2001 Technology Forecast: E-commerce spending to grow
Wholesaler spending on e-commerce systems and back-office automation is expected to grow significantly this year as software companies continue to offer methods of streamlining distributors' businesses.
A recent survey by eCommerce Business magazine of more than 250 U.S. companies -- ranging from small businesses to major corporations -- reports that 80% of brick-and-mortar companies that currently engage in or plan to engage in e-commerce intend to increase their e-commerce spending in 2001.
Nearly half those companies (46%) expect to increase their e-commerce investment by 15% or more, and 36% plan to increase spending by 20% or more.
The major software solutions providers for the wholesale distribution industry back up the research.
"Technology becomes more and more important as a tool for business success," noted Chuck Boyle, president and chief executive officer of Prophet 21. "We encourage our customers to think upon investments in e-business as they do other investments in their companies."
The HVACR and plumbing industries are very fragmented but can benefit tremendously by looking at technology, Boyle said. Distributors need to understand how electronic technology can affect the bottom line -- by improving the business culture and, in turn, improving profit margins.
For Prophet 21, 2001 is a "year of opportunity," as the company continues to increase membership in its e-marketplace, as well as users of its back-office automation and warehouse management systems.
"With regard to the business-to-business sector, the potential growth over the next few years is enormous," said Wayne Short, president of Mincron Software Systems. "The challenge that many distributors will face in 2001 is determining where the real opportunities in this sector truly are and then executing the right strategy to exploit them.
"There is a lot of noise in the marketplace about e-commerce. The technology is readily available to launch a wide variety of e-commerce initiatives, but, at the end of the day, it's the proper application of that available technology that will win."
In addition to the growth in e-commerce, he expects Mincron to see substantial growth in its customer base as the market for enterprise-level software and warehouse management solutions strengthens this year.
NxTrend Technology Marketing Manager Matt Turner said that the company expects a "banner year" in 2001 as more of its customers turn to e-commerce solutions.
"It becomes more obvious every day that the Internet is changing the way distributors conduct their business," he said. "Distributors can exchange information with vendors and customers on a common infrastructure achieving more profitable replenishment and better customer service. What was once hype is now reality -- distributors are realizing cost savings and other economic value creation with supply-chain automation."
Only a handful of distributors were using the Internet for business a few years ago, but today most distributors conduct some form of business over the Web, he said.
"Even electronic data interchange, which has historically languished due to the cost and difficulty in building a trading partner community, is currently growing at a 20% annual growth rate," Turner noted. "Clearly, distributors see the relationship between lowering transaction costs, becoming easier to work with and long-term corporate viability."
Eclipse also predicts an increased demand for e-commerce products in 2001 as its customers use the Internet as an extension of their business services.
"More and more distributors are implementing Internet storefronts," said Michael Honig, vice president/business development at Eclipse. "Industry B2B is driving distributors to be more e-commerce enabled."
Back-office automation will be a steady growth market this year as wholesalers begin to replace older legacy systems, he said. Growth of wireless technologies is also increasing, allowing distributors to be connected to their back-end systems wherever they are.
So what do wholesalers say? Most interviewed for this article say they are either enhancing the e-commerce capabilities that they have, or are developing e-commerce strategies.
"I see more wholesalers getting into Internet and Internet-related technologies in 2001," said Andrew Larson, president of Pewaukee, Wis.-based Gustave A. Larson Co. "At Gustave Larson, we will be launching an e-commerce/e-content initiative early this year. We are continuing our supplier-assisted inventory replenishment program. Also, we are bringing bar-coding into all of our branches."
Consolidated Supply Co., Portland, Ore., is seeing more of its customers using Internet order entry. The company saw an increase in users the last half of 2000 and expects Internet usage to accelerate in 2001, said Tom Bedell, Consolidated's vice president/branches.
Development of a Web site integrated into its back-office systems is Peabody Supply Co.'s (Lawrence, Mass.) goal for the second half of 2001, said President Domenic Messina. While the company currently doesn't have a Web site, it does engage in EDI.
Thinning the herdA number of online exchanges, marketplaces, trading hubs and portals have been jamming up the information superhighway in the last year or so. In 2001, many of these dot-coms may find themselves up on blocks in the front yard.
"The biggest thing this year will be a shakeout of all exchanges," said Al Jones, corporate manager/information systems at Apex Supply, Atlanta. "They're all competing for a finite supply of customers and suppliers."
In fact, Forrester Research predicts that, by 2003, fewer than 200 B2B e-marketplaces will be left standing.
With so many options now available, distributors find it hard to decide which way to go. Jones said that once the marketplace thins out, more distributors would be able to select the right trading option for their businesses.
The problem is interconnectivity, said Chuck Boyle of Prophet 21.
"So many e-business initiatives failed because they didn't understand the need for full connectivity to back-office systems," he said. "Without full automation of business systems, you create double the work and double the expense."