The Internet is finally coming into its own as a tool consumers and businesses use to research potential purchases, make purchase decisions, complete transactions and, for those selling products or services, reach out to new customers.
Contractors and other construction businesses are no exception to this trend.
Contractors are saving time and money buying equipment and supplies online and selling unwanted assets. Buying and selling online is proving to be a perfect compliment to the offline world for contractors, opening up an entirely new sourcing and disposition channel that helps contractors run their businesses more profitably.
As consumer and business use of the Internet grows, the Internet and e-commerce are playing an increasingly important role in the construction industry. To take advantage of online opportunities, contractors should understand the full breadth of what's available and follow some tips for success.
Growth of the Internet and e-Commerce
The Internet and e-commerce are growing into vital foundations of many businesses around the world today. According to Nielsen NetRatings, in March 2006, there were nearly fifty-eight million unique users who accessed the internet at work, and over 147 million unique U.S. Internet users overall. Jupiter Research reports the number of individuals accessing the Internet will grow from 195 million in 2005 to 234 million in 2011.
One of the primary ways that businesses are using the Internet is to support business purchasing (researching, comparing and completing transactions). In fact, a recent survey by ThomasNet and Google found 96 percent of industrial buyers use the Internet at some point in the purchasing process.
When businesses source items online, they may purchase directly through an e-commerce website or simply research vendor options and contact the vendor offline to complete the purchase. In 2005, IDC estimated global ecommerce-purchases made directly through an e-commerce website-to be $313 billion (of which eBay sales accounted for 14 percent). Beyond this, Shop.org also estimated Internet research led to more than $100 billion in additional offline sales.
Construction Industry Goes Online
The same rapid growth of Internet use and e-commerce are evident in the construction industry.
The 2006 CIT Group Construction Industry Forecast shows that 63 percent of contractors and 83 percent of distributors predict that their business' use of the Internet will grow in 2006. Distributors expect online equipment sales to increase by 50 percent in 2006, while 38 percent of contractors said they will use the Internet to buy equipment.
The use of the Internet in the industry goes beyond equipment purchases. The number of contractors that plan to use the Internet to find and purchase parts has almost doubled in three years, from 28 percent in 2002 to 50 percent in 2006, according to the CIT Group study.
Major distributors are seeing the impact of the Web, as CIT reports more than 70 percent have a website. In addition, 70 percent of those with a site sell equipment through the site and 20 percent rent equipment.
The increasing importance of the Internet in the construction industry is also being seen on the contractor lever. About one-quarter of contractors have a website, and 21 percent without a site expect to have one before the end of 2006. The most common reason for having a website is for an e-mail address, but contractors are also listing recent projects and providing company background, including location and mission statement.
At eBay, the construction industry's use of the Internet as a business tool is evident. According to Nielsen NetRatings, nearly half (49 percent) of construction industry internet users visited eBay at work in March 2006, a figure that wouldn't capture the small- to mid-sized contractors accessing eBay from their homes or home offices. At any given time, there are more than 26,000 construction industry-specific items available on the U.S. eBay.com site, in addition to hundreds of thousands of general business-relevant items such as computers, office supplies, cell phones, commercial trucks and more. In the first quarter of 2006, for example, seventy-two pieces of heavy construction equipment sold on average each day.
The online construction buying community is a diverse group, representing a large portion of the industry but tending toward cost-conscious small and medium-sized contractors that represent a wide range of trades, including concrete/asphalt/paving, masonry, excavation, plumbing, HVAC, utilities, remodeling and other construction professionals. These buyers have a variety of online resources to choose from when researching, comparing and buying equipment and supplies.
Online classified ad listings are available at the websites of major industry equipment publications as well as through more community-based sites such as local newspapers or craigslist.com.
Single vendor websites advertise the products and services of a specific company and either provide contact information for offline buying, or occasionally, offer integrated e-commerce functionality to enable visitors to buy directly on the site.
Online bidding for construction industry auctions is also becoming more prevalent with traditional auctioneers offering online bidding to make it more convenient for bidders to participate in an auction even if they can't be on-site on auction day.
Online marketplaces, of which eBay is by far the largest example, connect buyers and sellers in a 24/7 marketplace offering multiple selling formats (auctions, fixed price, ads), a wide range of business-relevant items (construction equipment, supplies, building materials, computers, cell phones, trucks, safety gear, etc.) and standardized trading rules and safe payment methods to provide a safe trading experience.
The two major benefits for the construction industry buyer from utilizing these online options are the ability to save money and save time. Contractors are saving money by reaching out beyond their usual supply sources to find a lower price on a specific item (often because another seller outside the region is overstocked or there is less demand in a different region), to find unique types of equipment or tools needed to increase productivity which are just not available locally, and/or to identify and purchase different types of equipment and supplies which may offer the same or better performance at a lower cost.
While top online brands tend to be virtually the same as the top offline brands-on eBay, for example, the top selling brands in the construction category include: Bobcat, DeWalt, Case, Greenlee, Hilti, Topcon, Ridgid, Paslode, Milwaukee, Stihl, Bosch, Wacker, Partner, Hitachi, Kubota, Ditch Witch, Vermeer and others-not all brands may be consistently available locally.
Construction industry professionals are also using online options to save considerable time. A normal work day doesn't leave much time for researching equipment or supplies purchases. After spending the day on the jobsite, submitting bids and general management of the business, contractors can shift their product research, finding and buying to a time that's more convenient.
For example, searches for unique parts, attachments, tools or equipment can take a fraction of the time online versus driving to different potential suppliers in their local area. Equipment buyers, in particular, are finding that 24/7 online auctions or listings enable them to find and buy the equipment they need, whenever they need it, without waiting for a local auction and tying up their time, or their employees' time, at the physical auction site. Some online sites offer listings that last up to ten days and enable buyers and sellers to communicate with each other prior to a sale to insure that all questions are answered before even placing a bid or committing to purchase an item. This affords contractors a little more time to make a decision on a given piece of equipment and to make sure it meets all of his or her needs.
Construction sellers online include businesses and end-users, specialty contractors, construction equipment rental outlets, equipment dealers, tool distributors, state/local governments and many others.
For sellers of construction equipment, online sales present the opportunity to sell equipment to a national and even international marketplace. For most businesses trying to sell large equipment, the local market is much smaller than the national or global market. Sellers can connect online with a market unconstrained by location, time or schedule.
The costs to sell online are often considerably lower than offline alternatives. For example, many industry equipment publications offer free online listings to their print advertisers (extra exposure for no additional cost), and online marketplaces like eBay can charge one-tenth the fees of traditional offline used equipment disposition options. These lower online costs are attractive to both small and large construction industry businesses. For example, United Rentals launched its eBay Certified Auctions in 2005 and today has a 100 percent positive feedback rating on eBay.
Additionally, selling online has opened up a disposition channel for assets that once were not worth taking the time to sell. Almost every contractor has assets that aren't currently being used (and probably won't be), and we all know the stories of contractors throwing away older tools, equipment in need of significant maintenance or excess building materials. Whether it's tools, equipment, the old phone system or an old computer sitting in a closet, contractors can turn those assets into cash by selling them online.
The Internet has not only proved to be a strong tool for buying and selling, but also for research. Regardless of the method, online or offline, online research is well worth the time investment.
On sites where purchase prices are available, contractors can review actual sales results of equipment similar to the item(s) they are looking to purchase or sell. OEM sites include background on lines of equipment, dealers who specialize in servicing the brand and other information. In addition, a number of community-based sites exist where contractors can talk with other construction industry members about their use of the Internet and their experiences purchasing online. For example, eBay's Construction category is complimented by a specific Building and Construction message board where community members can connect.
Utilize the Potential of the Internet
The impact of Internet and e-commerce is clear. The construction industry, just like many other industries, is finding the Internet to be a key tool. There are a number of sites and methods for online buying, selling and researching, much like the offline world. Contractors should take the time to learn how each of these sites can help their business to grow.
Construction Business Owner, June 2006