Riding the e-commerce growth wave in building materials

Despite its size and growth potential, e-commerce penetration in building materials and construction products remains low at only 2% in India. However, promising developments are rapidly changing the e-commerce growth opportunity in building materials, with start-ups, large incumbent players and brick-and-mortar retailers jockeying in to gain their share of the pie.

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The Indian building materials and construction sector is a significant and expanding market. As of 2022, it was valued at $225 billion and is expected to grow by 8-12% over the next five years. This growth is primarily driven by urbanization, the real estate market's momentum, positive prospects for the healthcare and hospitality sectors, and rising income levels.

Despite its size and growth potential, e-commerce penetration for building materials and construction products in India remains low at only 2%, compared to 30% for mobile, electronics and appliances and 5% for even furniture and other home products.

The e-commerce sector for building materials faces several challenges, including high shipping costs, a lack of product standardization, and difficulties in providing accurate product information and services.

However, there are promising developments that are rapidly changing the landscape. The entry of new start-ups, investments by large incumbent players in e-commerce platforms, and business model innovation by brick-and-mortar retailers are transforming the building materials e-commerce opportunity.

Start-ups like Infra.Market and OfBusiness have achieved remarkable revenue growth through their innovative business models and utilization of technology. Infra.Market, a Mumbai-based start-up founded in 2016, has raised over $500 million in funding and experienced a 404% revenue jump in FY22 over the previous year. Similarly, OfBusiness, founded in 2015, has raised more than $890 million in funding and seen over 4X increase in revenue from operations in 2022 compared the year before.

Established players are also investing heavily to strengthen their position in response to the changing dynamics of the building materials e-commerce industry. For example, Grasim, a leading conglomerate in India, has announced a $270 million investment to enhance its e-commerce capabilities. JSW Steel has launched the JSW One platform, a comprehensive online marketplace that aims to provide a seamless experience for customers to procure building materials.

Brick-and-mortar retailers are building digital capabilities to leverage the digital space as a discovery platform to drive customers to their physical stores. Shankara Buildpro, a leading player in the building materials space, has launched a digital platform to drive growth.

The e-commerce growth in the building materials market presents several attractive opportunities for companies in categories such as cement, RMC, steel, plywood, floor and wall tiles, paint, sanitary ware, and home electricals. These opportunities include reaching a wider audience, offering a broader range of products, and providing better customer service.

To tap into the e-commerce growth opportunity, building product companies must set a bold aspiration, develop an effective digital strategy, and build digital capabilities.


Set aspirations for digital commerce

Building materials companies must start by setting ambitious goals to pursue the e-commerce growth opportunity. This entails clarifying objectives and developing a clear vision of the future to leverage the benefits of e-commerce.

For instance, a prominent European multinational corporation in the home electricals category set an aspiration to enhance customer experience through e-commerce. They aimed to support customers throughout their buying journey in a retail landscape dominated by small stores. Additionally, they emphasized strengthening and managing their brand in the digital realm. The company established the right direction and tone for their digital strategy, effectively communicating it to its sales team, channel partners, and influencers.

A clear and ambitious digital vision can assist building materials companies in three significant areas to execute their e-commerce plans.

First, it helps clarify the strategic objectives your business aims to achieve. Without a clear definition of why you pursue digital commerce, initial enthusiasm can quickly wane when your team faces challenges while implementing digital commerce initiatives.

Second, a well-defined digital vision mobilizes employees toward a common overarching goal. Often, building materials companies approach e-commerce in isolated departments, resulting in conflicting objectives and confusion. By defining and effectively communicating the digital vision, you can overcome this behaviour and rally your team around a shared goal.

Third, a digital commerce vision helps prioritize and focus on the digital initiatives that genuinely matter to your business. This focus ensures you stay aware of new technologies and features offering minimal benefits. It also helps you persevere with complex yet critical digital initiatives, even when faced with implementation challenges.

Develop an effective digital strategy

Once you have established a clear digital vision for your e-commerce business, it is crucial to develop an effective digital strategy to achieve your immediate and long-term goals. Leading companies in the building materials industry consider several factors when devising their e-commerce strategies.

Firstly, they decide whether to establish a presence on established marketplaces or create their own branded store. They carefully weigh factors such as visibility, control over the customer experience, and potential competition before making this decision.

Next, they identify target markets and customer segments within the building materials industry. This allows them to understand their specific needs and preferences, enabling them to tailor their strategy accordingly.

Thirdly, they analyze their product portfolio and revise their pricing strategy to ensure alignment with market demands and profitability goals. They strive to offer diverse materials while considering market demand and how customers perceive their value.

Lastly, if they utilize multiple channels, they implement strategies to manage potential conflicts. They aim to maintain consistency in pricing, promotions, and customer experience while respecting the advantages and limitations of each channel.

Build digital capabilities 

Ensuring the success of digital commerce initiatives also requires assessing the current level of digital capabilities and identifying any gaps that may hinder the achievement of strategic objectives. Digitally mature organizations demonstrate strong abilities in various areas, including technology infrastructure, customer experience management, data management and analytics, dynamic pricing, digital talent, and a test-and-learn culture.

Digitally mature companies identify and develop the most suitable technology infrastructure, creating a roadmap that aligns with long-term goals and available resources. These organizations actively leverage advanced technologies, such as sophisticated e-commerce platforms, robust inventory management systems, data analytics, and automation tools, to optimize their online operations and enhance customer experiences.

Furthermore, these companies foster a digital-first culture that encourages innovation, agility, and a continuous learning mindset among their employees. They establish dedicated e-commerce teams comprised of skilled professionals with expertise in online marketing, technology, customer experience, and supply chain management.

In contrast, less digitally mature companies lack a clearly defined strategy, struggle with essential technology adoption, face challenges in embracing digital transformation due to a traditional mindset, and do not have specialized teams dedicated to e-commerce.

As the building materials industry evolves, companies must seize the potential of digital by developing a comprehensive vision and digital strategy, embracing advanced technologies, fostering a digital culture, and investing in the organizational capabilities and talent necessary to drive e-commerce success.

About the authors

Deepak Sharma is Cofounder and Director at Kanvic Consulting, Shiv Sharma is a Principal and Manu Garg is an Associate Consultant at Kanvic Consulting.

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