Taken as a technology, not a business sector, e-commerce is an unmitigated success.
As Industry analyst Eliot Harper tells it, the birth of e-commerce can be traced to 1986 and Henry Freedman's "829" patent—a pioneering invention allowing for the interconnection of printing requesters to printing facilities on telecommunications networks (visit www.henryfreedman.com).
"However, we started to witness the real introduction of print dot-com providers in 1999 at Seybold in Boston, when we saw Collabria, Impresse and others springing up," said Harper, on staff with WhatTheyThink, Lexington, Ky. "There were a total of nine new dot-com companies at this show. Today, there are more than 200."
Collabria's model uses eCatalog, a centrally approved procurement point where end-users can places orders for multiple locations.
This report looks at three of those companies—58k.com, Four51 and Collabria—and the unique approach each takes in streamlining print procurement services for distributors and their customers.
Models, Methods & Means
The e-commerce gospel according to David Robb, vice president of marketing for New York-based 58k.com, is that an e-commerce model must save people money while helping others to make money, the concept must be easy to explain and absorb and the site must be easy to navigate and use.
"You also need a voice behind the site," he added. "Our customer service staff is readily available to assist and continuously reviews criteria for completeness."
Essentially, 58k.com is a free-market auction site where print buyers post RFQs online and printers bid for the jobs in an atmosphere of uninhibited dialogue. "It's an open posting," explained Robb, "where all specs and prices are visible to all parties, so buyers can select the most effective producer for the job."
Different from a bid site, which doesn't necessarily facilitate a better transaction, the auction format lets buyers see beyond price and allows sellers to showcase their areas of expertise to forge the most productive relationship.
While 58k.com brings the players together, each party is responsible for normal due diligence measures. A transaction fee of two percent of the cost of the job is extracted from the printer.
Robb explained that the largest growth area for 58k.com is in conducting private auctions for large customers—those doing at least half a million dollars a year in print buying. "The customers pre-select the vendors they wish to have participate and we conduct an off-site auction for them," he said.
Headquartered in Eden Prairie, Minn., Four51 is a many-to-many network designed to help distributors manage both buy-side and sell-side relationships. Three different interfaces link buyers, distributors and suppliers to a common trading platform.
According to Mark Osborn, Four51's vice president of marketing, this system accelerates the ordering process by eliminating paper. "You just get on-line and tell us what you want," said Osborn.
Distributors offer their customers the value-added service of an online catalog custom-tailored to the organizations needs, so individual buyers can purchase approved items while staying within their budgets and credit limits. "However, if necessary, there is flexibility for going outside prescribed limits with proper approval," Osborn explained.
Distributors receive orders through their own interface, as well as images associated with each product, and can do complete purchase orders without re-keying information.
In addition, Four51, an easy system to modify as new suppliers and customers are added, facilitates pricing efficiency, which allows distributors to aggregate order volume for various customers before submitting it to a supplier. The system also gives suppliers an efficient tool for managing inbound order activity and RFQs with standardized purchase order formats.
A fixed monthly subscription fee, usually paid by distributors over an average 18 month term, is based on the number of products and customers the distributor brings online. "On average, this runs about $1,000 per month," said Osborn.
Facilitating the collaborative effort is what drives Menlo Park, California-based Collabria's model—a three-tier supply chain that lets distributors interface with buyers and supplies without the time-consuming administrative headaches.
"The distributor is still the 'go-to guy'," stated Vice President of Marketing Michael Sanabria. The solution is simultaneously centralized and localized. No special software is required for access, as it works through standard Web browsers via any Internet connection.
A centrally approved procurement point—using a customized illustrated eCatalog—places orders for multiple locations, while eTracker allows project team members to view print specs, approvals and late-breaking changes as well as what's on schedule and what's not.
Distributors and suppliers use eProduction for order management and routing in addition to automated production services. Sanabria pointed out that, "Routing orders to the appropriate local suppliers for printing and shipping helps control costs and reduces turnaround time."
In addition, inventory management tools allow these printers to track companies' master stocks for quality and consistency, an important feature for corporate image.
According to Sanabria, future plans for Collabria include developing more print-on-demand so-lutions for greater one-to-one marketing capabilities, particularly for direct mail campaigns.
There is an annual fee for the system as well as a per order transaction charge, which Sanabria said is usually built into the cost of the product.
"You have to look at what you're saving," he explained. "Pre-flighting files is a very labor intensive process—accounting, on average, for 20 percent of the cost of the job. This system delivers files which don't require pre-flighting directly to the printer. Transaction fees are more than made-up for in efficiency."
Which Comes First...
It's Osborn's experience that end-users are influencing distributors to implement e-commerce. "Many end-users have already invested in e-commerce on their own," he said. "Distributors tell us they worry that if they don't do something to keep up, they will lose the account.
"Furthermore, many large end-users have also invested in their own supply chain and administrative technology," Osborn continued, "and they want their distributors' solutions to work within the technology parameters they have already defined."
Forward-thinking distributors, then, are turning to e-commerce to grow their companies and provide value to customers.
According to Osborn, XML (eXtensible Markup Language) offers quick interoperational flexibility. "With the right middleware, XML allows any system to talk to any other system," he explained. "Proactive distributors can present trading partners with a viable 'front office' solution—e-commerce—and a strategy for integrating it with their existing back office or accounting systems.
"Distributors can go in and say, 'Look, I'll give you this capability for free if you guarantee me X amount of dollars in business per year," continued Osborn.
"We recently had a situation where a distributor won a bid not because of pricing, but the capability of handling 80 different purchase orders online," he added.
Caveat Emptor!
The future bodes well for e-commerce as society has, by and large, reached a comfort level with Internet use and encrypted sites have dispelled a lot of the concerns surrounding online credit card security.
So could it threaten the distributor's position in the marketplace? Not according to Osborn. "Distributors bring their expertise to the mix, especially for those companies that don't have the necessary marketing and purchasing personnel. Plus, people buy on more than price—relationship is a huge factor."
"Distributors add value and services that go beyond order transmission," opined Sanabria. "The idea is not to change the dynamics of customer/distributor relationships, but to remove the administrative nightmares so they can get out there and help customers grow."
For distributors, however, there is still a great deal of confusion, noted Osborne. "Distributors need to look carefully at hard and soft dollar costs—getting up and running, training staff, etc.—before investing."
Thomas Cutler, president & CEO of TR Cutler, Ft. Lauderdale, Fla., agrees. In his article Print Manufacturers and Large Distributors Mortgage Future eCommerce Profits, he points out that various set-up and transaction fees can be costly and, "As sales increase, costs increase."
His article goes on the explore what can happen if the ASP goes out of business, and strongly recommends due diligence when selecting an e-commerce provider. Since the ASP owns the technology, it would behoove distributors to make certain that they maintain ownership of their data. "After all that fee-based revenue has been paid," wrote Cutler, "[distributors] could be left without access to their customer data." (Copies of Cutler's article can be requested via e-mail at trcutler@aol.com).
The Web is a good place to start learning more about e-commerce before investing in the technology. Some of the educational sites include www.businesswire.com and www.whattheythink.com.
By Maggie DeWitt