If your contractor customer breaks a tool on the jobsite, you can likely count on selling him a replacement. If he knows he'll be needing to purchase a new air compressor, you can count on that sale, too.
Or can you?
While overall retail sales climbed 6.9% between 2009 and 2010, online sales grew at twice that pace, rising 14.8% to reach $165.4 billion, Internet Retailer reports. And that increase wasn't just from sales of e-books and iTunes: Eight of the top 100 Internet retailers sell lots of the same products you do. That list features two big box stores (The Home Depot and Lowe's), a tool and equipment retailer (Northern Tool + Equipment), a hardware dealer (W.W. Grainger Inc.), a home improvement retailer (Build.com), No. 1 e-tailer Amazon, and two other mass merchants. The Home Depot's website led to $500 million in sales last year, Internet Retailer says. That tops the total sales of all but about a dozen pro construction supply companies.
To be sure, pro builders aren't the driving force behind such Internet sales; a survey of residential contractors by L.E.K. Consulting finds that the share of respondents' building products purchases made online totaled only 2% in 2006 and 3% in 2010. But by 2013, L.E.K. found, the respondents expect to make 4% of their purchases over the Web–a growth trend that Robert Rourke, vice president and head of LE.K.'s basic industrials practice, says merits attention. In addition, if one accepts as general truth the anecdotal evidence about dealers reaching out more to retail and remodeling customers, then LBM operations are increasingly likely to find themselves competing with virtual stores.
"I think the online piece is something this industry is unprepared for," Rourke says.
It's understandable why e-tail customers have been burning up the bandwidth to purchase commodities more traditionally sold in hardware stores, like power tools and plumbing and electrical parts. You can sit in your skivvies and comparison shop for a new wet saw blade, high-powered drill, or even a Briggs and Stratton riding lawn mower from sites offering prices that may well be better than you can find at the local big box, hardware store, or LBM dealer. You can get peer reviews of the product before you buy, and then can have those goods delivered to your doorstep–often for free.
Not only that, customers who purchase by credit card can rack up points that they can then exchange for cash, gift cards, or a whole slew of other products and services. To some, that's better than getting a discount for paying by the 10th of the month.
Even though she feels there "is still a human element in the deal that has to happen," Jane Fesler, manager of St. Paul, Minn.-based Lampert Yards' metro locations, believes that dealers who ignore Internet-based services do so at their peril. "If you don't have an Internet site and an e-commerce site, you will struggle against your competitors," says Fesler, a former executive for AT&T Consumer Products who later worked in Silicon Valley. "People like to have access to their accounts 24/7. A lot of builders are on the jobsite all day, then come home and do their paperwork and billing at night and want to be able to access their accounts at the yard.
"Eventually, I believe there will be a whole lumberyard online," she predicts.
Dealers are moving in that direction, but at a snail's pace. Even among the country's biggest dealers, only 15% of the ProSales 100 members responding to IT-related questions on our latest survey said they had a full online store. Roughly one-fifth let online customers check inventory and pricing, track orders, and make purchases, while about a third provided customer account access and online invoicing. (Co-ops can help you get started here. Do it Best has an online store that its members can link to, and Lumbermens Merchandising Corporation provides its members with software support that allows them to create an online catalog of products.)
Mark Pearsall was one of the industry's early technology adopters. Pearsall, vice president of sales and marketing for Berkeley, Calif.-based Truitt & White, installed the dealer's first computer in the mid-1980s. As his customers started buying computers, they asked him if there was a way that their computers could talk to each other. He developed a system that allowed them to dial in by modem to check pricing so they could write estimates.
"All of a sudden, it seemed like the greatest thing in the world. It gave us a ton of notoriety," he says.
The system expanded with the requests of Truitt & White's customers. They asked to see their invoices, which Pearsall was happy to let them do.
"That really made sense to me," he says. "The sooner they could see their invoices, the sooner we got paid. It immediately improved our cash flow."
Recently, Pearsall turned the system over to BuilderLink, a Springfield, Ore.-based company that has expanded it and is rolling it out nationally. President Steve Killgore describes BuilderLink as a web-based platform targeting smaller builders and remodelers who aren't big enough customers to have an account rep assigned to them. It has an estimating module that links directly to a lumberyard. Pros can research prices, look up product specifications and technical literature, check inventories to see what's in stock, talk to other construction professionals in forums and even watch installation videos. They're doing much of that with smart phones and tablets. (See "They're Getting Smarter.")
Fingerle Lumber in Ann Arbor, Mich., offers online ordering and delivery through its website for credit card customers. "The fact is, we know we have a lot of traffic on our site, and [customers] do use it for research," says president and co-owner John Fingerle. But Fingerle keeps that success story in perspective. When the customer wants something delivered to a remote site, he says, most people pick up the phone.
"Lumber and building materials are fundamentally different, and one material can be used in many different ways," Fingerle says. "They still need advice." Of course, that sort of service puts more pressure on a lumberyard's customer service reps, at a time when staff has been curtailed by the economics of the recession, and everyone is wearing at least two hats.
The result of those time and money pressures could be that dealers will end up treading water while the Internet wave pushes others forward. The IT director at one Western yard had big plans for e-commerce when he first came to the job, but the yard's owners proved reluctant to do more than stick their toes in the Internet pool. Seven years down the road, he says, things haven't really changed.
"They don't even have e-commerce," he says wistfully.