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Digital Commerce  – Revolution?

A CIO of a large cement company put it nicely: “Much of this has already been done in the retail industry – but for us, as a cement company, this is a huge transformation journey. Technology plays a significant role, but mainly this is a business transformation.”

Cement companies (and of course, even more, ready-mixed concrete) have rather been operating in a local B2B-business model – mainly to keep transportation cost under control.

This model is being disrupted from multiple angles – all of those points taken from conversations in the last 4 weeks:

  • Amazon (and other online retailers) enter into new product categories like building materials, steel, lumber, millworks. Customer expectations towards ease-of-use, and immediate fulfillment rise accordingly.
  • The digital generation gradually takes over the building & construction craft shops & businesses from their parens  – and expect a digital interaction channel including social media, instant messaging services.
  • New local market entrants take market share on the low-end with offering cement through simple online commerce
  • Retailers like e.g. HomeDepot shift their growth strategy online and stop building new shops
  • Chinese cement companies (who can produce at significantly lower cost) are able to ship & compete across the globe – partly enabled through better, waterproof packaging during transport

Doing “more of the same” online?

It is obvious that – as the market moves online – also “traditional” cement and building materials companies need to follow. Actually, many do far more than that and blend online commerce with new capabilities and more advanced business capabilities, even business models.

One-stop-shop or solution provider

Building projects rarely require only one product. Many companies either complement their own product range through acquisitions or buy-in and re-sell additional products.

Solutions combine products with complementary professional services e.g. for design and installation. Offering own products with services from external contractors requires rather a marketplace strategy than just a web shop.

Click-and-mortar or BOPIS

“Buy online, pick-up in store” (BOPIS) is a widely adopted B2C approach, that also works well for B2B. It increases traffic in stores and upselling potential alongside.
HomeDepot plays this strategy quite effectively.
Besides pick-up in store, several companies offer separate pick-up points or delivery to a construction site.

Channel-conflict or channel orchestration

Some of the companies I talked to have their own retail channel, others rely on large DIY-retailers or own franchises. This is not an easy set-up and may result in channel-conflicts if you decide go online yourselves. There are good strategies to share the revenue opportunity and orchestrate the mixed channel – like BOPIS, offering leads, or offering professional services in specific channels. Check out this blog to learn about many more options.

Cross-channel fulfillment & inventory

Omnichannel seamlessness can act as a major differentiator and protect your local market against low-cost-entrants.

  • “Find nearby distributors” is an entry-level offering.
  • “Availability nearby” is more sophisticated, especially across franchises and independent distributors
  • Orchestration & scheduling of shipments from different distribution centers or manufacturing locations requires sophisticated transportation planning capabilities.
    Best-in-class customer experience includes all required parts “showing up” at the construction site nicely orchestrated like in automotive just-in-sequence planning. No part missing – despite project adjustments and traffic jams.

Power to the pros

Providing “power tools” to internal sales reps is often the first step:

360° customer insights through cloud and mobile apps at the POS and for mobile field sales – including recognizing all touch points of a customer along his customer journey, across the many-fold interaction channels

Digitalizing showrooms, reference projects, and samples can boost the sales effectiveness – and the brand experience. They can even evolve into a social channel to interact with influencers like architects & designers.

Power to the professionals – as a second step also distributors and franchises – and finally to the B2B-customer pro, often small craft shops or constructors.

Even more specialized services and products

Individualized products like table-tops or panels with own designs and colors, or plasterboard in custom dimensions, are just a few examples I came across in the last weeks.

Such offerings provide first of all a better profit, but even more importantly they are not easily copied. They require an end-to-end integration from online shop to manufacturing execution, shipping, and billing – enabled for a lot size one production. And they require being locally present. You can’t individualize and support same day delivery as a remote low-cost competitor.

Several building material companies I talked to also offer financial services and building loans, some even consider more sophisticated banking capabilities.

Do. Or do not, There is no try.

I loved the “Famous Star Wars Quotes To Inspire You At Work” – but I do not agree with master Yoda here.

One of the best ways to identify your digital transformation strategy is a customer journey analysis as part of a design thinking workshop. I just returned from such a workshop with a company in Latin America.

Lots of brilliant ideas – next step is to try. Sorry, Yoda. Try, fail, try again. Learn.

Do you want to be part of the challenge? If you are student with a focus on design, business or development, join the SAP Labs Latin America’s Innoweeks 2017 – Construction Challenge.

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