Changing consumer behavior – a growing challenge for installers, wholesale trade and manufacturers
For many consumers in Europe Online Shopping is normal in most product categories. For technical products such as consumer electronics, telecommunications and computers the Internet is the preferred buying channel. Forecasts predict a continuous further growth of eCommerce for the next years.
Currently, the share of online sales in the sanitary field is still qute small, but again very high growth rates are expected. This development is not only driven by the conviction of consumers to obtain better prices online. To the same extent there are factors such as convenience (comfortable shopping from home), the delivery service and the ability to easily find and compare products, what makes online shopping more attractive.
But especially here, the traditional distribution channels for sanitary products have their limitations: bathroom objects and taps are expensive products and usually they are offered by installers as a bundle (installation and product). As a result, the prices are not very transparent. Compared with the offerings of existing online suppliers of plumbing products, these bundle rates appear much more expensive. Therefore it is not surprising that new market players in this segment as well as existing large online shopping portals are already achieving significant growth figures in the field of sanitary products.
New, fast growing, market players started conquering the sanitary market
The hesitation of the traditional market players to engage in online consumer sales has left room for new types of (online) suppliers. For example, in the heating industry the first full service online supplier positioned themselves in Germany to meet the requirements of customers for security and transparency. A European online shopping club in turn provides inspiration and low prices around furniture and decoration. Even here, you could already buy bathroom fixtures. Another US-based leading platform for building, furnishing and renovation projects brings together homeowners and interior design experts in a unique community and provides a platform for home improvement and design.
And this is only the beginning: The private equity industry has discovered the Home Improvement sector and attests considerable potential. Well financed and modern online offerings using new technologies, such as Augmented Reality, will create more transparency and convenience thus turning the industry upside down. Accordingly, a lot of capital is currently invested into such innovative companies fueling their growth and rapid internationalization.
These disruptive developments will result in significant changes for the structure of the sanitary industry.
The consequences for all industry members are serious:
New opportunities and risks for installation services
On the one hand side, the increasing market transparency will put the crafting sector under price and quality pressure. On the other hand, companies that use the opportunities of the new online platforms can grow significantly. Those who continue to oppose online activities will experience that customer loyalty decreases and seemingly loyal customers will start to shop online.
Manufacturers need to review and expand their sales strategies
Manufacturers will face more and more the question of whether they can survive without the active processing of new online channels. They already do invest into attractive and inspiring corporate websites. Using new technologies and networks make it much easier now to build up online direct sales than it was a few years ago. The growing market power of online stores will force them sooner or later to think about delivering to online shops too.
Resulting sales channel conflicts are still an obstacle for many traditional manufacturers. Because of gradually declining significance of the classical distribution channels (unless they change their current strategy and open themselves to online consumer business), price pressure and global competition, addressing these conflicts cannot be avoided. Other industries have already shown that there are ways to manage those conflicts successfully, solve or even avoid them.
Wholesale trade must reinvent themselves
The sanitary wholesale trade will have to face with the greatest challenges. Their classic functions such as purchasing from manufacturers, assortment building and local storage will become less significant caused by online vendors and modern logistics. Additional pressure on the margins will come from increasing price transparency. Investment in expensive bathroom showrooms will pay off less and less.
So what to do?
Wholesale trade needs to rethink its business model and sales strategy in order to adapt to the changing environment.
There are options to do so, e.g.:
New (paid) services and (online) tools for installers and manufacturers could be developed and sold in addition to products. This requires a substantial change in the self-understanding of wholesale trade towards a service provider whose aim it is to help its customers to be more successful in their business.
Another option is to actively address eCommerce and to build own platforms which are open to consumers. Also cooperative solutions with installers and / or manufacturers are conceivable.
In any case, it is necessary to think far beyond the borders of today’s business and also to review existing paradigms. This is the only way a successful further development and a long-term prospering of the wholesale trade business model can be ensured.