Online Or Out

Builders need to think harder about how technology can expand their businesses.

by John Caulfield

The recent disclosures that two major retail chains, Staples and Radio Shack, would be closing thousands of stores confirms what has long been evident to anyone who has been following recent economic trends: that E-commerce is fundamentally changing the retail landscape, and that the creative destruction of this process will not be good news for some of America’s formerly iconic retail brands.

The Commerce Department estimates that online sales hit $262.5 billion in 2013, or about 6 percent of the $4.5 trillion consumers spent at retail in total that year. But the more telling statistic shows that E-commerce sales have been growing at a rate four times that of retail sales in general. Emarketer.com estimates that online sales in North America, which jumped by 13.7 percent to $431 billion last year, should hit $660.4 billion by 2017.

This online trajectory simply reflects the way more consumers prefer to shop, and is being propelled by nonstop advances in mobile technology. But the trend is a mixed blessing for the U.S. economy, which is still having trouble creating new jobs from month to month. There has been scant evidence so far that E-commerce will generate enough jobs to replace those lost when brick-and-mortar stores go bust, especially if—as some market watchers are already predicting—the next casualties are giant retailers like Kmart, whose parent, Sears Holding Corp., lost more than $2.3 billion in the last two fiscal years.

Employment is the lifeblood of the housing industry. People who aren’t working aren’t buying homes. And the Census Bureau’s January estimates for annualized housing starts—a 2 percent decline to 880,000 units for total starts, and a 6.7 percent decline to 573,000 units for single-family starts—can’t be shrugged off as simply the results of bad weather.

Thankfully the employment picture, on the whole, has been getting better, or at least stabilizing. And homebuilders and suppliers that survived the past recession have actually been doing pretty well lately, and are hiring again. (The country added 15,000 construction jobs in January.)

America’s largest builder, PulteGroup, is coming off a year when its profits jumped more than tenfold, to $2.6 billion. Its largest home-improvement retailer, Home Depot, saw its income jump 18.7 percent to nearly $5.4 billion.

It’s worth noting, too, that in January Home Depot acquired Blinds.com, the largest online retailer of window coverings in the U.S. Depot’s online presence includes Redbeacon.com, which matches homeowners with approved contractors.

Like it or not, the Internet is where most consumers start when they are shopping for just about everything. It’s also where businesses create markets for their products and brands. But repeat after me: Social Media are not selling tools.

What builders and suppliers should be asking themselves, then, is what their places are in this growing online ecosystem. My guess is most would conclude they are still on the fringes.

Builders need to think harder about how technology can expand their businesses. For example, Michigan-based Marketplace Homes has been working with the software provider iRule to offer appointment tours of builders’ model homes at the shopper’s convenience by unlocking doors and turning on lights remotely, and conducting the tours via the visitor’s cellphone.

And while very few consumers would consider ordering a house online, it wouldn’t kill builders to offer that option as an experiment and see how it flies with the public.

At the very least, builders must figure out how to drive more prospects to their websites, keep them there with compelling, easy-to-find information, and allow them to connect effortlessly with a salesperson immediately.

Waiting for consumers to stroll into your sales offices is so 20th century. And resisting the inevitability of effectively plugging into your customers online can be fatal.  

About the Author

John Caulfield - Ritz-Craft Modular Home Blog
John Caulfield has been a reporter, writer and editor within the retail, remodeling and housing sectors for over 30 years. For the past eight years, John served as a Senior Editor with Builder Magazine. Prior to that, he was the Executive Editor of Home Channel News. John resides in New Jersey where he now works as a Freelance Journalist.