International sales increased an even faster 30%. The company also reported a record profit of $857 million during the second quarter and accelerated expansions ...
Strict rules on minimum orders and lead times are crucial for Dow Corning.
Retailers that sell lipstick, apparel and car tires know that some customers will pay more for new and improved products, while others want the lowest price. The same holds true for the manufacturers of those products.
Dow Corning Corp., which makes silicone products used in a wide variety of industries—textiles, personal care, automotive parts, construction and more—recognized back in 2000 that it wasn’t adequately serving its manufacturing customers who wanted the lowest price on commodity products available from a growing number of chemical companies. It turned to the web to provide a lower-cost, self-service channel for those customers, launching a new brand and business model called Xiameter in 2002.
Today, online sales, including those from Xiameter, account for 40% of Dow Corning’s annual sales of $6 billion, and the online ordering service figures to become even more crucial as the company’s business becomes increasingly global.
Key to the Xiameter brand’s success and profitability has been the rules it’s set for ordering online. Customers have to buy at least a certain amount of each product and order far enough in advance that Dow Corning can produce and ship the silicones ordered efficiently from its 45 plants and distribution centers worldwide. Some of the flexibility Dow Corning traditionally offered was gone; but Xiameter could reduce prices typically by 10-15%, says Jeroen Bloemhard, Xiameter vice president and executive director.
“In the chemical industry that’s a lot,” Bloemhard says. “For this business we have to be disciplined about these business rules and we expect customers to follow them. Initially some didn’t like it, but, coupled with the reduction in price, most said, ‘OK, that’s worth it.’”
Bloemhard also emphasizes the importance of the integration of the Xiameter web site with the accounting, manufacturing and planning software from SAP AG that Dow Corning uses to run its worldwide business. When a customer places an order at Xiameter.com, the SAP software notifies manufacturing to produce the materials, without human intervention. The system also automatically sends electronic order confirmations, shipment notices, information about customs and duties, and invoices.
When Dow Corning, a joint venture of The Dow Chemical Co. and Corning Inc., launched the Xiameter business model in 2002 it decided to sell 350 products through the e-commerce site, and mainly targeted larger customers; those, for example, willing to buy a full 80-drum trailer-load of chemicals.
But Xiameter’s success led the company to expand its operation in 2009. Dow Corning moved more products to the Xiameter brand—today more than 2,500 of the 7,000 products the company sells—and reduced the minimum order requirements. For example, now a customer can order a pallet of four drums instead of a trailer-load of 80; if he wants just a single drum, the web site points him to a distributor.
Another big change was that Xiameter products are now only available through Xiameter.com, and can no longer be ordered through Dow Corning salespeople.
At the same time as expanding the Xiameter brand in 2009, Dow Corning also redesigned the Xiameter.com e-commerce site. Customers now can more easily reorder, track orders and see what they’ve bought in the past. There is also more technical documentation available. “As we were putting more products on the web site we realized some customers may not be 100% familiar with the chemistry or features of some products,” Bloemhard says. “Having product selector guides on the web site that enable customers to look at technical specs and information has been a major upgrade.”
While Xiameter represents a growing share of Dow Corning’s business, most customers buy from both the Dow Corning and Xiameter brand catalogs. Most of Dow Corning’s customers, Bloemhard says, want new and differentiated products, those they get from the traditional ordering process, as well as the bulk, high-volume commodity products they buy from Xiameter.com.
Bloemhard emphasized that Dow Corning makes all the products in both catalogs in the same manufacturing plants. That may result in a higher-margin Dow Corning order taking precedence over an Xiameter order. Because of the way the dual-brand strategy works and the importance of innovation, Bloemhard says, “it’s not necessarily in our company’s interests that we blindly grow Xiameter brand as much as we can.”
But one factor that likely will drive the Xiameter brand’s expansion is Dow Corning’s increasingly global customer base, Bloemhard says. More than half the company’s sales now come from outside the United States, and Xiameter.com, which customers anywhere can access at any time, reflects that international growth. Exclusively an English-language site when launched in 2002, Xiameter.com since 2009 also has been available in Chinese, Korean, Japanese and Portuguese.