How to develop construction material trade via the Internet
Despite the complicated economic situation, the market for construction materials via Internet trading is growing in Russia, not despite, but because of, the crisis, which has made large producers look for new opportunities for distribution. Such a conclusion was reached by the participants of the round table titled “Internet for marketing - efficient strategies for construction material online trading”. However, according to experts, construction material producers should not jump into the Internet as if into the deep end.
Large retailers’ sales grow
On the whole, the market of internet sales in Russia is not so large: about 2.5—3% of total goods turnover in Russia. It is not surprising that almost all the main parameters show growth, according to Vlad Shirobokov, Director of the «East West Digital News» online magazine. Sales are growing in terms of roubles, pieces and numbers of orders.
Regions are growing faster than both the capitals: the online retail market in Moscow and Saint Petersburg is busier and the rivalry is fiercer. Another trend: 50—60% of all orders come from mobiles and pads.
Large players are showing the best growth, as they have the main traffic and established relations with customers. On the whole there are 600 online retail players in Russia, but only three or four of them may be called really large.
Russia is in the early stages, with only 3.5 purchases a year per person in this segment. China is the leader in the global online retail market, the USA takes second place, and then come Great Britain and France.
— The fact that we are not among the leaders is actually positive, Vlad Shirobokov is sure. — We have possibilities for growth despite any perturbation in our economy.
By the way, according to Sergei Timokhin, head of the industrial sales department of Yandex, the DIY niche stands out from the pack.
— The total demand for the DIY segment is growing every year, Sergei Timokhin says. — It is definitely a positive trend. As compared with electronics and fashion, where the interest is decreasing, the number of DIY searches per user is growing.
How much to build a website
Today, many large companies are trying to find new opportunities for selling their products. One of the main channels is the Internet. Everything seems simple as soon as one starts a website. But it is not so simple…
According to Nickolai Kozak, director for Internet commerce at “Leroy Merlin”, there are several serious problems. The first one is the degree of one’s own team’s readiness for such a novelty.
— I would recommend you start structural transformations in the company, the expert advises. — The employees working in shops will start worrying that the Internet will detract from their sales, and soon they may be fired…
Olga Kuznetsova, head of IT-solutions for business at the “Saint-Gobain” company, agrees with him.
— If there is a marketing department for each group of goods, and it has its own strategy, while sorting out the Internet marketing, one should take all of them into account and give them all a place on the website, the specialist says. — Because they will argue about the location of their banners, pictures, etc. Strange as it may seem, it is not easy come to an understanding with colleagues. Any cross-functional communications including several departments is a special topic …
The second challenge is logistics. What is good for a retail chain does not suit the Internet. It is quite a different thing, demanding investments and a different approach.
The third difficulty is IT systems, which your colleagues will have to learn in detail.
— You will have to learn what the digital-platform launch is, what the ID of a product is, a customer, an order… Nickolai Kozak warns. — Besides, you will have to understand what 24/7 support is, and how frightening it is when your website, visited daily by hundreds of thousands of customers, suddenly fails, and you have to do something urgently...
From the specialist’s point of view, a company wishing to work online will have to hire “very special” people to achieve success: on the one hand, they are to know both the customer and the retail business, and on the other, they must be ready to master new mechanisms of sales and move forward.
There is one more problem — relations with offline distributors. Some specialists think that starting sales in the Internet is not the work of one year: a producer must clearly arrange relations with online retailers and offline distributors and to understand how the two channels will interact in one territory.
Summing up all the “buts”, launching an Internet site, according to expert evaluation, will cost a producer about 10m roubles.
How profitable is it to trade on the Internet?
One should clearly understand that selling via the Internet is not a panacea but only one trade channel. Firstly, the price of goods on the brand website is often higher than distributors’, as this price is the result of negotiations between the income director and line directors, partners and rivals inside the company.
Secondly, not the entire line of products may be sold via the net. The head of the marketing and distribution department of KNAUF CIS Group, Alexei Zimin, thinks that there are products better sold by distributors, as they can give the necessary consultations to customers and will show them how to work with the materials.
Online sales also have their advantages: when buying a product from a producer via the Internet, people believe that they will get a quality product.
—Mainly, owners of private businesses look for construction materials on the Internet. These are people who hardly do repairs themselves but take part in making a decision.
Where to sell
According to expert opinion, if a producer decides on selling on the Internet on his own, it is better to start in Moscow or Saint Petersburg. The market there is established and it is easier to find contractors (fulfillment operators). One may master the skills of direct sales and relations with customers. However, regions should not be forgotten.
— Regions are our future, Nickolai Kozak stresses. — Once there was an excellent program realized – “Internet to every school” – and fiber lines were laid. As a result, penetration of the Internet in the regions was enhanced.
Nickolai Kozak advises you to start your expansion into the regions from Yekaterinburg, then Novosibirsk and other cities with a million-plus population.
— There are models that may be calculated and they are rather simple, he continues. — This is your website’s traffic, the average salary in the region, the number of higher educational institutions and internet shops. As a result, one may achieve average growth of about 20% a year.
Who, if not you?
But it is not compulsory to open your own website: one may use the existing DIY networks to sell the most popular brands. The largest of them are “Leroy Merlin” (the correlation of sales via the Internet to the total company’s turnover in the retail segment is 7%) and Home Décor, having up to 7.3%. We may also mention such famous retail chains as OBI, Castorama, and K-Rauta.
“Petrovich” and “OTTO Group” should be mentioned separately. Their online sales are 80%, as they do not have shops where offline customers may come.
These companies constantly update their service, invest rather large amounts in the development of digital strategies and sales geography expansion, and focus on complex solutions.
However, such chains are not interested in the promotion of brands, and work with them cannot be limited to giving them goods for sale. Mutual planning, shelf simulation, and research on customer preferences should be carried out. Besides, a special trade mark for online trade may be created.
Meanwhile, the situation on the market is changing constantly. Consolidation tendencies are being observed now. According to Vlad Shirobokov, 19 out of 100 income players are present on the DIY market, but in a year there will be 10 or 15.
— If in 2010 a user searching for “shop” found only 10% of brands, in 2015 they found about 46%, Sergei Timokhin says. — It means that many users now associate a specific product family with a specific shop.
According to the expert, expanding the set of product families is a winner, but there are few shops in Russia yet that can meet all customer demands.
— The future belongs to the shops which will be able to present a unified solution: that is, the whole set of what a customer needs for repairs or construction, the specialist thinks.
As we can see, every construction materials producer will win from online marketing arrangements. It seems to be the only sales channel showing growth. It is up to a businessman to decide which way to go: his own website or the existing DIY chains. It depends on his requirements.
— And do not forget about mobile, Vlad Shirobokov reminds us. — If you are not in mobile now, next year you will be nowhere.
According to information voiced at the round table, “Leroy Merlin” delivers goods within a radius of 300 km, “Saint-Gobain” 100 km. With “Leroy Merlin” the return of goods is possible up to 100 days to any shop, with “Saint-Gobain” up to 14 days.