Digitalisation: Will distributors be the winners or losers?

At the recent Stahlhandelstag organised by German steel distributors’ association BDS in Darmstadt and attended by Kallanish, the evolution of workable online platforms for steel purchasing was a central topic. In his presentation Heinz Jürgen Büchner of IKB Bank asked the question, ‘… who will stay on top as this development unfolds, and how?’

According to a study by the Cologne Institute of Economic Research (IW) cited by Büchner, one quarter of steel buyers are now using online platforms, “… and in five years it will be half,” he added. This development will be accompanied by a shift to more direct sales from the mills, which is why “… distributors need to apply digitalisation to secure a piece of the action,“ he said

Big companies, like Klöckner, with global sourcing potential, are in a good position to drive digitalisation, Büchner said. “There will always be the small and regional players, as mills have no interest in [… selling] standard products’ lots which are too small,” he added. However, it is the wide range of the middle rank of steel distributors which will be the group most at risk from digitalisation, “… unless you have some unique selling point, you are a supplier for (large infrastructure projects like) Stuttgart 21 central station, or you are the extended workbench of Daimler,” he continued.

In this scenario, the future fate of distributors could resemble that of travel agencies in earlier times. The more standardised the products, the more they will be traded online, “… while products that need a lot of consultation will remain the job of ‘brick-and mortar’ stockists.”