The Seismic Shift Toward Point of Purchase Wood Displays-Part I

Why They are Here to Stay and How You can Use them To Drive Sales and Build Brands

Point of Purchase wood displays have quietly been growing in popularity over the last several years. However, recent events, together with a set of underlying market forces, are likely to increase the trajectory and retail presence of wood displays in the coming years. In today’s blog, we’ll explain what’s behind the unmistakable shift toward wood displays, and then in Part II of this series, we’ll provide numerous examples of custom wood displays designed to drive sales and build brands.

Buddy Fruits Wood displays

So, what’s driving the shift toward wood displays? The answer is based on the confluence of 5 key factors:

1) Distribution of Natural Resources (i.e., Who has the Trees?)– The fundamentals start with who has the trees. When it comes to wood displays, he who has the trees has the economic advantage. China has 139 billion trees. That sounds like a lot, but it works out to only 102 trees per person- one of the lowest per capita rates in the industrial world. Contrast that to the U.S. which has 228 billion trees and an average of 716 trees per capita- over seven times China’s per capita rate. Other countries like Brazil (1494 trees per capita) and Canada (8953 trees per capita) have an even greater natural resource advantage. The per capita tree rate helps to explain why India, which only has 35 billion trees and a measly 28 trees per capita, is in the call center and software business rather than hosting lumberjack conventions.

forest Of Dean Wood displays

China has been a dominating force in the production of POP displays, but when it comes to wood displays, their labor cost advantage is not enough to overcome their natural resource disadvantage. While China still has a cost advantage for wood composite products like MDF, when it comes to displays made of solid wood (both softwoods like Pine and hardwoods such as Oak), the cost of producing displays in China and the U.S. are pretty similar. That is a result, in part, of the fact that Chinese display manufacturers often have to import solid wood which significantly reduces their labor cost advantage.

2) Steel Industry Economics– Against this natural resource distribution backdrop and the associated economics, it is important to consider steel industry economics. It’s relevant because the majority of displays in the retail industry are made primarily of metal. Unlike wood, when it comes to steel, China has an overwhelming advantage relative to the rest of the world. In fact, China produces 49% of the 1.75 billion metric tons of steel produced globally- more than the U.S., Europe and a host of other industrialized countries combined. China’s strength in steel helps to explain why so many retailers, brands, and POP display companies have moved to an overseas production model and why metal displays account for a disproportionate share of retail store display placements.

steel factory china Wood displays

However, as environmental concerns loom, as wages continue to rise, as the it approaches the technical limits of existing technologies, and as it deals with excess capacity related to the post-peak demand era, China’s steel industry will be forced to raise prices which will reduce the relative advantage of metal used in POP displays vs. wood.

3) International Trade Developments– While there continues to be widespread fear and anxiety within the POP industry about tariffs and impending trade wars, our view is that we are watching a global negotiation unfold that will result in more of a level playing field but not really a new industry-wide cost burden. There are, however, a couple of developments on the international trade front that support our argument that wood displays are approaching a growth inflection point.

Tariff Wood displays

First, the U.S. government recently implemented a 25% tariff on imported steel which will erode at least some of the relative advantage of producing metal POP displays in China vs. wood displays. While the tariff is for imported raw material steel, it will undoubtedly reduce demand and force China steel producers to raise prices which will drive up overseas POP manufacturing costs.

Second, in December of 2017 the International Trade Commission issued a ruling on China dumped and subsidized hardwood products, thereby activating significant tariffs of nearly 200% on a wide range of Chinese hardwood products. This ruling is likely to have an even more dramatic impact than the steel tariffs, which is to say prices will increase, further disadvantaging POP wood display manufacturers in China and creating an additional boost to U.S. wood display manufacturers.

4) Shift in Consumer Preferences Toward Natural Products– The forces at work described above are largely economic in nature, but consumer preferences and shifting social norms are also helping to fuel the growth of retail wood displays. There is a clear shift among consumers toward natural, organic, and sustainable products. That preference shift has, in turn, changed the requirements of brands who increasingly want their displays to be made of wood to support their natural products story and image.

herbs Wood displays

5) Shortened Planning Horizons– In addition to the economic and consumer preference shifts, planning horizons have shrunk over the past few years. What that means is that for many projects, overseas production is not an option. Instead, brands and retailers are faced with a shorter production window which will favor wood displays over metal displays since producing metal displays in the U.S. is still a relatively expensive proposition.

In summary, when all factors are considered, there is a strong case to be made for a large surge in demand for wood displays. In Part II of this blog series, we’ll share numerous examples of wood displays and discuss how they can be used to drive sales and build brands.

Start Your Next POP Program Today

Leave a Reply

Your email address will not be published. Required fields are marked *