Paying a bill online is old hat in this age of e-commerce, and it's growing rapidly elsewhere. At a time when most brick-and-mortar retailers were complaining about lagging sales, online sales Dec. 1-5 rose 9% from the year earlier to reach $3.74 billion.
But for pro dealers, the industry still wrestles with accepting online payments, largely because the technology needed to make them cost effective is not readily available.
This is true even with the biggest dealers. Of all the companies in the 2008 ProSales 100, fewer than 3% accept online payments. "I don't think they are not buying into it. I just don't think the exact technology is there for them to do it," says Jerry McNamara, owner of BuilderWire, a Bedford, Mass.-based provider of business software.
Steve Lochbaum, vice president of finance and administration at Professional Builders Supply in Morrisville, N.C., the middle of the tech-savvy Research Triangle region, says the company is looking to adopt an online payment system but would prefer to accept bank-to-bank payments as opposed to credit card payments. "We have a number of customers who are pushing to use credit cards, and we would like to take advantage of that, but we are working on reducing the cost in order to allow that to happen," he says. "In this competitive market, we are doing whatever we can to keep sales going and cash coming in."
The technology for accepting payments online from a credit card is more readily available. But dealers that have investigated electronic payments have run into a common obstacle: the cost behind accepting credit card payments. While a bank-to-bank payment typically carries a charge that is a tiny fraction of the transaction's cost, credit card processors charge up to several percent. In a low-margin business like lumber, the difference on the bottom line between a bank draft's cost and a transaction paid with a credit card can be significant.
Even Stock Building Supply, the second largest U.S. pro dealer with 2007 total sales of $4.7 billion, accepts online payments only from holders of its private-label credit card.
Having the right level of security is another barrier to creating more widespread online payment systems that cater to dealers. McNamara says hackers have become more and more sophisticated and have the patience not only to break into a system but also get into its payment mechanisms.
McCoy's, the San Marcos, Texas-based dealer with 84 locations in five states, decided more than six years ago that real-time online access would be part of its business plan, and developed its own online payment system. Contractor customers can view and print invoices as well as make payments to their credit accounts by providing a bank account and routing number. Once a payment is made, the contractor's credit is freed up in real time.
Dan Stauffer, McCoy's vice president of marketing and real estate, says that while the transactions happen in real time, there is a "trust level" since the funds do not clear for up to three days. But while more than 5,000 McCoy's customers can view their invoices online, only 250 customers take advantage of the service and pay their bills that way, according to Stauffer. Where the system has been most popular is giving customers access to their invoices and seeing what types of materials have been picked up and when, particularly when a subcontractor is authorized to do so. "That's been a big plus for our customers," he says.
Last March, BlueTarp, a financial services provider that caters to the building materials industry, rolled out its own system. Like PayPal, which lets eBay shoppers pay sellers via a third party, the BlueTarp system lets contractor customers pay their dealers via BlueTarp through a partnership with Wachovia Bank. Since introducing the system, nearly 10% of all payments BlueTarp receives are made online, "and it's steadily ramping up," says Shawn Cunningham, vice president of operations. The company also accepts mail-in and pay-by-phone payments.
"It's a matter of how much dealers really see a need for it," Cunningham says. "But it does take a significant effort to get it up and running in a safe and secure environment."
McNamara believes there is enough interest in the industry, particularly when it comes to dealers being paid that much faster. Within the next six to eight months, McNamara expects BuilderWire to have its own system running, with 10 to 20 dealers on board almost immediately.
"They have gotten into the Internet, and they are seeing the light," McNamara says. "Payments will be a part of the online systems they are deploying, if not the biggest."
But he adds: "You have to have a bulletproof system."