Constructive resources
When construction distributors build their Internet strategies around particular contractors' needs, it's a 'clicks and mortar' feast
By Ken Brack -- Industrial Distribution, 3/1/2000
Construction distributors are bending, but not breaking, the mold by how they use the Internet. Scores of companies have established Web sites, and the capabilities and resources they offer vary widely. Many sites list and display products and give the distributor an online marketing presence. Only a few link customers to manufacturers or allow buying over the 'Net. Instead, many sites direct customers to pick up the telephone to place an order.Going further, large national firms like Hughes Supply and small distributors have each discovered the value of establishing virtual resource centers. Their sites often enable customers to discuss tool tips, applications updates, and in some cases, even provide industry and community news. Some firms go the extra mile to tailor their Web site to customers -- Williams Equipment & Supply Co. in Memphis, Tenn., offers its products in Spanish, for example.
The differences in Internet use have less to do with a distributorship's size than which segments of the construction industry the firm is devoted to. For example, while searching catalogs and ordering online may appeal to contractors who routinely buy the same power tools or electrical supplies, HVAC or water-sewer contractors often seek more specialized parts and may prefer other services, such as, help with the lengthy bidding process.
"A challenge now is gathering information from customers as to what their needs are ... in the past a lot of people have slapped up a buying site without really seeing what the customers' needs are," says Tom Ward, Hughes Supply's chief technology officer. Hughes Supply is a leader in using the Internet to reach customers in nine product groups that include building materials, PVF and electrical utilities.
How a construction distributor chooses to show products and create valued services on the Internet is of growing strategic importance. A recent survey of Specialty Tools and Fasteners Distributors Assn. members points out the skyrocketing use of the Web, but suggests there are limits -- perceived or real -- as to how effective it is for selling tools and equipment. Two-thirds of reporting STAFDA firms said they have Web sites, and of those that did not, 90 percent said they planned to soon. Still, fewer than 20 percent of the reporting firms had sold products over the Internet and their combined revenues totaled less than $1.5 million.
It isn't hard to find companies that have strengthened ties with longstanding customers and brought in prospects via the 'Net, however. Small distributors like Russell Supply in South Burlington, Vt., are testing the waters with sites that offer fresh products and references.
Knowledge nucleus
Almost two years ago Russell Supply established a Web site (www.toolsvermont.com) as a nucleus of information for contractors, machinists, woodworkers and others. The site lists products in about 10 categories and links to more than 100 manufacturers. It also includes sections for professional trade association and personal interests, which include access to the Vermont Manufacturing Extension Center, a "My Town" community reference site, the Vermont Crafts Council, even links to local ski areas and national news outlets.
"What we're basically selling here is knowledge," says company president Bill Russell. "That site is a library ... if [you] are up at 2 a.m. you can go on and go do your homework. It's more than a service than it is sales."
Russell, who founded the 12-employee company 25 years ago, says that before hiring someone to develop the site he checked out what other firms in various trades were doing online. Early this winter he added a "SKU search" and online ordering just for material handling equipment as a tryout, but Russell remains skeptical that Internet ordering will be a big hit for his customers, who largely work in small machine shops or are contractors. Many of them are just beginning to use the Internet at work themselves, he says. The vast majority of sales involve follow-up calls after someone visits the site, and locally it's also used as a training tool.
"You have to integrate personal interactivity with the customer," he says. Although sales have risen slightly, Russell adds there is no evidence yet that selling from the site will dramatically boost revenues -- he believes a 10 percent increase would be about the limit.
Still, Russell says having the site is a useful tool for his outside salesmen, who can quickly show a customer a supplier's updated catalog. "As their product lines change and their site changes, one always has a current catalog in front of you," he says.
He believes the connections and research available at Russell Supply's site are invaluable. "We make it easy. We try to become part of their community wherever they work," he says.
The distributor doesn't shy away from making the site appealing to the eye, either. By clicking to "Russell's Weld Center" within the site, users see virtual sparks fly from a welder's torch. The point is clear: the section showcases Russell's custom welding service for bandsaw blades.
Investing in new channels
Orlando, Fla.-based Hughes Supply is one of the few construction distributors large enough not only to develop a comprehensive Web site but also invest in promising B2B online marketplaces. The $3 billion company is doing both, says Ward, the CTO and vice president, with a careful eye to provide what different customer groups need.
Hughes provides line cards for products and suppliers online. Yet perhaps because of its size and the complexity of connecting disparate computer systems at 472 locations, Hughes has not posted a catalog or offered online buying on its corporate site, although some branches -- mostly acquired companies that developed online sales on their own -- already do.
"There are some examples of customers who are making damn sure it happened, and some branches that have been more aggressive and made it happen," says Terry Helms, Hughes' marketing director. He and Ward say the company is cautiously exploring its options to conduct online sales corporate-wide.
"We want to be smart about it," adds Helms. "I guess we don't feel we need to be first."
In the future, Hughes expects to provide self-service options for customers to check prices, order status and their credit. The distributor also publishes its own magazine, The Source (www.thesourcemag.com), which features articles on trends and solutions in nine product groups.
Late last year Hughes Supply invested in supplyFORCE.com, the company formed by Affiliated Distributors as an e-business center point for distributors servicing AD's national accounts. By participating in the venture, Hughes Supply will gain access to large end users that want to standardize their MRO buying processes and reduce vendors.
"They are an electronic market for customers and distributors," Ward says. "Given our variety of product and the geography, it is very big for us."
"Big national distributors will tell you, if they're honest, that it's very hard to achieve a similarity of processes over a wide expanse," he continues. "SupplyFORCE.com takes care of that and makes processes consistent. We become the back end fulfillment, and being able to be a national player in that is great for us."
In January, Hughes Supply also invested in and joined the management team of bestroute.com, a startup virtual marketplace specializing in hard-to-find electrical parts. Bestroute.com, which plans to open this spring, expects to expand into markets like HVAC and PVF. Ward describes it as a "pure dot.com, a pure Internet play" whose intent is not to compete against the traditional distributor but provide typically slow-moving class B, C, and D items.
Explaining the two investments, Ward says, "We don't believe there's going to be one model or channel that wins in this ... obviously there are opportunities for us to sell to existing customers online, but that is not the model many customers will work in."
Tailoring sites to customers
With robust growth expected to continue in many construction markets this year, more distributors will likely develop and refine their Internet strategies. Contracts for new construction slipped a bit at the end of 1999 but the year ended with a nearly nine percent increase, the eighth consecutive year of expansion, according to industry analyst F.W. Dodge.
Complicating the decision of which 'Net strategy to pursue is the crowd of e-commerce hubs on the World Wide Web vying for business in the construction materials industry. Notable startups include BuildPoint.com, which recently hired James Piraino, electrical distributor WESCO International's top marketing executive as its CEO, and BuildNet, an e-business center for the residential construction industry that distributor Cameron Ashley has invested in.
The question many construction distributors face is whether to go it alone with their own Web site, or join one of the construction e-commerce hubs or a broader market player like supplyFORCE.com. Hughes Supply's Ward and others suggest that customer preferences should drive the decision.
Like Vermont's Russell Supply, examples abound of small and regional firms that developed online services targeted for specific contractors and other customer groups. Salem, Oreg.-based Western Tool Supply (www.westerntool.com) hosts a "tool talk" where users pose questions and receive responses from the staff and other customers. Specials, close out items and searches by manufacturers are also offered.
Williams Equipment & Supply (www.williamsequipment.com) goes the extra step by duplicating its entire Web site in Spanish for its Latino customers. The firm, which operates in Tennessee, Arkansas, Louisiana and Mississippi, receives orders to purchase or rent equipment over the Internet, credit applications and more. Customers, however, cannot locate part numbers on the site before making their order.
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