This is the fifth and final article in MDM’s Emerging Technologies Series. This article examines trends in e-commerce and how distributors are approaching the challenges associated with implementing an effective e-commerce strategy.
Often when e-commerce is mentioned, Amazon.com comes to mind. And while that model is extremely successful in the business-to-consumer market, it’s a stretch for some to see how that model can be applied to business-to-business.
“It’s all a question of: What do you mean by ‘e-commerce’?” says Roman Bukary, head of manufacturing and distribution industries at NetSuite, a Web-based business software provider. “If what you mean is Amazon.com, then absolutely it may not be relevant.
“However, if you think of it in the broad sense of doing business on the Internet – the ability to have self-service, schedule service, check an order, etc. – then there is no industry, no segment of the marketplace where e-commerce is not relevant.”
Distributors are on all different levels when it comes to being online, says Kelly Squizzero, director of product management for Infor Distribution. Some simply have company information with some high level product information, while others have developed highly interactive user environments for their customers.
As the general public has become more computer and Internet savvy, so have the customers of distributors. “The web presence is important,” says Gene Nusekabel, worldwide industry lead – wholesale distribution, Smarter Commerce, IBM Software Group.
“A lot of people look to the Web first to find things.”
Increased Demand for These Tools
And as more customers are looking to the Web, the challenge for distributors is to find a way to meet that demand.
“Our separate verticals are looking for different things from e-commerce,” says Scott Clifford, chief information officer for electrical distributor Graybar, St. Louis, MO. “Commercial and industrial customers want to transact with us in a way that’s similar to how they’ve done it on typical consumer sites. … And a majority of our contractors are still more comfortable with ordering over the phone.”
Graybar set out to provide options for its customers by upgrading its online shopping process and maintaining its traditional ordering process.
Other distributors, such as industrial distributor Zoro Tools, are focusing most of their energy on the online experience. Zoro offers around 250,000 products through its online store, while maintaining a limited physical presence – a model that’s been successful for the start-up, allowing it to effectively compete with larger, more established distributors across markets. (Zoro was recently featured in an MDM Webcast).
“Zoro is trying to take a more traditional catalog-style business and turn it on its head,” says Ranga Bodla, director of industry marketing at NetSuite. NetSuite is one of platform providers for Zoro.
But Graybar and Zoro remain the exception for distribution. According to a recent survey by Real Results Marketing and MDM, 40 percent of distributors have no revenue from e-commerce. And almost 10 percent have no plans to ever enable an e-commerce platform. (See more detail on that survey on page 6 of this issue.)
Distributors who don’t have e-commerce-enabled websites are probably losing out on a competitive advantage, says Squizzero. “You’ve got to have an interactive transactional website.”
“Distributors face a number of challenges that are unique to this market segment,” says Kevin Cooper, director of sales and marketing for Insite Software, a provider of B2B and B2C e-commerce platforms.
Distributors often have complex pricing or several distribution centers from which to fill orders.
This structure contributes to distributor hesitation to implement e-commerce. “They just aren’t sure that e-commerce can accommodate that structure,” Cooper says. “But they’re wrong.”
“In the past, it was very difficult to reflect the complexities, the personalization of the experience to each customer,” says Brian Strojny, CEO of Insite Software.
But the number of software companies offering e-commerce solutions in the business-to-business space has grown significantly over the past several years, and at the same time the options available to distributors have expanded. It’s no longer just an adaptation of what’s available to business-to-consumer customers, Strojny says.
Platforms now can be designed as portals that are fully integrated with existing ERP systems, where customers can log in and get their specific pricing and product categories – including common configurations or kits – without having to search through an entire catalog. Software providers also offer features that allow distributors to service customers the way they need to. One example: letting a distributor’s customers track spend with that distributor with an integrated online budget/approval process.
The key is finding a balance that works for your company, Strojny says. “I’ve often seen organizations leaning too far one way or another on a solution,” he says. They may select a solution that looks cool and has a lot of great merchandising, marketing and recommendation tools, but can’t handle the business logic of their pricing. Or they’ve chosen a platform that was provided by their ERP company so can handle the logic, but has no options for branding or personalization.
“And there also are still a lot of people out there who believe they have to build the entire thing on their own,” he says. “They’re trying to be software companies when they really need to focus on their business and what they do best.”
Even if you’re not interested right now in selling online, related e-commerce functions can be beneficial for distributors looking to provide better accessibility to product information. BuildSite.com provides distributors with a “sales support system” through its online product and technical specifications database. “No one can keep track of all that information in their heads anymore,” says Ned Trainor, president and CEO. Though customers cannot purchase online, the information available improves the transaction experience, Trainor says.
When you do settle on a path, success starts with education, says Infor’s Squizzero. The distributor has to understand the underlying process and how to manage it.
That’s the current challenge for Graybar. The electrical distributor recently expanded its e-commerce capabilities. “For the long run, we are far more focused on delivering solutions for the customer,” says Clifford of Graybar. “But in the short-term, we’re learning the intricacies of the technologies first, so we can best utilize them for our customers.”
Understanding what you want to deliver to your customers is a critical component of selecting the appropriate platform, says IBM’s Nusekabel. Are you trying to improve your sales process? Or are you trying to improve sales performance? Be clear in your goals up front so that everyone is on the same page to achieve those goals.
Then there’s the question of control. Who’s responsible for getting things up and running? Who can make changes to the system? And when are you ready to actually go live with the e-commerce options? “There’s a challenge in being able to rapidly get through the test cycle,” Graybar’s Clifford says. “And to do that, we have to remove the expectation that everything will work perfectly all the time. Sometimes ‘good enough’ is acceptable to move forward.”