Capturing market share in an evolving market – no longer business as usual for the independent building products supplier.

The building supplies industry is wide and encompasses many different areas of expertise and product sets, ranging from bathroom accessories to ‘heavyside’ materials such as concrete building blocks and tool hire. Each market has its own distinct concerns, but certain umbrella factors such as industry consolidation, an influx of cheap product from the Far East and competition from retailers such as DIY stores affect suppliers across the board.

To give some idea of scale, the entire UK builders' merchants market was estimated to be worth £10.1bn in 2003*. Despite subdued levels of new housebuilding in the last five years, there has been a general growth in the UK construction market during the last two. This has supported a widespread increase in demand for builders' materials through a well-established network of builders' merchants.

However, consolidation within the industry creates a challenge for the large number of smaller builders' merchants operating in the market. The threat from above comes from three major companies - Wolseley PLC, Saint-Gobain Building Distribution Ltd and Travis Perkins PLC, who, along with BSS and Grafton are estimated to have a 65% share of the builders and plumbers merchants’ market. In order to gain buying power that is even broadly comparable to that of these major players, independent companies often have to make purchases through buying groups.

Buying groups have an advantage over the large chains in the way they can purchase, due to greater flexibility. For example, they are often able to ‘set the pace’, purchasing large volumes of stock at the lowest price point, whereas chains, restricted by supplier management inventory, tend to react only when they see prices begin to rise.

The threat from below is posed by retailers, in particular the chains of DIY stores in the small contractor sector of the builders' merchants market. Although these stores do not always offer trade conditions, they now have considerably longer opening hours, increasingly greater warehousing space and often directly target the trade customer.

Despite these threats, the builders' merchants’ market is still likely to develop over the next five years through further consolidation, with the Internet a key channel to obtaining business in the Eurozone countries.* Demand is clearly still on the rise for building supplies, so how can smaller players ensure success in this rapidly changing market?

“For the wholesaler, developing market share is as important as creating demand,” says Tim Wayman, managing director of Robert Lee, a plumbing supplies wholesaler. “The UK bathroom products market alone was still worth £774m in 2002, and in order to grab a vital share of that market your company must appear credible and have up to the minute information on, and understanding of your customer’s business.”

One of the ways in which Robert Lee is ensuring it always has this key information to hand is by the use of technology, specifically sales intelligence technology from Vecta. This out-of-the-box solution is designed specially for sales professionals working in wholesale and distribution. It works by taking information from existing back office and accounting systems and delivering insight into customer buying patterns by proactively keeping the sales team informed of sales opportunities or potential problems with drifting business.

Many of Vecta’s customers in this sector are seeing a major uplift in sales due to implementing sales intelligence. The main reason for this level of success is that it incorporates those elements of CRM that are relevant to distributors and wholesalers such as contact, diary and activity management. It also automatically delivers critical information about customer buying patterns that translates into real sales opportunities and is able to identify potential up-sell, cross-sell or switch-sell opportunities. In addition, it highlights customer drift, without relying on an operator to perform complex data analysis.

Another Vecta customer in this sector is Deva Taps Ltd, one of the premier brands in the tap, bath and shower fittings market selling to major distributors throughout the UK. The company decided to invest in VECTA sales intelligence software following a survey carried out by management, which showed that its sales force was spending far too much time on preparing for calls and looking for information about customers. The results convinced them that they could be working in a more efficient way.

“VECTA is a terrific means by which live sales information may be used to best commercial effect by a customer focussed and forward thinking organisation,” says Deva managing director, Tony O’Neil. “The efficiency gains alone were enough to justify investing in the software and we could see that we were going to enjoy considerable benefit in terms of additional sales.”

The key difference in the VECTA approach is that it does not require the level of investment, both in terms of time and money, as that of traditional CRM or BI solutions. VECTA delivers actionable sales intelligence, out-of-the-box. There is no need to build data warehouses and dashboards using toolkits like many BI solutions, and unlike CRM, salespeople don’t have to enter data before they get useful information back, so end user adoption is almost guaranteed.

Deva has implemented VECTA internally across its management and marketing teams. In one instance the software helped the company to identify an opportunity to sell additional product lines into one of its major nationwide distributors, a deal which proved significant. This year has seen Deva achieving record sales and according to O’Neil much of this success is attributable to VECTA.

The building supplies market is clearly experiencing a period of growth, but factors such as consolidation and the availability of cheap product from overseas means many smaller companies are not reaping the benefits of this economic upturn. Customers will respond to increased choice from smaller players, but only from those who can differentiate themselves by playing to their strengths.

Key Pressures:

IT decisions are being made in the boardroom not by IT departments.

ROI justifications are becoming more sophisticated.

Customers demanding flexible pricing models.