Sell and Serve in Web-based World
How distributors are saving time, opening doors and sharpening their competitive edges.
It's no longer a question of "if" distributors offer online capabilities, but since when, or how soon. Indeed, today's marketplace demands that distributors implement Web-based solutions.
But for every action, there is a reaction, and transitioning from manual to automated workflow is going to have a major impact on daily operations and relationships. In addition, while e-commerce can be an effective time-saving tool that streamlines routine operations, some distributors are finding that there are limitations when it comes to serving more customized needs.
BFL&S invited the following panel of distributors to share insights on these issues:
- Michael Boyle, president, Murray & Heister, Beltsville, Md.
- Bob Cronin, president, MacGraphics, Oakbrook Terrace, Ill.
- H. Dean Horn, president, RATH Information Systems, Bellefontaine, Ohio.
- John Katzman, co-owner, Informs, Anaheim, Calif.
- Jeff Martin, vice president of sales & marketing, Control Printing Group, Independence, Mo.
- Walt Smith, CDC, president, IDS-Integrated Document Solutions, Dallas.
1. Briefly describe the influences leading to your implementation of e-commerce and its services.
Martin: Our software system needed to be updated anyway, so meeting the needs of our customers was our basic influence. We offer a fully integrated front- and back-end Windows-based system called INCONTROL. The program is a customizable, secure, electronic ordering system that ties together an online product catalog, support information, online proofing, report generation and electronic messaging.
Smith: We established electronic ordering primarily for business cards in September 2001. Business cards tend to be the most scrutinized piece of printing out there, and quite frankly, the salespeople didn't enjoy selling them. Electronic ordering is great for these repeat orders and it allows customers to print out a color proof. It was necessary to offer this service in order to get the salespeople committed to marketing these products again.
Boyle: Going online was our idea though we certainly put feelers out there. We have a Web site, which we host ourselves, and customers use it to communicate with and order from us.
Distributors really need to keep up with trends, but I'm not as worried as I was a year and half ago about not being totally e-commerce ready. A lot of customers don't seem to be that interested in ordering that way, so we're sitting back, seeing exactly where it goes and gathering feedback.
Katzman: We investigated online order management programs that allow customers to upload artwork and specs straight to manufacturing facilities but opted to keep the ordering, manufacturing and specification part a face-to-face transaction. We use e-commerce for warehousing, distribution and reporting. If we depend on our clients to complete an order online from concept to completion, then we've belittled our value.
2. What was involved in start-up, and what maintenance is required?
Martin: The new system was operational in May of 2000 and we wanted to master that before we launched the Web-based portion, which was active the following May. For each client, we build a database of items customers buy from us and it becomes a secured online catalog. It takes time to build the database, but it's a cinch to maintain—the key is not to let the data entry pile up. We have no Web master or network administrator; the office manager and I do the troubleshooting. It's simply a matter of creating purchase orders or warehouse releases for our vendors, and then shipping the product to the customer.
Cronin: It only took several weeks to get people up to speed on the site. The costs aren't any greater than if we were putting together a promotional piece. Some of the Web site development work was sub-contracted, but our current employees have been trained for in-house maintenance and future updates.
Boyle: The e-commerce that's available with our software goes for about $4,000 and the transition and training time is pretty short. Currently, we participate in a $25 per month program with Carlson Craft. Clients go directly to the Carlson Craft Web site, which is linked to ours, for viewing products like wedding invitations and stationery.
We also have SAGE for promotional products. Customers can go to Web sites and fill shopping carts and the orders are sent to us. Training was simply a quick meeting where we brought the salespeople up to speed.
Katzman: The start-up cost of the software was minute in comparison to the time spent learning and teaching the whole concept of supply chain management and relaying that philosophy to our clients. The training wasn't that difficult, it's more about attaining a particular mind set.
3. What impact has e-commerce had on your workflow and profit margins?
Horn: Profitability has in-creased as a result of e-commerce because we're able to concentrate on revenue-producing activities instead of on paperwork. We've also experienced greater workflow efficiency, which has freed up our time to penetrate more accounts. It's a very consistent part of our daily operations, and although less than 2 percent of our customers are using it right now, they're responsible for about 15 percent of our business.
Smith: Since September we have gone from receiving $2,000 in business card orders to more than $30,000. Customers can order two- and three-color jobs as needed and have the products in three days instead of 10, and the salespeople are working with a greater profit margin.
Katzman: Approximately 20 percent of our customers—our larger accounts—use our online services. These are the clients who understand them and are looking for ways to streamline their supply chain management.
It has definitely increased our profits. One account actually grew from $200,000 to almost a million dollars, all because of the customized package we were able to offer them.
Cronin: My feeling is that a small percentage of our customers use the site. Certainly the newer customers use it to find out more about us and our tech-savvy customers come to the site as part of their standard business procedure.
The site also provides a great way to share information and advertise special offers. However, it hasn't been the direct cause of increased profits, and I'm not sure that it will be. For us it's more of an informational tool.
Boyle: E-commerce has certainly increased our profits. Aside from clients placing more orders, file transfers to our graphics department and returning PDF proofs have become much more convenient and profitable.
4. Discuss some of the advantages and disadvantages of e-commerce.
Horn: The larger the customer, the more uniqueness they demand. Sometimes it's difficult to customize capabilities for each customer and it also can get very expensive.
Martin: E-commerce is a major benefit for those customers who need to charge off expenses to different locations, and it's a tool that results in a guaranteed return on clients' investments.
On the downside, it presents a whole new system for customers to get used to, one in which they're handling our data entry. But it's actually more efficient for the customer to make a warehouse release than it is for us.
Cronin: One advantage is that it allows a company to convey itself as contemporary and forward-thinking. It eliminates potential concerns of size and scope that certain customers may have if they can go to a nicely designed and well-maintained site.
Also, geography becomes less of an issue. The sell doesn't necessarily have to be within a car ride.
Smith: One disadvantage is that with large jobs, customers need to see rainbow proofs and press checks, especially if it's their first time dealing with us. Distributors need to be able to know how to properly spec jobs for the manufacturer or send PDFs correctly.
Boyle: It's an advantage to simply have it there—I'd be embarrassed if a customer asked for my Web site address and I didn't have one. The only disadvantage to e-commerce is that it has the potential to replace that personal touch.
5. What is your future outlook for the industry and e-commerce?
Horn: We expect to be fully integrated within the next six months. After that, profits may or may not increase. It's true that streamlining workflow makes things less cumbersome, but it can create a new set of unanticipated problems. Sure, being able to pull up repeat orders reduces paperwork, but if there is a slight change, there must be a mechanism in place to catch it.
Cronin: E-commerce changed the marketing ability of smaller companies, and I think the ones that are good at getting their message out will benefit from it.
Katzman: E-commerce continues to evolve and is constantly changing the way we do business. We are going to always be in a state of flux. As business changes so will our product mix. Every client has different concerns or concepts of supply chain management, and it is our job to address them.
6. Do you have any advice for distributors who are considering e-commerce?
Smith: We are entering a new era with our eyes wide open and it's exciting to see the opportunities developing for independent distributors. What we bring to the table is service, and if distributors are not willing to keep up with the times and offer the new technology to their customers, their time is limited.
Horn: Maintaining a personal relationship is still very important to customers, and I don't expect that will ever go away. In terms of the global outlook, it is important for companies to be going in this direction. As for the confines of where we live, it isn't that important. We're located in a rural area, and those within a 50-mile radius still want to see a salesperson.
Martin: Whatever system you choose, make sure you have excellent technical support. We are fortunate in that most of our issues are resolved quickly. I consider this partnership just as important as the ones with our key vendors. If an issue can't be resolved quickly, it could mean the loss of a customer.
Cronin: Do it well or don't do it all. Distributors need to talk to as many people as they can and get feedback about their experiences. Ask a lot of questions and never be satisfied.
Boyle: Don't spend a lot of money by jumping on anything too soon. Certainly we need e-mail and a Web site, but the future is uncertain. Look around and ask a lot of questions before making an investment.
Katzman: Do your homework and look at all of the available options. It is going to take a lot of time so you need to be committed. Also, avoid the software that makes clients do all the work because it just turns distributors into quote machines.
By Maggie DeWitt and Sarah Lerow