Comparable Models ?>

Comparable Models

sm1
sm2
sm3

During the peak of the “tech-boom” in the early 2000’s, there was a significant rise in the number of portals that were designed to facilitate business-to-business wood products trade around the world. As time passed, the traction and activity of these sites increased in European and Asian countries. However, the relationship-based wood products industry in North America has remained true to the traditions of personal contact. The three remaining dominant portals are:

  • TimberWeb
  • Fordaq
  • WoodBusiness

A variety of means were employed to facilitate transactions, ranging from auctions (in a variety of forms), open bidding, published pricing and discrete communications tools. Business response to the auction format was muted at best, as it functions contrary to the business objectives of maximizing as much possible revenue from each product unit produced. For this reason, the portals shifted their business models away from actively participating in price related negotiations and reverted to simple membership fee-based business models. Users now pay a flat fee to join the website as members and are able to utilize additional resources and tools on a fee-for-use basis.

A combination of the lingering effects of the economic downturn and the industry continuing a shift away from the use of portals has caused a further decline in their relevance and usage, as illustrated in the reported listing volumes on TimberWeb. The overall activity on the web portal is declining at a significant pace:

timberVolume

Review of the membership demographics on the dominant portals reveals that there is a heavily weighted representation of producers and manufacturers from areas such as the Baltic States, where environmental performance, governance and business practices are under frequent question and scrutiny. The portals do facilitate trade between these origin regions and the Asian markets, but are not relevant to the North American (especially Canadian) buyer or seller.

A deeper review of a sampling of Canadian companies that are very active on TimberWeb and Fordaq reveals that they are in fact mere traders who are not engaged manufacturing of wood products and do not have a physical presence. They broker the wood products between buyer and seller, using the portal as a promotional tool. Often they are acting as agents and not taking ownership or responsibility for the transaction. Examples of these are “Titan Global” (titancanada.com) and “Coast Fraser” (coastfraser.com). These websites can be characterized as vague and make certain claims that are well beyond the reasonable industry standards (i.e. “Our tallies are 100% accurate”). Further investigation reveals that some are simply an office, without a physical warehouse or yard.

Lessons learned from portals and brokers

These “portals” typically reflect a very narrow spectrum of the value chain (i.e. broker to broker, or broker to distributor) and oftentimes the listings are surplus, off-grade or damaged product.

Careful attention must be paid to the fundamentals of an electronic tendering strategy’s business model and service offering. Its primary role must be to identify and facilitate sales transactions, rather than being an intermediary or take ownership of the wood products.

On the merits of our analysis, we advise that the existing alternative marketing options reviewed here are deficient in terms of First Nations producers’ demands and expectations. We believe real business impact will be catalyzed through the expansion of markets for First Nations manufactured forest products by First Nations at a national scale. To do this, increasing the efficiency and reach of First Nations forest products marketing must be facilitated. Conclusively, NAFA’s OriginalWood Market Access System will do just this in an innovative format and function.