Short Title:
Doing business with European timber buyers
Sector:
Timber and Timber Products
Reading time:
16
Updated at:
Thursday, April 7, 2016
Document name:
Top 10 tips for doing business with European timber buyers (2015)
Intro:
This CBI Doing Business document answers the question: What needs and wishes of European buyers should I take into account if I want to build a fruitful business relationship with them? It provides you with ten important tips for doing business with buyers in the European timber sector. After reading them you will stand a better chance of convincing importers to buy your product. Make sure you also read the closely related CBI Finding Buyers guidelines.
Body:
Comply with common buyer requirements
Apart from the normal market access requirements such as EUTR, CE, REACH, packaging, CITES and FSC (all discussed in the CBI Factsheet “Buyer Requirements”), there are some general requirements importers find important.
Buyers place reliability above all other considerations, and this factor is likely to become even more important as more European buyers outsource and thus need reliable suppliers. Reliability means dependability on delivery times, the ability to guarantee a stable quality and excellent communication.
You should be able to show you have a good track record for reliability and to provide references to demonstrate this, and your company image should be professional. If you do not have written evidence of your reliability, demonstrate it in other ways such as inviting buyers to your factory for a few days.
Corporate social responsibility (CSR) is becoming more important every year. EU buyers pay more and more attention to their corporate responsibilities concerning the social and environmental impact of their business. This also affects traders and processors. Issues such as respect for indigenous rights, owner’s rights, labour rights and healthy and safe working conditions play a key role here.
You should train your workers on how to work more efficiently, reduce waste and emission levels. Ask your EU buyer about his policy with regard to suppliers’ labour standards. Do not forget to find out how these standards are supposed to be monitored and/or evaluated. You might like to consider applying for certification of your processes for continuous improvement of their sustainability level in accordance with one or more of the following standards: ISO 14000 (environment), OHSAS 18001 (health and safety) and SA8000 (working conditions).
Show professionalism
Professionalism in the timber sector is highly respected. The sector is rather complex due to its many requirements and a natural product that never looks the same. Thus you need to be a professional to find your way around. Professionalism is of all ages and will continue to remain highly important in the timber sector. Professionalism can be divided into the following characteristics:
Speak the language. Use the right terms when talking or writing about timber products, timber species and the various buyer requirements.
Use your track record and experience to your own advantage. This works well in the timber sector.
Be honest about your company. Realise that sooner or later the buyer will visit your factory. Buyers regard capacity as another word for quality. They are well aware of the fact that a potential supplier’s capacity in machinery, manpower, raw material and skills is a critical factor in his ability to deliver as promised.
Buyers will want to be certain that a supplier has an adequate source of raw materials. If you are only a small company, then look for small buyers. It is a serious mistake to try to hit above your weight. Raw material supplies are key. Make sure you have a steady supply of timber to convince buyers that maintaining the promised deliveries will not be a problem.
Show expertise during the whole process of doing business. Read all other points in this document and make sure you read the “CBI Finding Buyers” document!
Accept price/quality differences
Buyers are engaged in an endless quest for quality but the quality demanded by customers can vary from one EU country to another. You should be aware that Europe can be roughly divided into the following price/quality groups with regard to the timber sector (Source: FSG):
Netherlands, Poland and Eastern EU: lower quality is often good enough and the price paid is also low.
France, Belgium, Italy, Spain and Southern EU: medium quality is accepted, at medium price levels.
UK: medium to high quality is demanded and high prices are paid.
Germany and Scandinavia: high quality is rewarded by a high price.
You should have an effective quality control plan in order to produce the quality levels demanded. Quality control is always a hot topic in the timber industry, because wood is a living material and no two products are the same. When you have a quality control system in place, it could also be promoted on your company website and demonstrated to buyers during factory visits. Furthermore, a good quality control system improves production efficiency, thereby reducing costs. The final price and quality demanded of a product depend on many factors. We suggest that you read the CBI Product Factsheets to check out prices and qualities for particular products in particular countries.
Use realistic margins
You may need to prove to the buyer that you have no financial problems or risks associated with your raw material suppliers. In addition, buyers attach considerable importance to a supplier’s image (with respect to such issues as CSR), and to the beneficial or adverse effect this may have on their own image. Image problems can be very costly for big importers. When all these issues have been sorted out, both parties can move on quickly to the more important part of the business: sharing the margins!
The margins are more or less fixed in the timber sector, and are no secret. If you sell your product directly to an importer in the EU, and the product costs the end-user 100 Euros (including VAT), the margins (including costs) for the various partners in the chain are typically as follows (Source: FSG):
Raw material (your supplier): 20 Euros.
Processing (your company): 20 Euros.
Shipment and transport: 5 Euros.
Importer and further processing and packaging (your customer): 25 Euros.
Retail shops (the final outlet): 10 Euros.
Sales tax (average for EU): 20 Euros.
List contractual requirements and make a good trade offer
This is where you can show your professionalism: 95% of contractual problems in the timber sector can be avoided by making a proper trade offer. The trade offer is often the only official document on which trade is based (the order itself being a very simple document most of the time). You should use the trade offer to protect yourself. A good trade offer in the timber sector consists of the following elements:
General introduction about the product. Here you can give general details of the product and the quantity in which it is supplied, the trading partners etc.
Product description. This is by far the most important part of the trade offer. The product description comprises the following elements: the description itself (what is it you sell), technical drawings, finishing (sanded, oiled, painted, etc.), repairs made to product (in plywood for example), accepted colour differences (with pictures), moisture level of kiln dry product (%), permitted defects (mention all and in detail, such as “Dead knots allowed, maximum 5 mm”), packaging (in detail).
List the market access requirements (MARs) you are complying with. Make sure you mention and explain any of the following MARs that are applicable: FSC, REACH (with reference to the glue and paint you use in timber products), CE, CITES, ISPM 15 packaging logo and EUTR.
Price and payment conditions (as laid down in INCOTERMS 2015). Mention your price in EU or USD, discounts (if applicable), currency exchange options or risks and your preferred payment conditions (such as FOB or CIF).
Delivery conditions. Specify the proposed harbour, shipping line etc. Mention when pictures are made (before closing the container for example) and how these are sent to the customer.
Further terms of sale. How long is the offer valid? (usually 6 weeks in timber) Procedure used to resolve problems (law suits in the courts of which country?) or quality disputes. Arrange or suggest independent quality inspections by an organisation such as SGS, the costs of which are to be shared.
Organise transport and logistics
Transport and logistics in the timber chain are usually organised by the exporter and go by container load. Orders are transported and counted by the number of containers (20ft or 40ft). Dry Cargo Containers defined as 20'GP (general container), 40'GP and 40'HQ (high cube) are usually used for shipment. If the density of your wood is very high and the volume of the order is low, it is recommended that 20'GP containers are used. If the volume is large, it is recommended that 40'GP containers are used.
There is also non-product-specific EU legislation on packaging that applies to all goods marketed in the EU. The aim of the regulation is to introduce measures to reduce the risk of spreading pests associated with the material used to package raw wood. All wooden packaging material (mostly pallets) used must display the ISPM 15 logo and your unique identification number (if you produce the packaging material yourself). Read the CBI Factsheet “Buyer Requirements”, which provides further information.
Use or adapt to new technologies
One of the consequences of the more stringent requirements for the use of tropical timber is innovation, and particularly innovation in timber alternatives. Most EU importers state that innovation and re-thinking your product line will be key to staying in the market or conquering new markets. (Source: feedback from 17 importers during meetings and online questionnaire 2015).
Thermally modified wood (TMW), for example, is an alternative to chemical treatment that offers many advantages. When used in combination with thermal treatment, it makes the wood more resistant to fungi and other microorganisms, and also more durable and less likely to change shape. In the Door & Window Frames market, aluminium and PVC-framed windows and frameless glazing systems are being used more often. According to a report from Forest Industries Intelligence Ltd, plastic materials in particular will be an important competitor for timber material for doors and window frames. Wood plastic composite (WPC) is also a growing market. This material is used as a substitute for timber mainly in garden products, decking, fences and frames.
Glued laminated timber (Glulam) is becoming more popular as well, particularly in construction work but also in mouldings (in finger-jointed form). Employment of glued laminated/ finger-jointed products is good for your raw material efficiency as it often allows you to use shorter pieces.
In France, companies like Neolife and Silvadeck create composites for terraces and shelves; in Belgium, Beologic offers wood pellet polymers; in Germany, Megawood makes composite garden fences, while Staedtler uses this material to produce pencils. Ikea of Sweden is producing composite chairs and armchairs, Lunacomp makes composite corrugated panels, and UPM-ForMi makes composite components for Puusteli kitchens.
Tropical timber has various applications and its successful promotion requires creativity and innovation. Try to add value to your product before exporting it, focusing on its design and the specific qualities of the tropical species. This will benefit both you and your country’s image in the timber sector. Check the CBI Factsheet “Trends in Timber and Timber Products” for further details.
Help to improve the role and image of your own country
Political stability tops the list of buyers’ priorities, and unfortunately there is not much you can do about it.
Since buyers are looking for long-term relationships with suppliers, the exporting country’s stability is an important issue. Many European buyers select exporting countries on the basis of their stability – even before they start looking for suppliers. Politically unstable countries are not a reliable source for timber buyers, because they generally suffer from other problems, such as corruption, theft, inefficient harbour facilities, the sudden imposition of new “taxes”, and other such difficulties. Furthermore, the issue of political stability is related to the growing importance to EU buyers of using sustainable and legal timber.
You can help to improve your country’s image by simply providing correct, realistic and up-to-date information. Some countries have a doubtful reputation with regard to timber, just because of occurrences in the past. If the situation has improved since then, you are the person to promote that new positive image.
As a supplier, you should be able to explain briefly the situation of your country as part of your own general image building. It is a good idea to have a general country-status document that answers all the main questions that may be relevant, to hand out to buyers.
Be aware of the differences in business culture in the timber sector
Differences in business culture are relatively stable, and may be divided into three groups: cultural awareness, business etiquette and daily business practice. The features listed below may vary from one European country to another; if necessary, we can provide further details on request.
Cultural awareness is key for success as an exporter. Be aware of cultural differences; study them before you travel! Some key points to take into account:
The international business language is English. And perhaps Spanish in Spain.
Religion is not that important when you are during business in the EU.
Hierarchy is important in companies, but nobody “plays the boss”.
Status and respect are due to businesspersons who work hard and get results.
Managers are open and friendly. Building personal relationships is easier and goes quicker.
Northern EU buyers are very strict in demanding compliance with contractual obligations. Southern EU buyers are slightly less so.
The elderly are always respected.
Northern EU buyers are often straightforward, they will tell you what they think. Southern EU buyers are less so.
Always keep your promises and be punctual. Recognise the value of a contract.
There are substantial differences in business etiquette from one EU country to another. Some important points to take into account:
Be honest at all times in your conversations with buyers. This is important and greatly appreciated.
If there is something you don’t understand, just ask; that will never cause problems.
Know when to listen and when to speak. Buyers appreciate it when you listen carefully to what they have to say.
Casual clothing is appropriate in the timber sector, though it might be a good idea to wear a tie at the very first meeting.
Meetings normally start with an informal chat, lasting no more than 2 or 3 minutes. Try to ask a few personal questions, but do not be too intrusive.
Differences in daily business practice.
The way you present your company (and yourself) is most important. Everything has to be just right, and in the right sequence: your business card (in English), your website, the story you tell and so on. If the presentation is right, you have won half the order. On the other hand, you will lose the whole order if you get your presentation wrong.
English-language websites are crucial. And remember, if your website includes links to background information, that should be in English too.
You can expect negotiation to be tough in Europe, particularly in the Northern European countries - and even more so in the DIY sector. You will often have to negotiate prices down to the last few Euro cents. Be patient and friendly with the buyer at all times, but also display your own professionalism and show that you are a good businessperson by sticking to your point when there is an argument and you know you are in the right.
Trade offers must be worked out in detail (see tip 5 above).
Arguments and conflicts will happen, sometimes due to the differences in culture and in any case generally due to misunderstandings. A business conflict has nothing to do with personal relations in Northern European countries, but business disagreements in Southern European countries can have personal consequences. Always keep business and personal matters strictly separate.
Comply with communication rules in the timber sector
Communication is quick, available everywhere, and generally digital nowadays. EU buyers use social media, Skype, and above all E-mail to run their entire business process. Telephones are hardly used at all, except for informal calls or to ask a quick question. Buyers expect suppliers to be available to respond to queries 24 hours a day, in English. The importance of quick digital communication follows the social-media trend. You can no longer escape your buyer when he has questions, and you need to adapt to this new reality, especially since it seems unlikely that we have seen the end of the possibilities of Skype and social media. Take the following considerations into account:
Get connected with social media, so that you are always available for your customers in English. Having a mobile phone that can read E-mails is essential. Skype is best for longer telephone conversations; your buyer will be more than happy to use this.
Agree on the selected communication methods and stick to them.
Quick communication is crucial. There are no excuses for responding late to messages. Quick means the same day, or perhaps the next day at most.
Not calling back by phone when you promised it? No one picking up the phone? This is unacceptable nowadays.
Always have an answer ready. But remember, saying “I don’t know right now, but I’ll let you know at 4 p.m.” is an answer! And remember time differences between different parts of the world too! Time costs money. Being on time means being no more than five minutes late in Northern EU countries, and no more than perhaps ten minutes in Southern EU countries. When time is very short, take care to call at least thirty minutes before a meeting.
The same goes for delivery times. When you deliver late, without any good reason and without letting the customer know, it will be your last order. Inform the buyer as soon as possible when things are not going according to plan, and explain clearly how you are going to solve the problem.
Keep in touch with your clients. In the past, buyers were looking for you. Nowadays you have to be proactive in looking for them. You still have to make the effort to keep in touch even after you have established good relations with your buyers. Remember, they will not contact you, you have to contact them. And they will appreciate it when you do.
“An offer should include a clear description of the quality and safety test results (CE marking). Apart from that we always check their website for professionality, references and experience of the exporter. We also like to know why we should buy this product. What is our advantage (apart from the price) when we buy this?”
Hans van der Grinten, Korlam
“A trade offer should explain where the timber is coming from. What is the source behind the factory? Apart from that we like to see pictures of the production, information about the available species and details of how legality has been complied with, in relation to the EUTR”.
Jan Kemps, Hotim
“Communication is everything. Always respond in time, be on time for meetings or Skype conferences and let your buyer know in good time when things are not going according to plan. ‘Radio silence’ from a distant supplier makes buyers extremely nervous.”
Marco Bijl, CBI expert.
"The importance of a properly drafted and very detailed trade offer is still underestimated in the timber sector. This document is your security against any problems later on. Timber is a natural product, and thus every batch is different. It is extremely important that you agree on the variations in timber characteristics and product quality that are considered acceptable.”
Marco Bijl, CBI expert.
Last updated:
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Tags Sector:
timber and timber products
Tags Type_of_study:
tips for doing business