Digital casualties litter the recent past. Andy Scothern, Managing Director of digital transformation specialist eCommonSense, explains why merchants must transform or die.
For years, the building materials industry has failed to fully embrace the opportunity of eCommerce.
Over the same period, digital has transformed retail in front of our eyes with some long-established High Street names brought to their knees by new digital upstarts. Many of these household behemoths went through the full cycle of spotting the opportunity, trying to respond but still failing to be competitive online.
History has always been a valuable resource for those predicting the future and the tale of the High Street provides a useful lesson for the building materials’ industry. Similarly, Amazon and Screwfix, amongst others, have set their sights on the building materials market, so the urgency just ratcheted up a few notches for merchants who now must modernise quickly or die.
As Eric Shinseki said: “If you dislike change, you’re going to dislike irrelevance even more.”
Amazon’s strategy is to target markets where they see low hanging fruit, or ones beset by inefficiencies and are ripe for disruption. It’s no surprise therefore that it is pursuing the building materials market, along with other well-known names such as Screwfix and Toolstation.
However, as many of the long-established High Street retailers found, simply building a website was not enough to guarantee survival.
Part of the problem is that manymerchants have chosen to invest a small amount of money to see if trading on the web is viable before they invest more. This cautious approach is a self-fulfilling prophecy — it’s like turning up to the F1 Grand Prix in a pedal car with the expectation of investing in a proper team once a race has been won.
It’s a fantasy to think that this is a possibility, as it’s literally a technological arms race in digital, just as it is in F1. If you want to win the race, you have to invest in the right team and technology at the outset, or you will simply throw good money after bad.
The larger issue is the disconnected nature of the sector as a whole. The entire industry needs to go through a digital transformation, part of which will be connecting the websites, product databases and back office systems of merchants and suppliers. This will enable rapid and accurate data exchange to allow customers to make informed buying decisions.
Without providing this data to customers, a supplier or merchant will simply lose market share to a competitor who can — and if that happens to be a supplier, then merchants can expect to be disintermediated, as suppliers go direct to customers through their own websites.
The digital revolution also offers the opportunity to increase business efficiency by automating manual tasks whilst also decreasing mistakes and delays in the supply chain. So connecting systems can offer numerous benefits — and all of them have a commercial return.
The current situation relies on too much human intervention, which is inefficient and can lead to errors and missed sales opportunities. Receiving supplier data directly not only allows products to be accurately represented online, but also keeps merchants up-to-date with product releases.
So why has this not happened? The reasons are myriad but they start with a lack of awareness, and end with a lack of technical expertise which sandwiches the fact that the industry is not demanding it to happen.
The office products industry provides another good history lesson: Amazon has ravaged that sector to the point where it has undergone huge consolidation and business failure of some household names. Conversely, and to stave off becoming irrelevant, some large office products businesses have connected up their suppliers’ product data systems. The concept, called ‘Endless Aisle’, provides the ability to range a huge number of products and become a one-stop shop.
Big data analysis of these joined-up systems also offers the opportunity for demand forecasting. Merchants and suppliers will be able to predict what customers are likely to order, so that the right stock can be moved to the right place at the right time, creating huge efficiencies.
It is unsustainable and inefficient for hundreds of suppliers dealing individually with hundreds of merchants to provide the same information over and over again. This must change but to date the problem remains.
“The entire industry needs to go through a digital transformation, part of which will be connecting the websites, product databases and back office systems of merchants and suppliers. This will enable rapid and accurate data exchange to allow customers to make informed buying decisions.”
There are lots of reasons for this, but the primary one is that many merchants have simply built a website but not made it fit for purpose with the addition of a product information management solution (PIM). Some of the more advanced suppliers have these systems, but unless merchants can consume the data, their value is limited. In the ideal world, all suppliers and merchants would have a PIM system and they would all be connected, using acommon data standard.
A good example is LinkedIn which has revolutionised the recruitment market; matching jobs with suitable candidates. It allows both employers and job-seekers to enter the necessary data of both the job requirements and the skills of the candidates. This joined-up approach means that the recruitment market has changed forever and made the whole process easier, faster and more transparent.
While our industry fails to adopt this joined up approach, it continues to face attacks from the digital retailers who fully understand the value of data and have it in their DNA.
The good news is that the process has already started with some merchants benefiting from the integrated website and PIM platform that we have built. However, there are still many suppliers and merchants failing to see the need for more fundamental and wholesale transformation.
If the building supplies industry is to avoid the fate of the office supplies industry and be decimated by the likes of Amazon, it must learn from the lessons of recent history. The destiny of the industry remains in our hands and can be saved if we learn from other industries.