Most businesses today have some form of e-commerce system in place. However, the construction industry has a slow adoption rate and lags behind other industries in terms of e-commerce adoption. There are several impediments to construction e-commerce adoption. Some barriers include: lack of confidence/trust, low IT literacy, heavy initial financial cost, and fear of losing current clients.
Despite this, studies show that there are numerous advantages to e-commerce construction such as industry evolution, multiple stakeholder benefits, promotion of e-business drivers and designs, national economic advancement, and waste reduction.
According to a 2005 study by Guillermo Aranda-Mena titled “Barriers to e-business adoption in construction: an international literature review”, the following have been identified as the top 5 impediments to construction e-commerce adoption. Luckily, there are many workarounds to these barriers today.
Both buyers and suppliers have exhibited doubts with regard to adopting e-commerce for their business. This is because of privacy and security concerns. SMEs feel that they lose control of personal information when using e-commerce for transactions.
The lack of IT literacy amongst consulting firms is one of the primary barriers to e-commerce adoption. In connection with the issue of confidence and trust, how can one trust a technology they do not understand? Additionally, how can firms
The operational expenses incurred after implementation is of concern to suppliers as most do not understand the costing breakdown for websites and applications. Additional operational expenses, therefore, deter suppliers from adopting e-commerce because they do not yet understand the long-term payoff.
E-commerce integration into the current infrastructure depends on non-technical aspects such as cross-border trade where businesses are under different legal systems, languages, and cultures.
Many industry players and SMEs are still unaware of the benefits of construction e-commerce adoption. This lack of awareness disallows stakeholders from understanding the long-term profitability and cost reduction of e-commerce.
There are more than 3.7 million active SMEs in the UK alone. They contribute to 55.4% of employment and 51.4% annual turnover. In the construction industry, SMEs represent 18.5% of all SMEs.
The world has seen an increased e-commerce usage especially with the advent of the pandemic. For instance, Amazon Business, one of the largest e-commerce giants today, reports that by 2023, they will see $75 billion worth of gross merchandise value.
In 2018, Amazon Business reported $10 billion in total sales with $6 billion owing to maintenance, repair, and operations supplies. This points to a market that is rapidly shifting from traditional over-the-phone transactions to online transactions. Even if the construction industry is notoriously difficult to introduce changes to, it is not immune from evolving market demands.
Thus, for players in the construction industry, making the move to e-commerce is not only a matter of expansion. It is a matter of survival. In the rental industry, 34% of contractors expect transactions to be done online, according to the American Rental Association 2019 consumer survey.
Reduced building costs and completion times
According to Professor Peter Stewart of RMIT University, “If the construction industry adopted e-business then they could expect to save up to 2.3% building costs and reduce completion times by 15% (BuildOnline 2000)”
The two categories of impact include internal and external effects where internal effects refer to the replacement of manual processes and external effects refer to the flattening of marketing and sales structures. Both effects together offer up to a 30% increase in savings.
This is largely due to the streamlining of traditionally tedious and time-consuming processes like procurement, auctions, contractual agreements, and more. By digitizing what was once resource and time-consuming, costs and completion times will be reduced.
Having a digital source of truth can make it easier for information to be managed by stakeholders. The following activities will be made possible by reviewing and re-engineering existing business practices:
These processes are traditionally done physically however with e-commerce, they can be re-engineered to fit the digital landscape.
Stakeholder specific benefits
E-commerce promotes service-excellence in construction because transactions are much faster, self-service is highly encouraged in a digital environment, all digital services are easily integrated, and progress is tracked with only a few clicks.
E-commerce promotes quality products at the right price by affording a price decrease because of cost reductions. Additionally, the sales/service gap is narrowed because of the ease of online collaboration. The supply chain is streamlined because sources are digitally pooled and managed.
E-commerce promotes continuous innovation excellence by providing easy methods to integrate services, providing asynchronous fulfillment and convenient delivery because of the flexible nature of online transactions, and finally providing maximum process transparency by referring to a single digital source of truth.
E-commerce promotes consumer trends by providing asynchronous and instantaneous digital channels that enable fast service delivery, easy self-service, and highly integrated services.
The narrowing of the sales/service gap, promotion of ease of use, and flexible delivery is driven by e-commerce’s ability to provide tools that make it easier for sales/service processes to work in conjunction thereby leading to better ease of use and flexible delivery times.
E-commerce allows construction companies to become brand intensive instead of capital intensive. Again, this is owed to the reduced costs that allow stakeholders to focus on building the brand instead of shelling out for CapEx. Reengineered processes also allow for increased process transparency and employee retention.
Digital systems allow for enterprise applications to connect the entire organization. This also means that infrastructure convergence is possible with the merging of voice, data, and video channels.
NOIE (National Office for the Information Economy) reports that the following macroeconomic effects would be felt once the construction industry has adopted e-commerce:
Here at Codvo.ai, we believe that e-commerce construction is a field with much potential. Though the construction industry has been slow to adopt e-commerce, studies show that it increases revenue and reduces build time. The drawbacks to e-commerce construction are now easily mitigated by today’s technology which means there is no reason for industry players to make the shift.
If you are in the business of construction and you are interested in outfitting your company with e-commerce construction, contact us today at email@example.com!
Read this article to know why the construction industry needs e-commerce:
Do you think your company’s data warehouse is efficient, scalable, and consistent? Read this article to learn more!