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The role of the Internet in sales may be more about efficiency and enhanced relationships than new customers

Buyers are looking to the Internet as a way to not only do things cheaper but also as a way to do things better. There is great potential in the Internet to enhance business relationships and increase sales. Most attempts to apply e-commerce to industrial distribution, however, have been disappointing.

According to National Welding Supply Assoc. technology consultant and president of Efficiency Associates, Scott Ehrnschwender, one of the reasons for these disappointing results is that distributors initially approached the Internet exclusively from a marketing standpoint, without regard for integrating their existing sales support (backend computer) systems. The Internet was seen as a way to reach beyond the existing customer base to expand sales. Following the B2C retail model, many distributors developed a virtual storefront with an online catalog, retail pricing and credit card processing.

"Industry wants to maintain its relationships," says Ehrnschwender, "and to change, the gain did not exceed the pain. The delivery of goods is often localized so the convenience, price, and service of Internet purchasing must surpass the value of the existing relationships in order to move traffic."

Ehrnschwender says these sites didn't consider how the industrial consumer purchases. They want an open line of credit, check payments, and special pricing.

"Why would I use the Internet," asks Ehrnschwender, "if I can get account specific information, service, and pricing over the phone?"

According to Ehrnschwender, 60 percent of one distributor's customers use the Internet to research before buying while only 15 percent are actually purchasing online.

"It is compelling to do research on the Web but not necessarily to purchase online," says Ehrnschwender.

It also is compelling to use the Internet to enhance existing relationships. Rather than viewing it exclusively as a marketing tool to expand the customer base, it can be used to improve the existing sales relationships, remove costs in the sales process, and increase efficiency in the supply chain. An e-commerce Web site that provides online training, useful content literature, and customer specific account information provides a significant incentive to be online.

It should mirror the existing relationship, says Ehrnschwender, and be fully integrated from the e-commerce front-end to the back-end functions -- purchasing, inventory, accounting and shipping information -- all available around the clock. He says that most small distributors tried to spend between $2,000 and $5,000, which falls below the price of a fully integrated site which can cost upwards of $25,000.

Selling your Web site

"We are one of the companies that believes the Internet is an integrated component of a market strategy," says vice president of marketing for Grainger.com, Steve Braun. "It broadens our reach beyond our catalog sales into other channels."

Braun says Grainger leverages the same sales force, inventory, and fulfillment services and adds other services and information online that they can't put in the catalog.

Many small distributors, however, simply can't consider the cost of developing a fully integrated e-commerce Web site. Glenn Cummins, principal of Milwaukee-based consulting firm AMS Technology Group, advises these businesses to develop an Internet presence with an informational Web site, essentially an e-brochure, through which potential customers can contact the distributor.

While not providing the sales advantages of a fully functional site, Cummins says it has great marketing potential.
"Even if it is only an informational site," says Cummins, "it can be a lot better than voicemail if a customer is trying to contact you after hours. The site can provide documents with useful information."

While he says that e-commerce is more about decreasing costs and better service than new sales, he cites one client that was contacted by a foreign company which found them on the Web through a search engine. This account nearly doubled the small distributor's sales. While this may not be a typical result, it illustrates how powerful a marketing tool the Web can be.

"Ninety percent of the firms that try to market their own Web site, do not manage to do so effectively" says Cummins.

For most e-commerce initiatives involving rudimentary Web sites, Cummins says 60-70 percent of the cost will typically be devoted to marketing the Web site. Conventional marketing firms will produce advertisements on billboards or radio spots and print media, says Cummins, but most Web sites are accessed through search engines. He suggests using an Internet advertising specialist to most effectively market a Web site through search engine listings.

The Web site should be prominently placed on business cards, letterhead, and any advertisements. Each Web page should display contact information and an "800" number. While an e-mail feedback option should be present, many users would rather call and talk to someone instead of writing an e-mail and waiting for a reply.

Web sites should be an extension of any other marketing, with the company logo, and should reflect the company. It should build credibility by showing affiliations, reputation, and how long the company has been in business.

Cummins advises keeping the site as simple as possible, with few enough graphics that it does not load slowly, and simple navigation -- or as many as one in three users will log off. For information, he suggests a library of PDF files users can download and printout on demand to keep the site uncluttered.

Cataloging your success

One of the greatest obstacles to creating an e-commerce site for a distributor with many thousands of SKU's, is creating an online catalog. Most of the prepackaged software programs for e-commerce don't allow for flexible descriptions of product attributes which may be necessary to differentiate the many products a distributor offers.

"People are amazed at the amount of man hours, detail, expertise, and especially the cost of content," says Bill Guttman, principal of the Katun Group of Jersey City, N.J., an Internet consulting firm.

The upkeep of that content will also require staff devoted to the management of that data and updating of catalog materials. As this is not a distributor's core competency, Guttman advises outsourcing those functions.

Cummins points out that once the information is cataloged in an electronic format, a distributor could then dispense with the recurring cost of printing paper catalogs by making CD-ROM's on demand with the most current data.

If a distributor chooses to develop its own e-commerce solution the investment will likely run greater than $100,000, according to Guttman. There are less expensive e-commerce software packages available but because most pre-developed software packages don't preserve the many pricing relationships and are not fully functional with backend systems, this will often require a custom-designed solution.

"You shouldn't think of putting your catalog online unless it's fully functional," says Guttman.

Also, there is not any one set of universal standards, but the trends are leading to greater integration of data systems. As consolidation occurs, says Christopher Peters, CEO of eMarket Concepts, a Pittsburgh-based business-to-business e-marketplace consulting firm, a custom solution may be more difficult to interface with other systems.

Going to the marketplace

For most distributors, partnering to develop a shared solution or joining a marketplace makes the most sense, says Guttman. Many distributors have been reluctant to get involved in an online exchange or e-marketplace. There are sure to be many e-marketplaces that will merge or crash and it is difficult to predict who will still be around in a few years.

Peters says that an online marketplace is a great value at a relatively low cost and there is at least one for nearly every industry. He adds an e-marketplace is a good place to start learning with reasonably controlled risk factors. To determine a stable marketplace, he advises using good business sense to determine what provides value.

"Even in the worst case scenario," says Peters, "there is a lot to be learned. Go ahead and get involved. Those businesses that figure out how to adjust will have a distinct advantage."

"Marketplaces provide a service that most distributors couldn't do on their own," says Peters. "And it gets them online where intermediaries are finding greater value."

A system that is integrated with backend systems will also open the way to vendor managed inventory in which the Internet is key, says Peters. He also indicated that a good e-marketplace will take on the burden of cataloging which is an added value for the distributor.

The online experience

A recent study by eMarket Concepts found that only six percent of senior executive from B2B e-marketplaces thought that market research on what end-users need and want is most critical to site design. Over half of these sites went live without any usability testing. Nearly half of the existing sites have no user feedback in ongoing developments.

"It seems like they have forgotten marketing 101 concepts," says Peters, "like understanding the customers' needs and wants before going to market. We need to get back to basics to create e-marketplaces that solve problems and increase productivity."

Cummins advises going into a brick and mortar store and observing the interactions and trying to mirror those best practices online.

"The quality of the experience is key," says Braun. "many dot-com's have forgotten this."

Braun says that Grainger has done extensive usability studies and utilized customer feedback to continually improve Grainger.com. He said that they strive to bring the best practices from their other channels and integrate them into Grainger.com.

"It is a strategic advantage to maintain the consistency of data across all channels," says Braun. "At Grainger, the core information of a call is consistent with the dot-com experience."

Cummins also suggested that the informational content should be part of making the experience useful. Online education and applications that help customers become more efficient make them more likely to use and buy from your Web site.

"The key thing is to be practical and use common sense," says Cummins, "You want to welcome visitors and make their experience as pleasurable and successful as possible. Remember, it's all about better service and decreased costs when customers use automated services. Make sure they want to use them."

Cyberguide

Outside sales often takes an active role in engineering solutions for their clients. They may also be taking on a role as Internet guide and researcher, says Bruce Merrifield of Merrifield Consulting Group in Chapel Hill, N.C.

"The need for someone to manage information available on the Internet is an opening for sales to fill and add to their value chain," says Merrifield. "Sales staff provide tools, and information is becoming a stronger and stronger tool."

COPYRIGHT 2001 Cahners Business Information in association with The Gale Group and LookSmart.