Daily Archives: July 4, 2013

If You Want Profits to Go Up, Help People Get Up!

This spring, the Economist published a very interesting piece on how things are looking up for lift-makers who help people who need to get to the top floor, please. The four firms that control two-thirds of the global lift market — Otis (United Technologies), Kone, ThyssenKrupp, and Schindler — have seen their profits, more or less, steadily rise over the last ten years, as their margins increased approximately 10 points.

This is partly due to the fact that global demand for new lifts has gone from approximately 300,000 a decade ago to nearly 700,000 this year. This is primarily due to the urban migration — as approximately 70 Million people migrate to cities every year, where they live in apartments and condos and work in high-rise offices which all use escalators and elevators. And these people, who despise getting stuck in lifts, pay $2,000 to $5,000 a year to keep them running smoothly. As most of these only need a quick check-up and a little grease every few months, margins on maintenance are 25% to 35% compared with 10% on new equipment.

The mega-trend of urbanization provides opportunities for any business that can service the changing needs of the population, which needs to live and work in high-rises. This poses more opportunities for companies in construction, utilities, (last-mile) transportation, and service industries that cater to busy people who need dry-cleaning, maid service, meals on the go, and entertainment. And it also poses opportunity for companies that can optimize the services and servitized supply chain and the last-mile of delivery.