Installation is Dominated by the Global top Five Players in the Industry. In the New Elevators, the Profit margins are generally Low or Non Existent, this is the strategy used to sell the Equipment at a lower cost thereby Preventing the competitor from entering the market. And then Earn Higher margins throughout the life of the Elevator through the Maintenance Charges. The Installation of the New elevators are directly related to the Infrastructure Activity of the country or the region.
Modernization is required from time to time for the Elevator to be in service and many a times also to comply to the changing local legal Codes and regulations. Generally this is done to replace or repair the worn out parts and also replace the Control System with the latest Features. More often the Control System and the Electrical and Electronic components are the main equipment’s which are replaced during the Modernization. Modernization is preferred as compared to complete replacement as it is costs less, can be done quickly and this means lesser down time for the Elevator.
Maintenance of the Elevator is required so that the lift stays in service and the down time is effectively reduced due to proper upkeep of the components. Maintenance is probably the most important Part of the Elevators for the Elevator companies as they provide the companies with long term and Steady stream of Financial inflow which the company can use to fund their requirements. Also, Maintenance is generally most profitable Income Source.
2. What is the Business Model for the Elevator Companies
Sell New Elevators Cheap to restrict or discourage Competition.
Use Proprietary Components in the New Elevators and Modernized Elevators. This will ensure that other Elevator companies will not be able to maintain the Product. This also discourages competition.
Earn High Profit Margins in Maintenance Business, typically, over a Period of 8 to 10 Years which is the standard time for elevator before it is modernized or Upgraded.
Elevator companies generally outsource the manufacturing of most Parts of the Elevator. they may manufacture some parts of the Elevators considering the requirement of with an idea to have control over that part as a proprietary component. Some Parts / Components are Manufactured by the Elevator companies depending upon the Business Philosophy. This way they can pick and choose the required part from the vendors to supply for the order. This is much easier than to have a complete production line for multitude of parts with a multitude of variants. This helps to reduce this complex manufacturing process to Procurement Process.
3. Types of Clients for an Elevator Company.
Elevator companies have a lot of different types of Clients right from Residential complexes to Industrial Complexes to Airports and Metros to Name a few.
Elevators are required for vertical movement of People and Goods. So wherever there is a need for such movement you will find an Elevator. From a simple Villa to the massive high rises in the cities.
The Top Clients of the Elevator Companies and the Largest Capacity of the Elevator companies is used to Supply and install Passenger Elevators. Passenger Elevators are about 80% to 90% of the Total Elevator market, with Traction Passenger Elevators Being the Majority of them. Hence the Top Clients are the Real Estate Developers building Residential and commercial complexes. Airports, Metros and Railways also are a Large Contributors to the Elevator Business. These Passenger Elevators are Generally supplied by the TOP Elevator companies and some times the Market share of these 5 Elevator Companies is about 80 Percent in Passenger Elevator Segment.
Industrial and Other Custom Elevators are Supplied and Installed by Small Elevator companies as they involve higher customization and therefore of less interest to the Top elevator companies.
4. Consumer Behavior (What is the Client Looking For?)
The Client is Looking for mainly 4 things while Buying an Elevator.
A. Quality – This is generally associated with the brand and the Top 5 Lift Manufacturers have created themselves a reputation for Quality considering these are European and American Companies. But in reality, at least for Indian markets, Elevators sold by the top brand do conform to the local norms but are specifically made for the Indian price Conscious Customers. If the Indian Client Desires Better Quality products for a Premium Project from the same Brand. These companies often suggest importing of the Elevators. This makes it clear that What is sold in India for local clients is not the same as what is sold elsewhere by the same Brand.
B. Services – Lifts no matter how well built needs timely Preventive maintenance and also have to be attended to for Breakdown. The Service Setup is a very important part in procurement of Elevators. The Time to attend breakdown is also very important for the client.
C. Price – Price is an important aspect to any client.Mostly all the Elevators are competitively priced to get as much market share as possible because the companies need market share scale to provide the clients with low costs and timely breakdown services and this can be achieved only at a competitive price. However, the client does understand that they have to pay a premium for certain brands, and they happily do so considering the Quality and the reliability of the Products.
D. Availability of Parts – Availability of Parts after the completion of the warrantee period is important, this ensures that the elevator can be maintained and serviced for a longer period of time without the need for replacement of major Parts. Sometimes non availability of small parts may require replacement of control system as a whole and hence the client may have to shell out a comparatively larger Price which could be totally avoided if the smaller part was available.
5. Supply Chain in the Elevator Industry
Elevator industry is similar to auto industry wherein the parts are manufactured by various manufacturers and the actual manufacturer may manufacture some Parts or none of them at all and just do the assembly for the parts.
Hundreds of different types of components are required for manufacturing an Elevator and the Elevator companies cannot do the manufacturing of them all. They choose which items they can or should manufacture based on their philosophy or proprietary parts and then procure most of them from the various suppliers. China is the largest producer of Elevator Parts and Exports all over the World. China also requires a large number of Elevators due to its strong domestic requirements.
6. Government Rules and Regulations
Considering Safety is a major requirement in the Elevator Industry, Government globally have Defined and implemented various standard for the Elevator industry. Some Countries require the Products and the Parts to meet Certain Standards and also after the installation is complete the Elevator must meet the local Codes which ensures that the Elevator is safe for its users.
Also, in many countries Before installation of the Elevator, the contractor or the owner may be required to take out permission for its installation and after completion a certificate is provided to state that the lift does comply to all the code of the local authority.
7. Conclusion
Elevators are an Essential part of the modern infrastructure, it is part of the mobility with the buildings and sometimes also forms a part of access control for the buildings.
Elevator industry is, globally, about a 100 Billion Dollar Industry with 5 Major Players which control over 80% of the market and Many Small players who compete aggressively for what is left. Existing players are feeling the pain of strong competition and we can see some consolidation in the Industry or sale of the Companies.
The innovation in this industry is happening, but at a very slow pace. Innovation comes in forms of monitoring and bettering the services for the Elevators.
Elevator companies require a strong supply chain considering that various parts of the Elevators are manufactured at various countries and needs to be brought together for manufacturing and assembly of the Elevators.
All Elevator companies must be competitive in pricing and provide strong services to stay in the market.
Information about our Company
Blue Star Elevators is an Elevator company Based in Mumbai and has supplied Elevators all over India and also exporting to Middle East, Africa and South America. It is founded in 1995 and provides all types of Elevators including Custom and high Speed Elevators.
You may visit us on https://www.bluestarelevator.com or Click Here.
We also have a company dealing with Elevator Ecommerce where you can purchase the Elevators Directly Online from us at www.lifigo.com or Click Here
Please feel free to write to us on below Email Id
Blue Star Elevators Email : enquiry@bluestarelevatorsindia.com
Liftigo Email : support@liftigo.com