August 20, 2017, 11:49 pm / Business Exclusively by subscription

Metal trading goes online

To increase efficiency, rental manufacturers want to get even small customers and are opening online stores Polina Trifonova It is expected that the share of the Internet platform will account for up to 5% of sales of the Russian division, said TMK Deputy General Director Vladimir Shmatovich / TMK

Metal trading, with which many Russian businessmen began to build their empires, is becoming a thing of the past. Thanks to new technologies, steel companies sell products directly to even the smallest customers.

In June, TMK launched the online store “TMK eTrade,” the company announced. The site is currently operating in test mode. “TMK eTrade allows consumers in Russia to place an order for products from any of TMK’s Russian factories , monitor its implementation, calculate delivery and generate the necessary package of documents,” explains the company. It is expected that the online platform will account for up to 5% of sales of the Russian division (it provides about 80% of all TMK sales), said TMK Deputy General Director Vladimir Shmatovich. The site is intended for spot sales of general purpose pipes - oil and gas pipes will not be sold there, the top manager noted. In the first half of the year, the Russian division of TMK sold 1.4 million tons of pipe products worth $1.4 billion, more than half (993,000 tons) are seamless pipes that are used in construction, mechanical engineering, etc.

The pioneer of online trading in Russia was Severstal. She opened an electronic trading platform back in 2005. At first, the platform worked on the principle of auction trading, then it was transformed into an online store. “On the site you can place orders for the production of a certain amount of rolled products, buy products from warehouses, track the status of order fulfillment, and generate reports,” says a company representative. Severstal expects that in 2018 approximately a third of rolled products will be sold via the Internet. “According to Forrester, 62% of b2b customers worldwide want self-service capabilities. It turns out that two out of three of our clients would like to buy rolled metal products on the Internet, without the participation of a sales manager,” explains a Severstal representative.

In 2007, MMK opened an electronic platform. “We wanted to organize a new sales channel, expand our presence in the market, and attract buyers interested in purchasing small quantities,” says an MMK representative. Sales, however, are small (see chart), but since 2012, when the site was modernized, they have grown 7.2 times to 40,000 tons. Since 2013, NLMK has been operating a remote service system “Client-info”, but only clients who have signed an agreement with NLMK can use it, says a company representative. Soon the company will be ready to offer a system available for the mass market, the source says. Companies do not disclose how much they spend on launching online stores.

The main online clients are construction companies, says Airat Khalikov, director of the Center for Economic Forecasting at Gazprombank. “Builders are forced to purchase steel in small quantities, needed for a couple of months,” explains the analyst. Metallurgists do not have the resources to work with all construction companies directly. Now traders are solving this problem both in Russia and around the world, but their markup is from 7 to 27% depending on the season, adds Khalikov. Online sales will reduce this markup for the end buyer, notes ACRA analyst Maxim Khudalov.

“E-commerce is one of the fastest growing segments of the economy: online sales volumes in the world are increasing annually by 20% and in 2020, according to experts, will exceed $4.1 billion,” adds a Severstal representative. “Online trade is designed primarily for the retail segment, but nothing prevents industrial consumers from switching to it in the future,” Khudalov is sure. The development of online trading, in his opinion, will allow for a better understanding of the market: “The company will immediately see what the consumer needs, and not the trader in the warehouse.” A massive departure of customers due to the emergence of online stores is not predicted, says a metal trader who sells fittings from Ukraine in the central part of Russia. Traders rely on speed of delivery. Small batches are processed via the Internet, and not all online stores allow you to create an individual order, the trader says.