Finding Balance

For many jan/san distributors, looking at the fate of the dot-com companies can help them make sense of the costs, benefits, and the mistakes that can be made in the world of technology. By analyzing the dot-com’s demise, distributors can get an accurate idea of what works — and more importantly, what doesn’t. In only a year, the view of the Internet has changed drastically from a must-have-now attitude, to one that is characterized by greater reservation, more contemplation and deeper consideration before any definite, costly decisions are made.

The dot-coms proved that an Internet portal with ordering capabilities did not alone constitute a sufficient business plan, and from that, distributors have learned that a website isn’t everything. In fact, this is where distributors have an advantage — their brick-and-mortar makeup is what drives sales, not the Internet. As Adam Fein, president of the Philadelphia-based Pembroke Consulting puts it in his report, “Facing the Forces of Change”:

“The Internet will be a common, but not dominant, method for receiving orders from customers.” In other words, the Internet is another tool for customers — it’s not a necessity.

In line with Fein’s predictions, many jan/san businesses are at some stage of adopting technology that will someday allow their customers to order online. But they’re no longer rushing it. In fact, most distributors SM spoke with were pleased with the rate at which they’d adopted technology — especially Internet related.

Gary Hegeman, general manager of Acorn Distributors Inc., is responsible for developing the information technology (IT) for the Indianapolis firm. He’s confident the company is up-to-date with meeting the technology needs of its customers. It began when the company launched a basic website with company information about a year ago.

“This year we added the option to enter orders for customers. What we’re in the process of developing now is a catalog where they can do online shopping.” The new catalog would target existing and new customers, says Hegeman.

“We wanted to give our customers as many different options to do business with us as possible and [Internet ordering] happened to be one of the options that was out there,” he explains. “Some still call, some fax — it really depends on the customer and how they want to do business with us.”

Jerry Blumberg, CEO of Kew Forest Maintenance Supply in Forest Hills, N.Y., plans to upgrade his site within the next year to allow online ordering. Currently, the site includes product listings, and the company also runs occasional product specials on the website. Kew’s site has been up for about a year, and its original purpose was simply to get the company’s name in front of more customers.

Blumberg says the site’s role in company business has evolved since it was launched. The site has enabled Kew to form some strategic partnerships with its manufacturers, tying the websites in with one another so customers can easily move between them. For instance, a potential customer can search a manufacturer’s website looking for a specific product, and if they decide to buy it, the customer is then directed to the site of their local distributor.

“We’ve gotten some nice results as far as customer acceptance of [the site],” says Blumberg. Kew never experienced the once-common fear that its manufacturers would try to sell direct to customers, and he feels the relationships with manufacturers are mutually beneficial.

Take it Down a Notch
These companies’ stories are indicative of what has become a mainstream trend in e-business adoption. For distributors, decisions are now deliberate and carefully planned, and decision-makers are more likely to absorb changes in small increments, rather than diving in head first without looking.

“Companies are not jumping online anymore,” says Gregory Kravitt, a professor of e-commerce strategies and founder of Joraco Inc., a consulting firm in Deerfield, Ill. “They didn’t even know why they were doing it before.” Companies are approaching e-business more conservatively, and are also expecting a quicker return on investment than they did before, he says.

“Expenditures on website marketing and customer acquisition are two areas that need to be kept in check,” Kravitt continues.

“Everyone said this was new and revolutionary,” he says of the Internet, “but that’s been proven to be untrue. The old rules of economics do apply. Companies need to be cautious about how they spend and make sure their e-commerce plan complements their company-wide strategic vision.”

Still, the Internet will never replace traditional means of ordering. “Online orders are expected to grow substantially as a percentage of all orders,” says Fein in “Facing the Forces of Change.” “However, online ordering will not dominate the other ordering methods. Today, distributors that sell to the industrial customer receive 10 percent of their orders electronically. By 2006, distributors selling to industrial customers expect to receive 37 percent of their orders online.” Much of that growth is expected to come at the expense of phone and fax orders.

Most experts do feel that online ordering is here to stay. The question remains, how big of a part will it play in the businesses of jan/san distributors?

“I think it will play an important part in future business, but I don’t think it will ever replace the one-on-one customer service department,” Blumberg agrees. “Many people don’t know what they really need or want, and by talking to a customer service person they can get more detailed information,” he adds.

Hegeman says about 5 percent of his company’s orders now come in online, though he expects that number to grow as customers become more comfortable with the process. Hegeman hopes to speed up the learning curve by encouraging use of the website through marketing and education.

Marketing the site’s name includes having it painted on the trucks, stamping it on the invoices and letting customers know that it’s an option.

“We also give the salespeople goals to get five more customers ordering from the website in the next quarter,” Hegeman adds.

The efficiency can’t be beat, he says. The order is processed as if someone at his organization had placed it, but there are fewer mistakes because there is no middle man.

All in Good Time
Overall, the companies interviewed seemed comfortable with decisions they’ve made regarding technology adoption.

“I don’t think I would make any changes. What we’re doing has been working for us,” says Blumberg. He adds that he knows larger distributors are working more diligently at providing online ordering, but his company of 22 has not been negatively affected by it at this point.

Next year, however, Blumberg plans to add product lines with photos for many. He says there is a good possibility he’ll add ordering capability as well.

Hegeman, though satisfied with where the company is right now, was spurred into furthering his technology offerings by realizing that many of his competitors were entering the arena.

After finishing a relocation last year, Acorn was able to focus its resources on updating its computer and network systems. Only in the last year has the company procured PCs for the staff and network capabilities, and has had to train on the new software. A lot to bite off in a year’s time, Hegeman looks forward to his next project: the company’s online catalog.

“We may not sell all the products so we need to go through and decide which of the items go in the catalog, but we need to do that for all the vendors,” he says. Including every product from each vendor isn’t cost-efficient since there’s a per-photo cost with his Web provider. However, he says he’ll set a budget and get the main vendors and main products online, then determine if it’s worthwhile to go forward with more.

The future of technology is unpredictable, Hegeman admits, and it’s often difficult to venture a guess as to where a company sees itself long-term. “Technology changes so drastically and dramatically. The key is being prepared as the changes evolve,” he advises.

The future is positive for businesses looking to complement other order-taking capabilities with an Internet presence.

“Brick-and-mortars will better understand the benefits of e-commerce and use them wisely, and everyone’s going to have a more realistic understanding of what e-commerce is,” says Kravitt.

Nationwide E-Commerce Act

Last year Congress passed the E-Sign Act, providing a uniform legal framework for engaging in enforceable e-commerce transactions. The Act also served to incite individual states to enact similar measures, and served to better enable industry-wide implementation of e-commerce initiatives, knowing a uniform national law was in place to enforce transactions.

Since, more than 37 states have enacted the Uniform Electronic Transactions Act, which recognizes electronic contracts and electronic signatures.

The major result: Companies can now implement a single e-commerce solution nationwide, knowing that electronic transactions can be upheld in the courts of any state, regardless of which state law is applied.

CRM in the Spotlight

Looking for help and advice in implementing customer relationship management (CRM) solutions? CRMcommunity.com is packed with information on how to evaluate, purchase and implement CRM. With news, a library, links and a discussion forum, the site gets those in the market for CRM software up to speed on what’s out there, and what’s going to benefit his or her business. There is also a list of classes and sessions to sign up for.