Klang Valley, Malaysia, August 29--Hardwood flooring manufacturer Ekowood International Bhd expects its local market share to grow from the present 7% to more than 12% by 2007, said chief executive officer Tan Aik Sim.
"Since we started marketing in Malaysia five years ago, our market share has grown to 7% from nothing. From now onwards, we are going to grow very much stronger," he told StarBiz.
He said improvements in living standards and spending power, coupled with the growing property market, would help boost demand. Furthermore, the increasing number of mid to high-end range of residential properties within the Klang Valley also bodes well for Ekowood's products.
"I'm full of confidence in the local market. It will get better as more and more developers and architects are using our products," Tan said.
He said there were two market segments – construction and renovation – noting that construction in Malaysia had not reached the maturity of that in Europe, which was more dependent on renovation activities to generate demand for wooden floor.
Market demand for wooden flooring was estimated to grow to 10% in the next decade from the current 6%, he added.
He pointed out that there was a difference between solid wood floor and engineered wood floor that Ekowood made. Although the former looks better, it faces problems like gaps and warps. Engineered wood floor, on the other hand, can withstand the large gap of moisture content and last longer.
He added that the Malaysian custom of not wearing shoes at home helped to preserve the flooring longer as "we do not bring in sand into the house, thus reducing the damage to the floor."
He noted that architects, interior designers, developers and individual home users were beginning to realise that wood floors were more beautiful than other types of flooring.
"Some 15 years ago, solid wood floor was the major player, commanding 80% of demand, but today it's 25% because people are changing to our type of floor," he said.
Ekowood's wide range of engineered wood floorings uses about 65% of local and 35% of foreign wood, mainly imported from Brazil, the US, Europe and Western Africa.
Tan said regionally, China was still using a lot of solid wood, but 10 years from now, it was likely to change to engineered wood floors sooner or later, and consumers would face similar problems with solid wood.
The company, which currently sells mainly to the US, Europe and China, is also planning to widen its presence in the Middle East by setting up two showrooms-cum-offices in Abu Dhabi and Qatar, both in the United Arab of Emirates, by the first quarter of 2006.
"The Arabs prefer to see and touch the products rather than to visualise them. I don't expect a lot of business during the first year, but it's a good start to put our name there and to give an opportunity to architects and interior designers to have a feel of our products," Tan said.
According to Tan, Ekowood's business model is slightly different from that of other timber companies that usually appoint agents overseas to sell their products.
"We decided to take the supply chain management into our own hands, which involved a lot of branding. Although it does increase our costs every year, it gives us the advantage of having first-hand information and we are not limited by the agents' capacity," he said.
He noted that Ekowood's products garnered as much as 16% to 17% margins, compared with the 8% from agents' sales.
By building on the brand, it would give the company the flexibility to dictate what products to sell, as well as facing less fluctuation in margins, he said, adding that the company spent about RM5mil to RM6mil every year on branding activities.
"We want to move away from the commodity segment, which people trade without looking at the product. Instead, we want to be a brand that is being recognised internationally for wood flooring," he added.