We, as a B2B company, look at retail B2C companies who talk directly to the client every day via on-line and off-line channels, Maria Shalina said during an on-line presentation of Severstals strategy in November. Such experience of B2C companies gave us an idea for further developments.
Everyone can take a taxi on-line and order food from an on-line store. Eventually, when a person orders steel products he will expect the same level of service, she added.
Severstal started a strategy of transformation in 2018 and entered its active stage in 2019. This year all our initiatives, in particular digital development, entering new markets, became even more important during the pandemic. Some projects, like distribution development, we decided to facilitate, Shalina said.
One of the most important client-oriented projects is Severstals on-line shop, called Severstal Market. It allows customers to purchase products that are already available from stocks.
During the first nine months of 2020, taking into account low business activity during the first quarter of the year, on-line sales were more than 1.5 million tonnes or 32% of sales through the distribution network in Russia. Its share has been constantly increasing.
In 2019, Severstals on-line sales in Russia were 2.25 million tonnes.
In total over the first nine months, Severstal sold 8.3 million tonnes, mainly of flat steel products. Within this volume, 58%, or 4.81 million tonnes, was sold in the Russian market and 42%, or 3.49 million tonnes, were sold as exports.
Starting from October 2020, on-line sales became available for Severstals clients in neighboring export markets: the Eurasian Economic Union countries, Armenia, Belarus, Kazakhstan and Kyrgyz Republic.
Meanwhile, the key export market for Severstal is the European Union, where only limited on-line sales services are available at the moment. Although the company aims to make all services, which clients in Russia enjoy, available for foreign customers in approximately the next three years, Shalina said.
Severstal has launched a smart calendar, which allows customers to place an order for a particular available date based on availability of delivery trucks and warehouse loading cranes.
Another new option, which appeared for the steelmakers clients in 2020, is a possibility to pay for an order with a bank card. Earlier the client could pay only with standard bank transfers for corporate customers and there were no options to use such payment methods like a corporate credit card, which is usual for B2C, Shalina said.
When we order apparel or gadgets it seems usual to pay for it with a bank card, and we want this to become usual for steel business as well, she explained.
In partnership with Russias major bank, Sberbank, Severstal has started a project of providing credit for small- and medium-size clients with as low as 5 minutes of approval time.
In late 2020, the steelmaker added the option of credit payment to its on-line store. It is available for clients in Russia who have approved registration at Severstals on-line-shop and a business history of at least 12 months. The credit limit can be taken up to 3-5 million rubles ($41,000-68,000).
Such development of financial services on one hand will expand the purchase funnel, and on the other will support our clients during the pandemic, Shalina said.
Since June 2020, Severstal has offered its customers a loyalty program called Plus - a completely new phenomenon in steel business in Russia. The program is available for clients of Severstal Distribution and the company is considering
spreading it into other areas. For each 300 rubles of the order, the client gets 1 bonus point. And like other traditional loyalty programs, clients can spend these bonuses in different ways, such as getting a discount, paying for delivery.
Now we have a single contract for all clients of Severstal distribution. Before, a client was forced to make a separate contract with Severstal for each of its regional divisions, Shalina said. Starting from 2020 they have a single contract for all divisions, she explained.
Severstal is also developing multiple channels of communication with clients. If it is comfortable for our client to chat with us in WhatsApp, we develop a business-account in messenger, she added.
During the Covid-19 pandemic, Severstal has also noticed a demand for on-line training among its clients. That is why we have launched Vmeste - a portal for Severstals clients - on-line educational projects for medium and small businesses, who suffered the most. Webinars are related to various subjects, from stress management to lean manufacturing, said Shalina.
Distribution and product choices
We are not increasing the number of warehouses, because we have analyzed our network and understand that they are located in the right places, but we are improving our services, Shalina said. We are widening the range of products [which is available from stocks], because the main and predominant factor for our clients is the availability of particular products at exact times from stocks, she explained.
Severstal has 13 regional sales offices through all of Russias territory. The company started to develop a new distribution model in the Central region around Moscow, the largest steel-consuming region in Russia, and it has widened the product mix there by around 6-fold. Over the next two years we will improve the distribution model in all cities where we do distribution. St-Petersburg is the next in line, she said.
The steelmaker has been moving from a product-focused model to a client-focused model. The company analyzes feedback from its clients and decides what can be changed in its production program both from the process point of view and from the aspect of product mix.
On the back of clients feedback, our engineering departments decide how we can produce some new product [needed by customers], for example, Shalina said. These initiatives are included in our strategic and investment plans, she added.
In some cases, initiatives can be implemented at the production assets of third parties. For example, in 2020, Severstal started output of racks at the production facilities of its partners.
When we started to contact our new potential clients - e-shops and large logistics hubs, which have warehouses - they said that they do not need flat steel products, they need storage racks, Shalina said.
Severstal made a contract with final users and an agency agreement with a company that has capacity to make the storage racks. That is how we engage production capacities of partners and supply a product for final users, she explained.
That is a growing project now, because it is beneficial for all three parties, she added. End-users get an attractive price because independent go-betweens are excluded at all stages of the production chain, from raw material to final product.
The partner company with its own production capabilities has a sustainable partner in Severstal and a stable income of orders, which is extremely important during the pandemic. For Severstal itself, it is an opportunity to reach new end-user markets.
Engineering and technology
In 2020, the company started to widen the operation of its advanced engineering service. It helped to optimize a structure for the final steel products consumed by its clients by choosing appropriate products with the specific properties needed for their applications.
Severstals advanced engineering team includes experts in three-dimensional modeling and material engineers. They study customer needs and their end-products to enable collaborative development and provide the best types of steel from Severstals range.
For example, we have collaborated with a large development company that deals with the construction of parking areas, Shalina said. Severstal proposed ways of reducing steel intensity for structural reinforcement in projects.
The steelmaker also started a technical consulting service in 2020. Our tech-support experts visit production assets of our other clients and help them to adjust settings of metal processing equipment. Experts can also share Severstal expertise, for example, in lean manufacturing, Shalina explained.
Severstal offers that service only to its own key clients because it is very specific, she added. For example, One of Severstals clients - a company which deals with heating systems - received from us flat steel coils, which were stored in conditions that were causing corrosion. Thus the steel was not always meeting the clients requirements. Our engineers visited the clients asset and studied the experience of our other clients, she said. We offered the client visual detailed recommendations on the organization of a warehouse for storage of rolled metal products. Potential reduction of logistics defects with proper organization of the warehouse, Shalina added.
She gave another example of consultation for a producer of cooling machinery. The client was bothered by the exfoliation of zinc coating from flat steel. The company had faced such a problem with [coated steel from] its previous supplier, Shalina said. We proposed how to change the incoming control of steel products. Also we have proposed to customize the technical requirements to the products that Severstal ships to the client, depending on what part of the cooling machine will be produced from the steel, she explained.
We understand that client-oriented projects indirectly but positively impact the financial results of the company. We hope that these services will support customer satisfaction and build an image of a unique supplier, Shalina said. Well follow the analytics, which show that a satisfied client stays with the company and increases their spending, she concluded.
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