Eleven Reasons the Construction Equipment Industry Needs E-Commerce
There is a belief that the construction equipment industry is immune to the shift towards e-commerce. The stereotype of the “old-school” customer is often used to define all customers in the construction industry. This is a huge mistake.
Using laggards to define the entire industry will cause businesses to overlook the majority of customers.
The heavy equipment and parts industry is just beginning to ascend the adoption curve. Here are the signs.
1. Buyers Adapt To Innovation Patterns
Heavy equipment rental seems to be following the same patterns as car rental, just 40 years behind.
Expedia, one of the first online travel agencies, was founded in 1996. By 2003, 21% of car rental bookings came from online travel agencies and 15% direct from the companies’ websites. Today, 65% of travel bookings are made online.
However, there is one key distinction that will keep equipment rental from being “platformized” like in the car rental industry: more is at stake.
Therefore, the human element in the equipment rental transaction is absolutely vital—something many tech companies overlook. The customer service and category expertise that comes with independent rental will keep the independent business thriving as long as rental companies make it a precedent to provide the same digital experience that the largest players do.
The temptation for customers to switch purely out of convenience will grow as the largest rental companies continue to invest in their ecommerce channels. Now is the time to focus on mitigating that temptation.
2. Amazon Business Is Growing, Fast
According to a report by Applico, Amazon Business reported $10 billion in total sales in 2018, $6 billion of which came from maintenance, repair and operations supply—their leading category.
To put that in perspective, Amazon Business is already fourth in MRO revenue. At their forecasted growth rate, Amazon Business is on track to be the number one industrial distributor in the US.
3. The Biggest Suppliers Are Focused on Ecommerce
Grainger expects that 80% of their revenue will come from e-commerce by 2023. Fastenal’s e-commerce revenue has grown 27% year over year and now makes up 35% of their total sales.
Across 300 B2B distributor businesses, ecommerce sales has grown by 11% year over year, bringing the total north of $700 billion in revenue.
4. Contractor’s Are Changing Their Buying Behavior
According to the American Rental Association’s 2019 consumer survey, 34% of contractors already expect that their rental transactions will be done completely online. Catering to these customers is a focus for the top rental companies.
United Rentals has seen a greater than 50% year-over-year growth rate in self service ecommerce revenue, according to their 2018 annual report.
The rental transaction is a complex transaction that is very difficult to be done without human intervention. Most contractors already have relationships with a few rental businesses and tend to stay loyal to those businesses because of the familiarity the rental company has with the work their customers do.
Therefore, ecommerce in rental should be implemented to retain and enhance their existing customer relationships first and foremost, not just to bring in new business.
5. Buyers Are Getting Younger
According to a Merit study, up to 73% of all B2B buyers are now millennials. Millennials are no longer teens.
The millennial generation is defined as people born from 1981 to 1995, which means they are currently between the ages of 25 and 39.
Source: https://madewithmerit.com/reports/Millennial_B2B-Report-Merit.pdf
6. Buyers Research You Online First
The digital representation of a business is now more important than how a store looks in person. According to Demand Gen’s B2B Buyer’s Survey, peer reviews are just as important as pricing (67% versus 75%).
According to a study by G2 Crowd, 92.4% of B2B buyers are more likely to purchase a product or service if they have read trusted reviews about it. Positive reviews can increase conversion rates by 380% and spending by 31%.
Trust in a supplier is invaluable. A business’s online reputation is a major factor in building and maintaining that trust.
7. Buyers Use Their Phones To Research and Purchase
According to a recent BCG study, up to 70% of B2B search queries are made via a mobile device.
Source: https://www.bcg.com/publications/2017/marketing-sales-digital-go-to-market-transformation-mobile-marketing-new-b2b-buyer.aspx
As reported by BCG, more than 90% of surveyed users would buy again from a business with a superior mobile experience, whereas only 50% of users would buy again from a business with a poor mobile experience.
Offering a mobile experience that makes working with you faster than a phone call will keep contractors coming back.
8. Buyers Prefer Self Service
According to a McKinsey study, 85% of B2B buyers prefer using self service tools for reordering over talking to a sales rep. However, businesses in the heavy equipment industry cannot attempt to become an ecommerce company because it will not work. Heavy equipment and parts suppliers need to focus on becoming ecommerce enabled.
According to the same McKinsey study, 76% of B2B buyers find it helpful to speak to someone when buying a completely new product or service.
9. Boom In Construction Technology
Many of the construction technology companies on the other end of the funding explosion are on the build side of construction. However, suppliers will need to keep up as contractors continue to digitize.
Source: https://techcrunch.com/2019/02/16/investor-momentum-builds-for-construction-tech
Behavior and expectations from buyers will continue to shift as digital adoption increases. Suppliers that do not adopt to this shift in behavior will risk getting left behind by those that do.
10. Distribution Is Evolving
In March, JLG announced the launch of Online Express, their direct-to-consumer ecommerce platform for parts and attachments.
Other OEMs have online parts ordering sites, but not like this. JLG, the leading aerial lift manufacturer, is one of the first to create a direct to consumer ecommerce channel where any customer can buy any part they need and ship it direct to their location. The traditional OEM parts ordering process is done through dealers behind an account login.
Many OEMs are concerned with “competing against their dealers.” JLG has made a statement that they are focused on what is best for the end user. Approaches like this one could have a ripple effect in the aerial lift industry and beyond.
12. Now Or Never
The global crisis has pushed us further into a digital world, exposing businesses that are ill-equipped to serve their customers digitally. Many online retailers saw a 74% year-over-year increase in revenue in the month of March compared to March of 2018.
The demand for a digital experience will outlast the pandemic. When everyone goes back to work and it’s time to build, consumer behavior and expectations will have changed.
Businesses that take action now will come out the other side of this pandemic more efficient and effective. Those that don’t risk getting left behind.