It may seem like the entire world is buying everything online—except building materials. But look again.
Last year, BuildDirect.com, a Canadian online retailer of heavyweight building materials, reported shipping more than 1 billion pounds of flooring to customers throughout North America. The Internet’s top retailer, Amazon, sells everything from Schlage locksets to plumbing fixtures—including that favorite dual-flush American Standard toilet with the elongated seat that every custom home builder needs, but no one has ever requested. They also deliver goods directly to the builder for free at a discounted price point.
As the retail environment expands into cyberspace and vendors move into areas once considered safe from virtual attack, dealers increasingly need to consider the threats of e-commerce competitors, particularly for sales of high-margin non-commodity goods.
Of the top 100 Internet retailers, eight sell many of the same products as LBM company: Amazon at No. 1; Sears at No. 7; W.W. Grainger at No. 15; The Home Depot at No. 43; Hayneedle at No. 77; Build.com at No. 80; Northern Tool at No. 85; and Lowe’s at No. 91.
According to Internet Retailer, Forrester Research predicts U.S. e-commerce sales will increase 13.4% this year over 2012, rising to $262 billion. Four years from now, online spending will climb another 41%, hitting $370 million. Used to having their wishes granted by online vendors such as Amazon, Zappos, and Nordstrom, which offer free shipping and returns with speedy shipping times, online shoppers expect the same from other service providers—including you.Even if most builders and consumers still like the personal touch, Bob Sanford, president of Sanford & Hawley, considers e-commerce an “emerging problem.” To that end, the Unionville, Conn.–based dealer has a pretty comprehensive virtual presence. “We have all of our stock product online, and our hardlines are available online,” he says. “We offer pickup at the store or we can ship it. It’s important for our customers to have the Internet [availability], but whether a dealer needs an Internet presence depends on their market niche.”
Another mindset prevails at Western Lumber, up in Gunnison, Colo., a town whose motto is “Base Camp of the Rocky Mountains.” “We can’t leave our county without running into a mountain,” says manager Roxie Rule. “I know there are people here who do a lot of shopping on the Internet, but it’s not building materials. Gunnison is not run by smartphones and the Internet.”
The threat of losing sales to e-retailers is probably more pertinent to dealers that have a significant number of retail customers—as well as more forgiving geology. Those customers are the ones who are tech savvy, using smartphones and tablets to access the Internet, shop for the best price, and make frequent online purchases. Even if the folks in Gunnison aren’t buying building materials online, Coloradans are using the Internet: The Denver Post says Colorado’s state and local governments estimate they lost $172.7 million last year due to residents’ failure to pay the 2.9% use tax on e-commerce purchases from out-of-state retailers.