The Plywood industry’s Capacity vs Demand Gap has widened where capacity is higher by 50% or can say there is double the capacity than demand. Unlike laminate where you need design and marketing sense to grow, in plywood you just need to reduce the price to finish your stock. And that is why plywood industry has begun bleeding and soon its impact shall reach to traded retailers as well.
Plywood is a commodity material, though in India it is sold like branded products. Consumer does ask for brand recognition, but percentage of such people is merely 5-7%, and growing. Plywood is largely purchased on the basis of recommendation from Dealers, Carpenters and even sometimes referred/ specified by Architects-Interior designers. According to the market demand patterns analysed by us at Ply Reporter of past 12 years, retail sales dominate in Plywood.
The Retail customers catered by retail shop and dealers has 65-70% of market dominance where as commercial projects/bulk account for remaining 30%. In case of project purchases,
Plywood prices are directly linked with sales volumes but do price fluctuation matter to a retail customer? Does Plywood price increase/decrease reach to an end consumer?
In retail markets, whatever the prices are, customers buys after some market comparison and little bargain from the dealer. Also in retail sales, the dealers buy plywood from factories or distributors after tough negotiation and sell at 15- 20% plus margins. Hence a customer is hardly influenced by plywood price increase or decrease unlike cement-steel or other commodities. In every industry, Price rise according to raw material cost & external factors takes place and simply put, the plywood prices must be increased now to survive and grow.
The Plywood industry’s Capacity vs Demand Gap has widened where capacity is higher by 50% or can say there is double the capacity than demand. Unlike laminate where you need design and marketing sense to grow, in plywood you just need to reduce price to finish your stock. And that is why plywood industry has begun bleeding and soon its impact shall reach to traders-retailers as well.
You may agree, in Plywood, pricing is a game played within B2B circles that starts from a manufacturer and end before entry of a customer, hence Industry & trade should work together to prevent business losses and save the entire ecosystem before it becomes throat cutting for every stakeholder.
The losses to industries would certainly not make the dealers any stronger or richer. In fact, “Plywood Trade & Industry” must work in co-operation to safeguard each other. Those who are desperate, fighting for volumes or selling without calculating ‘interest + taxes’, even below the cost, must know “Sales without profits will not let you grow”, because profits make business thrive not the losses, irrespective of volumes. If one has enough money to burn, he can but will it last?
The best sensible way is to “produce according to your capital + margins, with interest on that capital”. Why to offer long credit period for which you are not getting any interest and yet selling in volumes to parties who may disappear without paying. Ask yourself, are you Not witnessing this? Why to produce big, if you are not able to sell with a decent margin and on 30-45 days payment duration. Better is to Optimise, Curtail and Sustain.
Plywood & Laminates both segments are on the same boats and the realisation shall dawn on every industrialist, and seller, sooner or later. Do not miss to read the article on Present status of Indian Plywood Sector, published on page 162 to 174.
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