Thursday, November 12, 2009

Flooring May be Global but the Markets are Local

David WoottonDeclining domestic sales and a weak dollar have some flooring manufacturers considering exporting as a way to take advantage of the global market place. I whole heartedly support this concept but it’s not as simple as shipping a great widget to a new widget market. Although flooring may be global, significant differences in language, consumer preferences, channels, manufacturing standards – just to name a few considerations to avoid costly and time consuming mistakes - make flooring markets very local.

Vive la différence! – Just make sure you understand what la différence is!

Consider the case of a U.S. hardwood flooring manufacturer who decides to pursue new business in Europe:

Language. Whilst the U.S. is a huge geographic area pretty much all of the customers speak the same language. On the European Continent there are around 50 different countries each with its own language or dialect, culture, food, market conditions and preferences in color, design and wood species. The U.S. wood manufacturer will need to find a local partner or hire local employees or agencies to produce appropriate marketing collateral and prepare installation instructions for each carton printed in more than 30 languages.

Consumer preferences. In the U.S. wood flooring is either solid or engineered dictated mainly by the construction of the houses (slab or basement.) Throughout Europe the product of choice is almost entirely engineered longstrip - 3 layers approximately 8 ft long, 5-7” wide, 9/16” thick and installed using the floating method. The only U.S. manufacturers who offer this product are Mohawk (as a result of its acquisition of Columbia Flooring’s Malaysian operation) and Award who produces only small volume for the U.S. domestic market).

Random length is not a concept that European customers understand. They expect every piece in the carton to be the same length. Given the configuration of most U.S. flooring plants this would create a lot of waste and add to the manufacturing cost therefore offsetting some of the exchange rate advantages.

Installation style also differs. In Europe, end joints are in line in every alternate row of flooring laid….a practice frowned upon by U.S. installers and consumers.

Species and face preferences. Whilst Red Oak still accounts for well over half of all domestically manufactured products in the U.S., it is virtually unseen in the European market as consumers do not like the variations in color. They prefer European White Oak which gives a cleaner more uniform face. In the U.S. the majority of face veneers are still rotary peeled Red Oak Rotary Peelwhich gives a somewhat wilder “plywood” grain appearance. Whilst this is very well accepted in the U.S. marketplace, it is disliked in Europe where consumers prefer the sliced veneers Red Oak Slicedthat replicate the look of solid flooring. Ash is preferred to maple, and so on. Exotic species are growing in popularity but environmental concerns and raw material supplies mean these products are largely the domain of Chinese manufacturers today who need to show environmental compliance.

Finish preference. Over 95% of products are finished as natural in Europe; stained products are virtually nonexistent.

First rate quality is a must in the European market and all products are expected to carry the CE mark confirming that the manufacturers and their products conform with mandatory consumer safety, health and environmental requirements.

Taking products to the consumer. Assuming the wood manufacturer is able to produce a product that satisfies new, local markets, the next step is to find a channel to get the product to the consumer. Channels are also different in Europe. There, manufacturers have sophisticated logistics systems and centralized warehouses and deliver directly to and service retailers making the function of traditional distributors largely redundant.

So there we have it and hopefully I have highlighted some types of issues U.S. manufacturers need to consider before “diving” into the global marketplace. My intention is not to scare anyone away, far from it; I believe strongly in global opportunities and I am a champion for those companies pursuing it.

Vive la différence! – Just make sure you understand what la différence is! Look to becoming involved globally but remember the global market is made up of a number of local markets and it is important to know and understand these differences. Identify your target markets and thoroughly research them. The Floor Covering Institute has consultants who can help you and if you want an overview of the European market at close quarters my colleague Jim Gould (jgould@floorcoveringinstitute.com) leads a U.S. delegation in January each year to the Domotex Fair in Germany (DOMOTEX HANNOVER) which gives an insight into all flooring products offered in the European market.

Like it or not we are all part of a global market and no matter how we become involved we need to get involved to survive. Acquisitions, mergers, strategic alliances, private labels, and exporting - all offer opportunities.

I would love to hear your ideas or questions and as always if you have…… thanks for reading this.

David


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1 comment:

  1. Declining domestic sales and a weak dollar have some flooring manufacturers considering exporting as a way to take advantage of the global market place.

    ReplyDelete