The choice of sales channels depends on several factors. Much depends on the mills, as well as on the markets and their characteristics. The size of the market and its structure may have an effect on the choice.
Small and independent sawmills and bigger integrated companies often have different operating modes.
Sales channels
Direct sales
Direct sales from the producer to the customer takes place without intermediaries and contract details are determined between these two parties.
Direct sales features:
- Seller avoids paying an agent fee
- On the other hand, from sawmill’s point of view this model requires much more work and it may generate extra sales costs.
- In this model there is often a long, trustworthy relationship between the two parties.
- Customers are often big industrial end users and distributors.
- Credit risk is minimized by insuring the receivables.
Direct sales are perhaps most suited to smaller, specialized sawmills and on the other hand, in markets, where the sawmill only has a few, large customers. The use of other channels on these types of markets is not a workable alternative.
Direct sales can be assisted by the use of internet, which is a good tool as such, but it alone does not substitute the personal customer relationship.
A part of the direct sales concept can be producer’s own terminal sales. This means that the sawmill starts to run a landed stock operation in a target country to facilitate quick and direct sales to local customers.
Own sales offices
Larger companies have also started up their own sales offices to main markets.
In these cases, the local sales organizations sell primarily their own products to different customer groups. These offices require a certain minimum annual volume of sales in order to cover their costs. These costs should be lower than the use of alternative sales channels, such as agents.
This type of sales structure ensures that the producer can sell its desired specifications to customers without the steering from the agent.
On the other hand, this model may lead to restricted specification and limited market information compared with the agency sales model.
Agents and local representatives in export countries
Originally the export sales of sawn goods were based on the use of sales agents. Often sawmills may even have used several agents for a market area.
Today domestic agents and especially export offices act on markets further afield, gathering larger volumes from several sources to areas like Africa and Asia. Their role on traditional markets, especially in Europe, is these days minimal.
Another end of agency type model is that sawmill chooses an agent, which acts as the sales agency for the producer in question. In this model no other sales channels, direct or agency based, are used.
Nowadays these types of agencies often have a few key suppliers, whose interests do not clash and who together ensure a big and broad enough and interesting specification to keep the customers interested.
Almost all sawmills use agencies in smaller markets. For independent small to medium sized sawmills, the sales volumes are usually not sufficed to start up an own sales office.
