An effective pricing is must for flourishing of any business - pricing that is in line with competition yet obtaining good profit margin is a priority for successful operations of wood and panel industry brands. Today in the plywood sector, pricing is being decided ‘not based on input cost’ but on the ‘basis of competitors price’. Hilarious! Isn’t it? That is why numerous appeals made by various industry groups have not yielded much result.
As a frustration, more and more plywood companies are switching to shuttering plywood, decorative laminates, doors etc in the hope to find better standing and growth. Unfortunately, the same has started happening in those segments as well. As a matter of fact: weak players are getting eliminated. There are few who position the price in such a manner so as to stop competitors from entering the market, to increase its market share, or simply to stay afloat in the market, but they often miss the main point, ‘Business and charity are two different things’.
Today when entire segment of commodity and raw materials have added the cost by 25 to 40%, how and why should an intelligent businessman not pass on the burden and charge higher price? In plywood, the answer I get is, ‘we cannot do so because we will lose our market to others’. Well, in fact if you don’t, how long will you stay in the market? By the way, it is not the cheap ones who are gaining, it is the ‘costlier’ and branded items that are growing with their trust factor, goodwill and supply abilities.
Today when entire segment of commodity and raw materials have added the cost by 25 to 40%, how and why should an intelligent businessman not pass on the burden and charge higher price? In plywood, the answer I get is, ‘we cannot do so because we will lose our market to others’. Well, in fact if you don’t, how long will you stay in the market? Price is indeed one of the deciding factors when it comes to their decision to purchase. But it is also the same thing that determine your survival and growth.
In my 22 years of industry journey, I have seen many sharp, calculative minds going out of the game. At that point, many of them didn’t appear as weak players. Later, when I analysed, it was clear that, ‘all of them were victims of wrong pricing, trapped in the competitiveness loop’. Today I can see history repeating as exactly similar things are happening before us, with every 6 out of 10 players in plywood and laminate industry. “Bad Pricing and competitiveness trap” hunt down its victims in scenarios like today when you feel the heat yet you try putting brave face forward, closing your eyes to the reality.
Of course, the pricing is the first thing that a customer notices in many of our industry products. It is indeed one of the deciding factors when it comes to their decision to purchase. But it is also the same thing that determine your survival and growth. In the present scenario, majority of plywood factory owners are missing the point of growth and earnings, they are just trying to stay afloat. In many cases, it is the fear and weakness that is pushing the companies towards the viscous trap.
Times are changing since GST happened. Times are changing since Okume came in. Times are changing since calibrated ply became a buzz word and HDHMR MDF is now an accepted category. Plywood industry and industrialists need to upgrade, update and uplift very quickly as time is running out. 10 years down the line, it will be large plants, all formal way, standard grades and bulk user led buying, which will eventually become a reality. I believe, to reach that level, one need to calculate the right cost, market the right way and charge the right price. Else, choose to opt for job work and slowly slip away into oblivion.