EDITORIAL: The Plumbing E-tail Market
Remember all the hype about e-commerce at the turn of this century? One widely reported study by Forrester Research predicted that by 2004 more than 13% of North American transactions would be via e-commerce, to the tune of some $3.2 trillion. In reality, the U.S. Dept. of Commerce pegged 2006 retail e-commerce sales at $108.7 billion, merely 2.8% of all retail sales. True, that’s only for the U.S. rather than all of North America, but it’s safe to say e-tailers south and north of the U.S. borders did not make up the huge difference between Forrester’s forecast and transactions actually made online in the U.S.
Commerce pegged 2006 e-tail sales growing at a 23.5% pace, compared with 5.8% overall retail sales growth. This is a large bulge in the electronic direction; however, a big percentage gain with such a small slice of the market means less than meets the eye. While e-commerce is bound to grow some more, it’s beginning to look like hands-on shopping will remain the dominant part of our consumer culture indefinitely.
Nonetheless, a few e-entrepreneurs have carved out lucrative niche businesses selling plumbing products over the Internet - chiefly faucets. Put “faucets” into a Web search and you’ll find dozens of e-commerce Web sites. A few are subsidiaries of plumbing wholesalers, although more are so-called “pure play” Web-only retailers. Some of these proprietors have plumbing industry backgrounds, others don’t.
Several months ago I spoke to more than a half-dozen of these e-tailers while researching a presentation I made about e-commerce at the Plumbing Manufacturers Institute Spring Meeting last April. Their consensus guesstimate was that the Internet accounts for between 2-3% of faucet sales, similar to the percentage for overall retail sales. That’s not much market share, but it adds up to around 2 million faucets sold online each year, enough to provide a nice chunk of business to the Internet sellers. It certainly has been a boon to Your Other Warehouse and other master distributors that have taken charge of supplying and fulfilling Internet orders for the e-tailers.
Booking orders over the Internet may sound like tapping into an automatic money dispenser, but the business is more complicated than some proprietors originally figured. Customer service still counts for a lot. Many e-shoppers also place telephone inquiries, and online rating services such as www.bizrate.com enable consumers to report on their experience with the e-tailers. The successful ones have found out they need to employ top-notch people to answer questions and troubleshoot orders. Marketing costs also are significant because with conversion rates only in the low single-digits and small order quantities, e-tailers need to drive plenty of eyeballs to their Web sites. Google search ads are a favorite advertising medium and the rates aren’t cheap.
Most of the e-tailers I interviewed estimated consumers account for about 80% of their business, the rest coming from trade sales, broadly defined. Almost everyone expressed the belief - maybe wishful thinking - that trade sales will blossom in years to come.
One of the earliest plumbing Internet e-tailers was www.plumbingsupply.com, a Northern California wholesaler’s offshoot. They’ve been at it since 1995 and their Web site identifies a lengthy list of customers that have purchased from them. The roster reveals a wide variety of companies and institutions big and small (www.plumbingsupply.com/some.html). Price drives some Internet sales, but even more e-shoppers are attracted by selection, availability and convenience. Online shoppers generally don’t care to spend time visiting showrooms or big box stores.
Here are some other interesting tidbits about e-commerce that I learned while
researching my PMI presentation: