BUSINESSWEEK ONLINE : FEBRUARY 19, 2001 ISSUE
BUSINESSWEEK E.BIZ -- WEB SMART COMPANIES ONLINE EXTRA: Q&A: TruServ's Neil Hastie: "B2C Is a Break-Even Proposition for Us" Still, the hardware co-op's members can learn a lot from e-commerce, and so TruServ is staying in the Net home-improvement market "It's the crappiest segment of the whole e-tailer sector." That's the view of the online home-improvement market given by Neil A. Hastie, chief information officer of TruServ Corp., the nation's largest hardware co-op with more than 10,000 members. Of course, that opinion hasn't stopped hundreds of TruServ members from building their own e-commerce sites. And Truevalue.com, one of TruServ's retail identities, has 8,500 products for sale. So why bother attempting e-commerce in such an unpromising segment? "Because our members demand it," says Hastie. Don't get him wrong, Hastie thinks it's a good idea for TruServ's members to get their feet wet in the New Economy, but he believes that B2C in the hardware world is a break-even proposition at best. Hastie spoke with BusinessWeek Chicago correspondent Darnell Little to explain why. Q: Why is the home-improvement market going to have a rough time generating Internet sales? A: Let's agree that the overall marketplace is around $160 billion. Studies show that 65% to 70% of hardware traffic are people with a problem that has to be fixed now. You don't bail water waiting for a UPS truck to come with a toilet repair kit. Of the remaining 30%, half of them want to touch or feel the goods before buying. Then consider that only 50% of Americans are online, and you don't have a really big audience. Q: So why should any hardware store bother with e-commerce at all? A: You can still provide a lot of services to your customers online, give them product information, let them schedule deliveries, things like that. But the pure-play Internet companies, I don't think it makes sense. Look, OurHouse.com raised more than $100 million in venture-capital money to get going. But the online market is only around $100 million. You raise a $100 million in VC money to go after a share of a $100 million market? Q: How well do you believe that Home Depot, the top hardware retailer, will do online? A: I question their distribution model for Internet fulfillment. Depot is like Wal-Mart, they're held up as a model of efficiency. Stuff is manufactured and sent directly to the stores. No warehouses. Now comes the Internet, and Depot has to pick the products from the shelves. That's not efficient for distribution. I don't know how they are going to do it if volume picks up. Q: So why should they go to the trouble of trying online sales at all? A: E-commerce is a big bother for Depot. It's a $30 billion company in a $100 million market. But I understand they are focusing on the professional buyer, and that may be a good play for them. Q: How about Lowe's? A: Lowe's has outsourced their Internet fulfillment, so they are in a different position than Depot. Lowe's will be able to operate more like a regular retailer who gets on the Web. They'll have their fulfillment done from a central warehouse. It's really just Depot that has this unique problem with Internet sales. Q: Can Depot last online? A: Depot and Lowe's have enough staying power to last a while. They're in much better shape than the pure dot-coms. Granted, Amazon.com is the top reseller on the Web, and they're doing business in hardware. But look at defunct sites like Hardware.com and HomeWarehouse.com. And others probably aren't doing so well, either. Q: So what is TruServ doing online? A: On our site, you have to select a store. And for any online purchase you make, 50% of the margin goes to that store. We're a co-op, so that's why we do it that way. We have 2,000 stores participating. We also have a pure dot-com fulfillment center in Pennsylvania. Q: How is the site doing? A: B2C is a break-even proposition for us. We get about 50,000 visitors a week at truevalue.com. We have 8,500 products for the regular consumer. We also have project tips and advice. About 33% of our visitors never buy a thing. They take the advice and go to the stores. Q: So, if you don't have a lot of confidence in consumer sales in this sector, why do it at all? A: Our members demand it. And I think it's a good thing for them to get into and learn because who knows where this technology will lead one day. We can help them get their feet wet in e-commerce without a big investment of time and money. Q: Do you have any other online efforts? A: Our big focus is actually on B2B. We have extranet sites where corporations like Lucent, Honda, Budweiser, contractors, and homebuilders buy. That's where the money is. I think the revenue potential could be 50 to 1, B2B to B2C. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Hammering Away at the Web TABLE: If I Had a Hammer TABLE: Tool Time ONLINE EXTRA: Q&A: TruServ's Neil Hastie: "B2C Is a Break-Even Proposition for Us" INTERACT E-Mail to Business Week Online

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