While e-commerce is front of mind for many distributors, there’s still disagreement on the role it plays within the industry. A recent survey conducted by Real Results Marketing revealed a “polarized phenomenon of distributors who are jumping into e-commerce with glee in droves and those who are still contemplating whether to do it or not,” according to Jonathan Bein, managing partner.
Bein finds the fact that distributors in 2015 might still be debating the merits of an e-commerce solution for their business, by far, one of the most interesting phenomena in the industry.
“I’m sure there are some companies that don’t need to do e-commerce, but they’re few and far between,” he says.
Bein cited a number of excuses distributors give for not aggressively pursuing an e-commerce strategy:
- Our field sales reps will become upset.
- It’s too hard to get the data.
- Our customers don’t need it.
- It’s a relationship business, and e-commerce goes against that mindset.
- We’ve already got e-commerce (an antiquated version).
- It’s too expensive and now is not the time to invest in it.
- We lack the expertise to implement it.
- We’re too busy.
The cost of investment is top of mind for Burt Schraga, president, Bell Electrical Supply, Santa Clara, CA, who says his company’s two biggest concerns are “getting really clean data and then getting a functional Web store that can compete with the big guys.”
A decent e-commerce site starts at about $125,000, which is pretty pricy for a $30 million distributor, Schraga says. And while the price may start there, a company really needs to spend $250,000 to meet customer demands.
“I’ve seen some distributors spend $50,000, and it doesn’t do what the customers are looking to do,” Schraga says. “They not only want to place an order, they want to check on their back orders, they want to know pricing, they like to look at their accounts payable, perhaps just go in and cost a job out and save it as a quote, and then turn a quote into an order. You better have a solution and you better do it pretty soon.”
Solutions are becoming more attainable for distributors, according to the 2015 State of E-Commerce in Distribution, which revealed two key trends. It is easier and less expensive to launch an online initiative, although many distributors experience more time in the nascent stage of e-commerce maturity, typically for three to five years.
That isn’t surprising to Timo Platt, who directs business development for Harrison Publishing House, a rich content service and software solution for the HVAC, plumbing and mechanical trades.
“What (distributors are) saying is, ‘We need to become more proactive in offering interactive tools that are as automated as possible, that will sync with our customers’ systems, that will handle that back-end communication and, lastly, that will give us more time to engage in higher-value activities,” Platt says. “What we’re hearing is, ‘We need to expand our e-commerce capabilities rather than they’re lacking.’ It’s two sides of the same coin, but those are the words they use.”
Platt notes that the definition of e-commerce is changing – and that it’s not just a way to sell products online.
Instead, it is all the “different ways that will help the customer more easily find you, interact with you, buy from you, restock with you, get the dashboard view of all of their historic business, all of their trending business, key metrics that come out of all that,” he says. “That’s the future of e-commerce,” and the gap between the companies that do it well and those that don’t is widening.
Bein acknowledges that plenty of distributors will go to their grave fighting against the need to provide e-commerce, despite the most compelling argument against holding out.
“If you’re looking at losing a couple of percent of revenue a year or more because you don’t have e-commerce, it doesn’t seem so bad at first, but after four or five years you’ve lost 10-15 percent of your revenue,” Bein says. “And that’s a strong current to swim against.”