The security market – a growing industry in course of change
Today ASSA ABLOY is the world's leading lock company. As the Group has grown, its product portfolio has been augmented with products that are relevant not just to the lock market but to the security market in general. The requirements of different customers vary greatly. Thus airports, private homes and hospitals have very different security requirements.
Development of the security market is driven primarily by the general trend towards higher security. As crime, violence and terrorism increase and look like continuing to increase, the overall threat picture has changed. People's growing insecurity moves security considerations high up the agenda, driving the development of more advanced security solutions and the upgrading of existing security solutions.
The total security market consists mainly of security services and electronic and mechanical security products. ASSA ABLOY estimates the total security market at more than 200 billion Euro, and the Group is currently active in about 15 percent of this total market.
Electronic and mechanical security products
ASSA ABLOY's range of electronic security products includes electronic cylinders, automatic doors and products for access control. Annual growth of the market for electronic security products is expected to be around 10 percent.
Besides locks, the main mechanical security products also include handles, door closers, evacuation products and door and window fittings. Demand for mechanical security products is driven primarily by new construction and the replacement of old locks in existing windows and doors. This section of the market is expected to grow, in the long term, at the same rate as each market's GDP, averaged over a business cycle. For ASSA ABLOY the market for mechanical security products stays relatively stable. This is partly because its sensitivity to economic fluctuations is buffered by a substantial aftermarket, and partly because ASSA ABLOY's operations are spread over a large number of countries with different business cycles. Consolidation between companies in the mechanical security segment is common and this trend is expected to continue.
Distribution channels
A characteristic of today's security market is that manufacturers of security products, such as ASSA ABLOY, are usually separated from end-users behind various forms of distribution. A high proportion of ASSA ABLOY's products are sold in small volumes to a large number of end-customers with different needs. In consequence, the distribution of mechanical and electronic security products is in general local and fragmented.
The role of the distributor can vary between the different customer segments. In the commercial segment, distributors on some markets act as consultants, engineers and project managers to produce good security solutions. They have good knowledge of the customer's needs and ensure that the products meet local regulations.
Locksmiths, buying from ASSA ABLOY either direct or through wholesalers, are among the most important distributors of mechanical security products. Many manufacturers of doors and windows integrate lock cases and other security items into their products before delivery to their customers. Wholesalers of building materials and locks play important roles in supplying the solutions specified by manufacturers for different construction projects. Retailers – building materials supermarkets and ironmongers – serve the consumer market.
In the case of electronic security products, products flow from manufacturer to end-user mainly via security contractors and specialized distributors. But the products are also sold through integrators who often offer turnkey solutions for the installation of perimeter security, access control and IT security.
One of the most obvious trends in the security market is the increased demand for electronic products. Another clear trend is the increasingly standardized technology, which makes it easier to integrate the different components of security solutions with one another. This means that, to remain competitive, manufacturers will be compelled to focus on specific product segments.
Distribution is changing too. Door and window manufacturers, DIY chains and other players are gaining strength by consolidation. Some locksmiths are placing growing emphasis on electronics, while a growing number of IT integrators are starting to offer physical security solutions as well.
The product groups that ASSA ABLOY manufactures today mean that the Group is active in about 15 percent of the total security market. ASSA ABLOY's market can therefore be estimated at around 30 billion Euro, which means that in these sectors ASSA ABLOY's market share is around 10 percent. Three quarters of this business is in mechanical security products and the remaining one quarter in electronic security products. ASSA ABLOY's growth targets are based on the expected growth of these markets.