We’ve all heard how customers want to be self-sufficient, that they want easier ways of doing business, that software can create connectivity between customers, that customers want to buy online or get their own pricing or use data-mining software to better understand what they buy and at what price. And many of us have experienced that the more electronic connections / relationships that we may have with other companies (think banking), the more difficult it is to disconnect or change relationships … and increased connectivity (read relationships) increases the opportunity for a company to increase market share.
As companies, or individuals, you use these tools to be more profitable (think of when the switchgear companies went to online pricing. Savvy distributors learned how to use these systems to their advantages.).
Now comes accelerating activity in electronic connectivity between contractors and distributors, through multiple initiatives. By multiple we mean distributor websites, eProcurement marketplaces (i.e. purchasing systems a la Ariba in the industrial MRO space) and third party contractor-focused companies like Net Pricer and Trade Sync.
The industry is used to contractors using estimating systems like Accubid, ConEst, Maxwell and others to estimate their projects and use as a quotation solicitation tool to distributors. NetPricer and Trade Sync were designed to facilitate electronic connectivity to “facilitate” the quotation process between the contractor and the distributors that the contractor selects. And there are fees involved.
Now we’re hearing that there are efforts by at least one system that contractors can now look at pricing, by SKU, by distributor based upon distributor responses to contractor RFPs. And, what then happens if this software enables contractors to analyze bids and cherry-pick SKUs between distributors and recommend what product to buy from whom (presuming that the products are equal, which probably means that there need to be good product descriptions?
If contractors cherry-pick for projects, what could this do for distributor margins? What does it mean about the value of manufacturer brands?
There are some national chains that have, and others that are developing, their own estimating and “buying” systems that are direct connections. While all these companies have websites that can accept orders, they are looking for additional ways to offer their contractors connectivity tools … and offer these tools as inducements for contractors to do business with them (i.e. take business possibly from you!)
Which then begs the question, “what can independent distributors do?”
If you are concerned about eroding margins with contractors that use 3rd party systems or see an opportunity to compete against the national chains, give us a call to participate in our upcoming research initiative.
6 Comments
You mention “facilitators”. We have been forced to work with Net Pricer and Trade Synch to support contractors so we can keep the business. We dislike Net Pricer. Reduces margin and we have the monthly costs. I don’t see how Net Pricer adds any value to the channel or to my business.
Here’s a response to your article entitled Could Software Determine Who Gets The Business? You are correct to point out that strong electronic connections in many ways can now be defined as “relationships”. Just as it was when the distribution model was initiated, connectivity is yet another step in creating efficiencies and taking cost out of the channel. Technology is unleashed, and again as you point out, banking as well as music and several other longstanding business models are writing new chapters. NetPricer™(now NetPak) joined the innovation train when it was introduced by ElectricSmarts about 10 years ago as the very first-of-its-kind connection between contractors and their distributors.
Your article suggests however that this connection is all about pricing and in particular cherry picking and eroding margins. Our experience suggests otherwise. Contractors have always had the ability to cherry pick if they wanted to. The fax machine allowed them to collect prices and enter them into their estimating software programs where it could scan prices and highlight the best ones. Getting prices electronically neither enhances nor diminishes that ability. However, our experience is that good contractors make buying decisions long before they get pricing. It’s based on a lot of factors but SERVICE keeps appearing as key. The cost of lousy service and bad delivery promises far outweigh the cost of saving a few cents here or there on stock items. Most contractors are buying the wholesaler’s organization, capabilities and trust first and foremost.
One wholesaler did a study and found that he’d experienced an additional 6% increase in business with no margin erosion with customers who connected to him via NetPricer™. In short, both parties grew closer and the customer used that distributor more.
We have learned a lot by working with the estimating system suppliers that contractors use. ElectricSmarts is on a mission to help make both manufacturers and distributors aware of the great e commerce opportunities that are before them apart from employing shopping carts. Shopping carts on distributor websites are happening, but today wholesalers who invest big money in shopping cart technology are still only realizing about 5% of their sales that way. Up to 60% comes from the tried and true contractor estimating software system. And, there is little or no cost for suppliers to participate. Pricing will always be a part of the equation, but by understanding and using these existing systems smartly, ElectricSmarts is helping industry players to comprehend, maximize and position their products for selection.
There is a old saying that goes like this: “If it walks like a duck; quacks like a duck; it must be a duck”.
Me thinks Net Pricer/NetPak has the ability to compare prices of many distributors.
If a contractor just buys the low price items for a project, then it lowers margins for all distributors in the area.
In addition, me thinks that there are other ramifications if G-Bar comes loaded from Electri smarts/ Net Pricer/Net Pak, we as distributors have other problems than accepting a one distributor estimating system.
At this point I think that the whole situation with Net Pricer has been a problem from the beginning. You can change the name but it has the same functions.
Streams of data can be diverted, stored and compared.
To the title of the post….it could have an effect on who gets the order. If a contractor relies on it, we have to figure away around it.
Bill your a great guy…maybe you need to stick to selling us ads.
We’ve thought from the beginning that Net Pricer was adding un-necessary cost to our business.
Now we know for sure they are. This offering with the blessing of Graybar confirms it.
It is a threat.
3rd party pricing offerings, with our process we can connect to the source in Real-Time and Sharing happens immediately.
Disruptive in a good way!
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