Time and technology slowly are eroding the reasons for dealers to do e-commerce. And while the early adopters have been mostly larger companies, smaller dealers are coming on board a bandwagon that enables their customers to go online and request quotes, review invoices, place orders, and pay bills.
Such services still are rare even among the ProSales 100 membership, which has yet to see a majority provide any of the common services one would find on a consumer site like Amazon.com (see table). On the other hand, a large percentage of PS100 members say they plan to offer those services.
One big driver behind this trend is a generational change among home builders. The building industry—like the LBM industry—has long been dominated by people who predate the fax machine and for whom bleeding edge technology is a cell phone and a basic website. But industry leadership is shifting to younger builders who grew up in the age of Amazon.com, many of whom graduated with business or construction management degrees and understand that being tech-challenged is not an option. Dealers without full e-commerce capability risk losing these builders' business to dealers that do.
"The old-school builders are being replaced," says Chris Rader of Rader Solutions, an IT company in Lafayette, La., that serves LBM dealers nationwide. "If you make younger builders call or drive to the yard every time they want to buy from you, you risk losing them to a competitor that allows them to get information and quotes electronically."
Another thing that will accelerate the move to e-commerce is the need for builders to cut overhead. "Builders are earning much smaller margins than they were back in 2007," says Tom Gebes, CEO of Builder MT, a Denver-based construction management software company. "Overhead is killing them." He says that a builder that was making 20% seven or eight years ago is lucky if it can crack double-digits today. "They're having to do more with less, and are looking to dealers to help them."
Making the Connection
One way dealers can help is with e-commerce applications that web-enable the dealer's ERP programs and let their builder customers save time and overhead by using the Internet do to tasks like checking current pricing and placing orders.
The two main players in this space are BuilderWire, based in Bedford, Mass., and Supply Pro, from Addison, Texas-based Hyphen Solutions. Both work with all the major ERP systems in the industry, including Epicor, ECi, Ponderosa, and Spruce. Builder customers can log on to see quotes and invoices, check order status and make payments. The dealer's sales force can also access pricing from the field.
Hyphen started 14 years ago as a scheduling application, according to CEO Dave Deniger. It has steadily added functionality and can fully integrate with dealers' back office systems. Deniger says his company has about 30,000 users, including a large number of the nation’s biggest building material companies and 10 of the top 15 homebuilders. Its offerings include a bidding tool that lets the builder issue plans and specs and the dealer respond to them electronically. The software can also provide appliance manufacturers with data on sales trends, defects, and other issues.
BuilderWire seems to have a growing presence among smaller dealers, although the company says it serves dealers of all sizes. John Mauri, Spruce Computer System's vice president of marketing and business development, says he knows of 25 or 30 dealers who are doing a great job using BuilderWire to push information from their Spruce system out to their builder customers.
An important feature of these applications is customization. Software providers understand that even the most tech-savvy dealers and builders won't want to change how they do business, so the provider works with each customer to map the software to that company's business processes.
"We need engagement from the dealer to tell us things like how they want their products displayed, and how they want to serve their customers," says Anand Pandey, BuilderWire's vice president of business development. For example, when someone from a builder's staff logs into the system, the system only displays the pricing and discounts pertaining to that company.
But even as the pace of integration picks up, getting the industry online remains a challenge. For one thing, IT consultants and software providers say that a lot of dealers are still using old "green screen" computer systems. With support for those systems dwindling, those dealers will eventually have to upgrade to newer systems that automate the back office. They need to finish this upgrade process before they're able to take advantage of any e-commerce program.
Another big challenge is the generation gap. Dealers who have implemented e-commerce technology confirm that younger builders are definitely on board, but caution that it might make sense for some dealers to ease into the process.
One of these is Arden Dean at Superior Building Supply in Neversink, N.Y. Dean says his company teamed up with BuilderWire about five years ago, after updating its servers and moving its back office system to Spruce.net. "Our website is linked to our point-of-sale system so any data attached to an account is available for the customer to view when logged on to the system," he says.
At this point, only a few pro customers are using the system's full capability. "Most of our contractor base is over 50 years old, and mostly not very friendly to technology," says Dean. "We have about 10 to 12 contractor customers who use the site to the max, and they love it, but these guys are all under 40 and most are under 35." He said the company knew this would be the case, but decided to think long-term. "We built the site for the future. We know there will be a generational change in our business."
Meanwhile, Dean advises dealers who are considering e-commerce to start with the retail side of the business. As part of the upgrade, Superior redesigned its retail website, making it easier to use and adding a lot of inventory. Customers can now go online and order products for delivery. (Superior also is a member of the Do it Best co-op, whose offerings include an online store.)
Dean says the website redesign
is responsible for about 80% of the company's new retail customers. If he were
doing it over, he would implement that first as a quick win for the company and
a way to motivate staff to embrace the full e-commerce effort. "Our website
gets used 98% by retail customers, and I would focus on that if we were doing
it over," he says.