Vision of the brands in the market, Porcelanosa strategy, Home Depot changed the rules on the Internet.
Due to its unique characteristics, porcelain tile represents one of the largest purchases regarding construction and remodeling. It is used in bathrooms, kitchens, and other rooms, on building fronts, small shops, shopping malls, airports, etc.
Brand and place of origin are not as relevant in the purchase decision as are price and design, which are the most valued features.
The average ticket for porcelain tile in remodeling is U$S 2400 to U$S6400 (e.g.: 160 m2 of porcelain tile in a range of U$S 15 to U$S 40 per square meter, although the prize can be much higher), and it will represent a high percentage of the total expense in the remodeling or construction process.
Production, measured in terms of square meters, has been increased as well as the technical possibilities regarding design, size, shapes which may be adapted to the market needs; porcelain tile can faithfully emulate wood, metals, fabrics and cement. The industry possesses technology such as HD, large sizes of 300x150 cm and extra thin of 3.5mm.
Driven by its passion for production, the industry focuses on the product and the productivity of the factory. Preserving product differentiation requires which are easily distinguished and generally they do not last, eventually, all will be copied.
Brand commercial strategies
The factories marketing is focused on:
Fairs: attended by distributors, architects, and decorators; although in these occasions orders are placed, the loyalty of the clients is not increased and a huge segment of retail consumers is excluded.
Advertising: Mostly found in decoration magazines.
Exhibitions: promotions on sales points, own showrooms.
Internet: Institutional web sites which include catalogues, collections, where to buy, latest news, placing orders to distributors (b2b).
Sales to local and international distributors: Showing scarce loyalty to the brands, distributors put huge pressure on prices by threatening with substitution. Many of them act as a purchasing pull.
Full speed on a commercial strategy
Porcelanosa is an example of commitment to product distribution because it reaches the retail buyer. Most of this business companies do not contact the consumer, and the sales process concludes when the product leaves the factory.
Porcelanosa has created a net of shops, complemented with highly committed associated distributors and authorized distributors. The strategy of deepening lines of new products under their brands: Porcelanosa, Venis, Gamadecor, Systempool, L’Antic Colonial, Butech Noken, Urbatek, has always been supported by a powerful strategy of distribution: direct approach, explaining, exhibiting, demonstrating, delivering, extending guarantees, with first hand assistance to the consumer.
A few years ago, I had the chance to visit the Porcelanosa plant in Castellón. Guided by its main stock owner José Soriano, I dared asking which was the criteria used to choose between owning a shop and having an authorized distributor. Soriano replied that if Porcelanosa had a market goal of, let’s say, a 7%, in each Spanish city, and the distributor at Segovia achieved that share of the market with their brand it was not their desire to open a shop there. What a market vision!
Instead, most of the tile companies use an indirect commercial strategy, achieving a scarce level of commitment of their distributors, who buy according to the commercial opportunities and conditions.
The concentration of the distribution channels makes the task of staying strong along the whole chain harder, the factories becoming more vulnerable, and not doing much to stay in touch with retail buyers.
The investment (capex) and operating expenses (opex) required to keep a store running, weather a small one or a big premise, diminishes the chances to progress with a “brick and mortar” distribution, furthermore, the developing of online sales also represents a threaten for traditional business.
All brands wish to sell above the average price in the industry, for this purpose they develop a different product, but only a few of them care to get the consumer to know about it.
If the consumer is not able to visualize a higher attribute in a brand, he will not be willing to pay a higher price. Marketing should highlight the benefit. Who does this job? The distributor?
Internet Business strategy
The limit for porcelain tile factories on the internet is the electronic commerce with the distributors (b2b). There is no commercial transaction with the final consumer, only catalogues, recommendations, suggestions, and may be some indications regarding where to purchase the brand in general, never a particular article.
On the internet, the consumer usually gets tired of watching products without a prize. Where is it sold? When he finally visits the distributor suggested by the factory, he will end up buying another brand, according to the discounts of the day and the advice of the salesman of the moment.
With this experience regarding Internet, there is no positive conclusion to arrive to, Internet is useless!
Some cases to be considered on the Internet
In the retail business (“brick and mortar”), the enterprises do not hesitate to buy well located grounds that will take years to build. There is no future for Carrefour, Home Depot, etc, without a well nourished portfolio of locations options.
The retail operation is simple. To repeat all that is correct, to correct what is wrong, and to do the same at all stores. That is the reason why shops are identical around the world. All innovations shall apply to all stores.
But the future of these companies lays in the selection of the locations, because this is the key to success that matters the most in retail sales. The best locations will ensure the higher probabilities of success. As they say in the USA, retail is “location, location, location.”
Internet gives new opportunities. Some enterprises have taken possession of locations they consider of privilege.
Within the Internet domains, generic words such as pearls.com are the best locations. It is the name that the consumer writes down the most when thinking of a product. At Google, yahoo, Bing, he will write down, for example “pearls”.
If he is looking for pearls, he will write down “pearls”. In addition, a generic site has spontaneous traffic: users go beyond the searcher and try the navigator (as they are used to write ford.com or levis.com, they write down pearls.com)
Armstrong, ceilings leader, purchase ceiling.com and ceilings.com;
Cemex, cement leader, purchased cements.com;
Mannington, a leading coating company in USA bought floors.com;
Elkay bought sink.com;
Infocus, projector leader, projectors.com…it is a long list.
In time we will see how they take advantage of these domains. Today, they are used to forward traffic to their institutional web sites (called forwarding).
I would consider changing the forwarding strategy for developing a site like kitchens.com and wining independence, predicament and authority, and referring consumers to committed distributors. I would add a specialized online magazine which would describe the business, products, tips, suggestions, advantages, use, etc. Then, replace the forwarding of, let’s say, floors.com to Mannington.com, and developing over floors.com that online magazine or an online commerce site directly.
On the Internet, floors.com has a greater potential than his owner Mannington.com.
The developing of a new brand online
A more powerful strategy than forwarding is to start a new business online with electronic commerce. Taking advantage of the rupture offered by Internet to launch a new brand: bathrooms.com; faucet.com; furniture.com; pearls.com; art.com; diamonds.com; telescopes.com, etc.
Home Depot changed the rules on the Internet
In January 2014, Home Depot, the largest retail in the world in the sales of construction and remodeling products, kicked the board. It purchased Blinds.com.
Blinds.com was born as a company selling blinds directly in the Internet. Home Depot believed that Blinds.com offers advantages when it comes to selling blinds over the giant Home Depot, being one of the most popular brands in the USA, otherwise they would set up an advertising strategy to strengthen their brand in this segment.
Blinds.com presents the basic requirements for a strategic generic domain: it is short, easy to remember, business related, simple to write down; it is the word consumers use in Google to search for blinds.
In Google, Yahoo, Bing or Facebook, advertising is expensive and it represents thousands or millions of dollars after ten years.
To develop a brand as a reference of a category is too expensive, even for Home Depot, consequently it is supported by Blinds.com to be first in the Internet.
Author: Julio Sol
Telephone: +54 9 11 4053-9030
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