A Brick Branch or an eBranch – Let the Arms Race Begin

As we mentioned Monday, a number of distributors, and some manufacturers, discussed e-marketing and more importantly e-commerce (commerce enabled websites) at the recent NAED Eastern Conference.  It appears that the impetus for this has been the continued growth, and competitiveness, of Grainger, who now reportedly books 30% of its business (and wants to get it to 50%) electronically (don’t know if it is all via the website) and the presumed involvement of Amazon Supply into the channel (since they are currently working on complementary markets but there are a number of manufacturers, and some distributors, who sell on Amazon or in Amazon Supply).

So, the arms race begins!

E-commerce has been a challenge for distributors as it has been a “chicken and the egg” situation.  If you build it, will customers come.  If customers aren’t asking “you” for it, then why invest in it.

And then we get to the issues of

• “there is no good source for data in the industry”
• “the ERP companies have lousy storefront functionality, especially when the customer expects Grainger (or McMaster Carr, and eventually Amazon)”
• “managing the tax issue is a b?!ch”
• “my people don’t understand this and I don’t know how much it will cost”

While there are no simple answers, consider these thoughts:

• When you open a new branch, do you always know it will be successful? Perhaps consider resourcing your e-commerce efforts as a virtual branch?
• If you open a storefront, remember you need to market it to existing customers to get adoption and then market it within your marketplace to let others know about it (and if you want to expand your territory, there are different strategies for that).
• Attributed data has gotten much better.  IDEA, and the IDW, has more data than ever.  If you haven’t talked to them recently you owe it to yourself, and your company, to become reacquainted.  Manufacturers have made more of a commitment and it continues to get better.  In fact I spoke to a distributor who compared IDW data vs. Trade Service data and they found that 30-40% of the same SKUs were different … but I don’t know which was “right or wrong”.  And Trade Service has reportedly 900,000 attributed SKUs.  Perhaps the right solution is a combination of both companies, plus some info from manufacturers and maybe some self-generated data.  Remember, there are electrical distributors and electrical manufacturers that do have storefronts, so they are getting data from somewhere without creating all of it on their own.
• Some of the ERP storefront solutions are getting better.  They won’t be Grainger, but they may be sufficient for now.  I’ve seen Infor’s latest version … not bad.  Serviceable.  And remember, the account management functions may be what many of your existing customers want while you then deploy the storefront (but don’t delay the launch too long.)
• Other “bolt on” solutions that can be integrated into your ERP system to pull pricing and other account information include
• Second Phase (and I’ve seen some of their system / mock-ups, again, not bad / serviceable)
• Hybris, which is doing work for Grainger, WESCO (here’s an article on WESCO’s Carlton-Bates initiative that was coordinated by Acquity Group and uses the Hybris platform) and  Crescent (and here’s info on their new site that has 200,000 SKUs)
• IDEA has a storefront solution, in conjunction with Unilog, that has already been deployed at at least 7 distributors and has some upsell, cross sell, / suggestion sell and advertising capabilities and there are mobility options (smartphone and tablet).
• and I’m sure that there are many more (and I presume Eclipse has an offering it’s just that I’m not familiar with it so can’t comment on it – perhaps a reader can?)

Bottom line … there is stuff going on!

Looking for some resources – 

• Baker Tilly wrote a white paper entitled “Time to See eCommerce Differently” which you can download here from the MDM website.  The emphasis is on growing your business with your existing customers.
• Hybris is sponsoring a presentation on MDM this Friday, December 6 entitled Prepare for the B2B E-Commerce Revolution.  It features findings from Forrester Research’s “State of B2B E-Commerce” and features a distributor case study and presenter. Click here to register.

And if you think you’re behind now, read this article on Grainger’s mobile platform – what they are doing on tablets and the % of business they are getting via their mobile venues.

Typically it takes a distributor 12-18 months for a new branch to become profitable.  And considering the lease costs (or purchasing a facility), outfitting the facility, the computers, inventory, adding a truck (or more), at least 3 people and more … and what are the sales of that new branch in 18 months (typically)?  Perhaps investing into an e-strategy should be considered … it’s using intellectual capital, technology, and some people … perhaps the financial investment is less?

Do you have / are you planning an e-store (maybe we’ll start calling them ebranches?)

And if you need some thoughts on how to develop, implement, identify customer needs, gain adoption, price and more, give either one of us a call.