Making and saving money on the Internet

Home Channel News, March 22, 1999 by Carol Tice

Web becomes profit-creating tool for home improvement firms

NATIONAL REPORT -- The moment when the Internet became important to home improvement retailing arrived with a jolt, right around last Christmas. While dozens of the traditional, brick-and-mortar retailers reported almost flat or declining holiday sales compared with the previous year, the season was merry for companies like Austin, Texas-based Garden Escape. The electronic purveyor of garden products at garden.com saw its December sales jump 300 percent compared with the previous year.

Some shoppers clearly stayed home. But they didn't necessarily holster their wallets.

While stores struggled, Internet sales during the holidays tripled from a year ago, according to a study conducted by Boston Consulting Group and shop.org, an association of online merchants. Overall, Internet retail sales were approximately $13 billion for 1998, according to the study.

Home improvement is a segment of retail with great promise for Internet sales, according to a study conducted by Forrester Research of Cambridge, Mass. James McQuivey, a senior analyst at the company, forecasts that online sales of housewares, including appliances and other home improvement goods, will surge from the $100 million they brought in last year to $5.7 billion in 2003.

In the past few months, the Internet has gone from theoretical gold mine of the future to a powerful sales and customer service tool in the here and now. And a few home improvement companies have already jumped into the online fray, hoping to capitalize on the explosive growth of online shopping.

Home Depot, Lowe's and Sears are all gearing up for online sales. In December, Home Depot began selling commercial/industrial products online through its Maintenance Warehouse division rnwh.com). The company plans to begin testing sales of a broader product array this year.

For its part, Lowe's plans to offer online selling of a large assortment by the middle of this year. It already operates sites where customers can order its private label Kobalt tools and Harbor Breeze ceiling fans.

Sears is also preparing for online activity. Last October, the company created a new post, naming company vp and treasurer Alice Peterson as vp and general manager of Sears Online. She reports to Jane Thompson, who left Sears home services division to head Sears Direct.

Wickes Lumber has been one of the first traditional retailers to get into the Internet big, debuting its toolsonline.com site last July. The site has since been renamed buildscape.com, and offers 8,500 skus of tools for sale.

The beauty of the Internet is that it's not just for big players. Site-creation and maintenance costs fell dramatically as thousands of companies poured onto the Web. For around $1,500, even a small retailer can have an attractive, functional site. And while the home improvement giants plan their Internet future, some companies around the industry -- in retail, wholesale and manufacturing -- already use the Internet to improve business. They save operational costs, improve customer service, and increasingly, make additional sales. Here are the ways they do it:

* Save printing and mailing costs. The Internet is a powerful communication medium, and using it can save money. Eagle Hardware & Garden, for example, sent out notices in its second-quarter 1998 report that it would no longer print and mail out its quarterly and annual reports, but would post them on its Web site instead. The result? A savings of roughly $100,000 a year, said company president Richard Takata.

By making its industrial/commercial catalog available online, Hatt's Industrial of Thorndale, Pa., has been able to cut its catalog print run from 500 copies a year to 200, saving nearly $4,000. The company also saves money by sending out bills online to some of its biggest clients.

"They do as much as 200 transactions a month with us," said company president Jeffrey Hatt, "and now we send them one electronic, monthly bill."

* Save time. In the old days, members of hardware co-ops would mail their drafts of proposed ad circulars back and forth to co-op headquarters. Circulars had to be prepared far in advance because of these delays. But those days are over for tech-savvy members of Do it Best, who now proof their Build-Your-Own flyers over the Internet on the co-op's Web page, instantly communicating their desired product and price changes to the co-op's headquarters in Fort Wayne, Ind.

The co-op's retail marketing manager, Larry Pensinger, said testing of the system began in January, and the first flyers created over the Internet will be out this month. The time saved from using the Web to communicate with members will allow price changes to be made roughly a month closer to deadline.

* Get business you can't get any other way. Many lumberyard owners may think the Internet has nothing to do with their business. But at seven-store Ganahl Lumber in Anaheim, Calif., it's already become clear that there is some business the company can only get via the Internet.