Wholesalers have edge over e-commerce firms
"Panic is the worst thing you can do," said Scott Latham, senior analyst at AMR Research, an information technology research firm. "If you haven't done anything yet, you're not behind. If you don't have an e-commerce site, you're not alone."
Latham made his remarks Feb. 1 during the annual meeting of the National Association of Wholesaler-Distributors in Washington. He was a member of a panel discussion entitled "Wholesale Distribution and the Internet: From 'Bricks and Mortar' to 'Clicks and Mortar.'"
The No. 1 myth about e-commerce is that everyone is doing it, Latham said. The reality is that no, they're not.
The adoption rate of e-commerce actually is very slow, he said, and the level of automation ranges from phone calls to faxes to EDI to e-mail. The efforts of a large percentage of companies trying to establish an e-commerce presence have resulted in failures or half-baked Web sites.
"This is similar to the gold rush when the only people making money were pick-and-pan vendors," Latham said. "Today that means systems integrators, consultants and ad agencies."
He listed several reasons why the e-commerce adoption rate is so slow but none is bigger than conflict within the distribution channel. Wholesalers are concerned that changing the way they do business might alienate customers they've had for 20 or 30 years, he said.
But change they must or wholesalers will be left behind, Latham said. E-commerce's biggest effect will be to increase the velocity of product through the supply chain. This will require tighter communication within the chain so that distributors can forecast demand more accurately and place timely orders with vendors to meet customers' expectations.
"The major impact in the next year or two will be more frequent orders and smaller lot sizes, which means fewer SKUs," he said. "E-fulfillment will be the buzzword this year, not e-commerce. Manufacturers will pass off logistics to you folks for smaller, more frequent orders."
Other value-added services that manufacturers will try to delegate to distributors include custom packaging, component assembly and light manufacturing.
The notion has circulated that e-commerce would "disintermediate" wholesalers from the distribution channel, making them unnecessary in the delivery of goods. Latham said that's not necessarily the case.
"Disintermediation is a bunch of nonsense," he said. "The lynchpin of the value chain is distribution. Distributors that use e-commerce to become part of the integrated supply chain will not be disintermediated; those who continue to use the phone and fax will. Identify where e-commerce will help your business and you will prosper."
Distributors' advantages over virtual companies and Internet middlemen, he said, are their knowledge of the market and their experience with logistics. But those strengths may not last forever.
"You're in the driver's seat at this point," Latham said. "You have the relationships and the know-how to handle product. Don't let your customers go to a dot.com company."
He advised wholesalers not to ignore e-commerce but to participate and compete. Latham suggested that they look at the best practices of other companies and to get involved with their vendors and customers to partner electronically. Most of all, he said, don't wait any longer.
In related news, NAW has entered into a strategic alliance with online marketplace TradeOut.com to provide wholesalers with an efficient way to dispose of excess inventory and idle business assets using the Internet.