(Bloomberg) -- As European steel demand comes under growing pressure, two big suppliers to the bloc are betting on online stores to help attract new clients.
It may not sound like a groundbreaking plan -- Internet shoppers around the world can already order anything from a prefabricated house to a human skull -- yet European steel buyers still make most purchases the same way as they have for decades. That contrasts with steel industries in Russia and China, where e-commerce has developed more rapidly.
Now Russian producers Novolipetsk Steel PJSC and Severstal PJSC are hoping to help change that. Both will begin offering online sales of products and services to European Union customers from next year, representatives from the two companies said separately.
“Europe is far behind in business-to-business Internet sales because it has a very conservative market,” Viktor Romanovsky, head of e-commerce at Severstal, said in an interview in Moscow. Online shopping offers opportunities to attract new clients and to offer more effective sales to small and medium clients, he said.
It’s been a tough year for steel in Europe, as sales are squeezed by weak automotive demand. Domestic producers are also facing competition from cheaper imports and surging iron ore prices hurt profit margins.
Germany’s Kloeckner & Co. has already launched an online platform, XOM Materials, for selling steel and related products. Severstal has signed on to XOM as a way of testing the market, before it opens its own online store to European clients next year, Romanovsky said. The company was offered a stake in XOM but has not made a decision on whether to make an investment, he said.
Christian Pokropp, a spokesman for the German company, said Kloeckner is open to investors in XOM but declined to comment on specific companies. A move by foreign suppliers to pursue digital sales in Europe is likely to put pressure on domestic producers to catch up, he said.
“In general -- at least for the steel industry -- e‐commerce in Europe is lagging behind China, whose market is bigger and younger, while in Europe we have many old and traditional ties,” Pokropp said.
Both Severstal and Novolipetsk Steel already operate online shops in Russia. Novolipetsk Steel plans to open the platform to European and American customers in 2020, its spokeswoman said.
Severstal started its online store in 2017 and plans to sell 3 million tons, or about one third of total output, with the help of digital channels this year, Romanovsky said. Customers can buy steel from warehouses with delivery in two to three days, order products directly from the plant or buy material in online auctions, he said.
The company teamed up with smaller rival Evraz Plc to expand its online offering and is also considering packages -- like combining steel rebar with concrete mix in one basket -- if it can find the right partners, he said. Customers can also earn incentives or points for purchases that they can use to pay for metal or services.
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