As mentioned last week, one of the topics of various sessions, and with distributors, was eCommerce and eSales. The companies that are viewed as more progressive, perhaps more profitable and who are positioning for future growth are driving their business this way.
Some of discussion at the NAED National may be due to Amazon stating that Amazon Business crossed the $1 billion mark, some could be due to continued industry discussions regarding product content (and, to be fair, this issue shouldn\’t all rest on manufacturers populating content, distributors need to be vocal that they are using IDEA / IDW and want the content through there as manufacturers have not seen mass distributor adoption – what % of NAED members are downloading from the IDW as their core resource? How many non-NAED members (and there are many of them) are downloading from the IDW?) and some of the discussion emanates from continued discussion of customer purchasing preferences given the eCommerce investments that are being made.
In talking to distributors, those in the industrial space are seeing eSales adoption, especially when punch-outs are included (and they are essential). Some are seeing slow adoption on website ordering and others are seeing traffic as a customer service / quotation tool for their customers.
Another potential tool that can help distributors increase account stickiness is integrating into their contractors\’ estimating systems.
Consider this … as a distributor, do you want to double key an order … write it, then enter it into your system and then have a manual process to submit it to your manufacturer? Or would you prefer to use EDI to send it system to system? Which is faster? More accurate? More efficient? More profitable.
With this in mind, and knowing that 20-50% of a contractor-oriented distributor\’s business is project, we decided to get Keith Peck\’s view of the market:
\”What percent of your business comes from projects?
Our conversations with distributors tell us that a significant percent of their business comes from contractors and from project business; schools, commercial buildings, hospitals, etc. The numbers we\’ve heard go as high as 60% of their total revenue. While contractors will eventually get younger, and to the degree it makes sense, may buy some electrical product through a consumer type interface (Amazon-like shopping cart), today’s big chunk of project business starts within the contractor’s estimating software program. This is where the big eCommerce opportunity lies.
Estimating systems today are very sophisticated. They’re used to do on-screen take-offs, create material lists, and automatically retrieve distributor pricing. They also factor in the extra costs of working on higher building floors, recalculate wire and conduit bundle sizes to be code compliant. They compare today\’s estimate to like-jobs that were bid in the past and so much more. So who uses estimating software? The answer is simply every contractor who does substantial work, and surprise, also industrials like Ford Motor Company that estimate the cost of their own infrastructure upgrades and changes.
How can 3rd party software affect distributor bids?
Contractors buy estimating software from over a dozen different vendors. The software is shipped with a very limited database of products that were randomly selected by each software vendor. The software vendors usually pick a single wiring device, distribution equipment, fuse manufacturer, etc. Products from your line card may or may not be in there. The pricing associated with these product databases is MSRP or 3rd column, until adjusted to meet the contractor\’s real world cost from their distributor(s). And then the process begins.
E-Connectivity creates efficiency and accuracy for both the Contractor and Distributor.
Once the product material list is complete e tools like ElectricSmarts’ NetPak with NetPricer saves time and cost. The contractor can click a button to instantly get his pricing from his preferred / desired distributor(s). The numbers are not rock bottom but competitive enough for bidding purposes. The NetPricer Service instantly delivers the distributor’s pricing for that contractor into any bid software bid without phone calls, faxes or emails and with no misunderstandings or inaccuracies. But what happens when a product in the contractor’s material list is not carried by the distributor? NetPricer, in an effort to satisfy the request and return as many item prices as possible, automatically syncs to the wholesaler\’s line card and returns and flags items that his distributor carries in place of what was requested.
So where\’s the shopping cart?
As you might imagine, a contractor who has already created a material list within his bid software is not going to then login to Amazon or a distributor’s website and re-eselect hundreds of products again. It\’s wasted time and an opportunity for errors. The eCommerce potential is in getting connected to your contractor customers through their software ecosystem (creating an electronic umbilical cord to your product line card, pricing, and ordering). This is, in part, why IDEA has partnered with ElectricSmarts; to make the IDW product data, including specs, images, 3rd column pricing available directly from contractor bid software. This is where the bond is formed.
The potential for E-commerce, and a quick return on distributor investments, originates from the estimating software environment. Yes, distributors need to build shopping carts, but the focus of a webstore will primarily be stock replenishment or small orders.
Distributors will never out Amazon Amazon. The shopping cart is what Amazon does best along with offering a breadth of products. Amazon, however, is currently not well positioned to handle the contractor’s estimating software ecosystem and if wholesalers and their manufacturers are not first to maximize the advantage of this capability they are missing a major opportunity.
Keith hits on a number of good points:
- Projects represent a concentration of business … and the hardest part of the business. Systems talking to systems can give a distributor an advantage.
- If distributors don\’t do this, Amazon will. Consider, Amazon wrote the interfaces to 20+ punch-outs to their system. And reached $1 billion in sales. If they wrote a \”punch-out\” to electrical estimating systems, over time, could this give them an advantage.
- The benefit of the system converting requested items to \”your line card\” can be significant, especially when the project states \”or equal.\”
And there are a number of distributors offering this type of service, inclusive of national chains.
The bottom line is that eSales will be defined as sales through a website, punchouts, EDI and connectivity through customer ordering / estimating systems. The benefits relates to operational cost savings, enhanced \”stickiness\” to a customer (which banks have proven is very productive) which will lead to increased sales and profitability with these customers.
From a performance viewpoint, what percent of your sales are captured electronically today? What do you want it to be in 1 year? 3 years? And have you looked at the net profitability, in dollars and integrating activity based costing, on these sales versus your non-eSales? Which is better for your business long-term?
Oh, and yes, you will have to manage your salespeople through this change in customer ordering behavior but … your responding to how the customer wants to be … the true definition of omni-channel!