Customer demands will affect wholesalers' technology strategy more than anything else. That's what the most recent Distribution Research and Education Foundation report, "Facing the Forces of Change: Four Trends Reshaping Wholesale Distribution," states. Tomorrow's customers will be more at ease with the Internet and more knowledgable. They'll demand more information and self-service options, such as 24/7/365 online order entry, electronic funds transfer, real-time inventory checking, online order status and account history, as well as shipping and delivery information.
"If the new value proposition largely lies not in products but in information, the race will be won by those who surround the products they sell with valuable information the customer needs about those products and others like them," the DREF report states.
A survey published in the September 2000 issue of SUPPLY HOUSE TIMES states that 38% of contractors have purchased business-related equipment online, and 41% say they are likely or very likely to purchase plumbing and heating supplies over the Internet in 2001.
Contractors are getting on the Web at an ever-increasing rate and they are using it for more than checking the sports scores or getting the weather: They are using it to conduct business. Wholesalers who survive tomorrow need to invest in Internet technology for their businesses today.
"The gross margin in our channel is certainly not going up," says Steve Cook, president and CEO of Baltimore-based Northeastern Supply, a plumbing, HVAC, water systems and hardware distributor. "We have to maintain our position as an important part of the channel, and to do that we have to drive our costs down. Our Internet site is one very important segment of the equation."
Andy Perry, president and founder of Hill Supplies, agrees: Investment in technology is critical for the survival of his plumbing, heating, cooling and electrical wholesale distribution company, based in Richmond Hill, Ontario.
"Changes are being made faster today with technology," he says. "If wholesalers can't adapt to change, if they can't keep up with technology, they won't survive."
Luring them inThe more time a contractor spends on a Web site searching for information, the less time he's out in the field making money. A business-to-business Web site is only useful if it's quick and easy to locate information.
"We didn't want to just stick something up there and act like we were on the Web," Cook explains. "So we asked our customers what were the top 100 features they'd like to see on the site. We ended up with a very large list, but we prioritized everything according to what made sense for the majority of our customers. Those we added to the site first, and we're working on the remaining items now."
However, Northeastern is constantly getting new ideas from its customers. Twice a month Northeastern holds Web training classes for customers registered to use the site. IT Director James Fehrmann and Steve Coppage, director/marketing and new business development, conduct most of the classes.
"We spend time educating our customers to let technology work for them," Coppage explains. "It's a challenge because some customers don't believe they need technology."
The training room at the wholesaler's corporate office provides a structured environment with no distractions for the contractor, says Rick Tomaschefsky, vice president/sales. This hands-on approach allows the contractor to go through the different features of the site over and over. He becomes more adept at moving through the site and is more apt to place an online order once he gets back to his office, Tomaschefsky says.
And Northeastern is committed to getting its customers to transact business on the Web. More than 100 of the 300 contractors signed up for online ordering are using it on a regular basis.
"We try to emphasize in our training sessions that the Internet is not an alternative way to place orders but a better way," Fehrmann says. "We want our customers to use the Web, and we tell them why: Using the Web saves contractors money as well as Northeastern."
Northeastern's site, www.northeastern.com, has a members-only section that requires contractors to log in with an identification number and a password. Once in this section, members can view the most recent additions to the product line, featured products and pricing announcements. From the menu bar, customers can examine their recent transactions, partial and open orders, invoices and account statements, as well as submit a quote inquiry.
To search for a product, the easiest way is by category style, such as faucets. Other search options include general keyword and manufacturer's name. Contractors drill down to find the exact manufacturer and style they want. A list of all locations where the particular product is carried appears at the bottom of the page. The quantity of the item found at each branch is given. Customers select a branch location for pickup or they can choose a delivery option.
Northeastern's redesigned shopping cart now allows registered contractors to add various items to an order without going back and forth from one page to another. If a customer wants to buy several products from one page, he selects each item and a shopping cart icon appears next to the items. The icon indicates which items were sent to the shopping cart, and the customer can continue shopping.
Another popular feature is the Favorites page. For example, a customer has standard equipment and accessories he purchases when doing a residential job for a particular builder. The contractor saves a list of all these products into a folder on his Favorites page. The next time he has a job with that builder, the contractor can provide the builder with a quote in a couple of seconds, Coppage notes.
"A couple of our customers said that Northeastern's site was easier to use than (W.W.) Grainger's," he says. "That surprised us."
Retail sites are great for finding new functions and applications that would benefit Northeastern's customers, Coppage adds.
"We have to do everything we can to be the first wholesaler that a contractor thinks of," Cook says. "And a customer-friendly Internet site will soon become part of that mix you need to maintain your customer base. That's why we built our site; it's just another relationship-building tool."
Navigation 101Hill Supplies is also very committed to getting its customers to use the Internet. Perry works with his customers to find out what they want on the site, and he gives it to them.
"We have to keep adding value to our customers," he says. "Doing business over the Web eliminates errors and wasted time. We will add any feature to our site that helps customers become more efficient."
A team of five people dedicates its time to Hill Supplies' Web site, www.hillsupplies.com. They spend an average of 200 hours a week upgrading the company's proprietary software and enhancing the site with new features requested by customers.
Training customers to use the Web site is important, Perry says, as is making customers comfortable. Contractors have the option of traveling to Hill Supplies for Web training, or requesting on-site training.
Hill Supplies' salespeople are equipped with wireless laptops, allowing them access to the Web site when they're on the road. They can visit a jobsite, download the site plans within minutes and walk the customer through the site.
Another hook to get customers to Hill Supplies' site is providing e-mail for contractors who don't have computers or e-mail accounts, Perry notes. The company gives the contractor an e-mail address, which the contractor passes on to his clients.
Hill Supplies' in-house server processes the contractor's messages as they come in, automatically changing them to a text format. The text messages are then faxed to the contractor's business or home. Contractors can also pick up their e-mail from Hill's Web site, which gives them access from anywhere in the world.
"It's a lot easier to get an existing customer to use your site than it is to find new customers on the Internet," he says. "If you give the customer options and keep him happy, he'll stay with you."
Roughly 5% of Hill's customers use the Web for ordering product, he adds; about 25% of its customers browse the site for product information.
Product pictures guide contractors around the site to the information they're seeking. Customers can go to a particular area, such as plumbing, and get a page of product images. Clicking on a picture brings customers to a listing of manufacturers; clicking the photo again displays the product code and description. After entering the quantity of each item, customers review the items in their shopping cart, complete with product images, before placing an order.
"You know the old saying, 'A picture's worth a thousand words,'" Perry says. "Our customers are raving about the site. It's a lot easier and faster to look at a picture of a copper fitting than reading a description of a copper fitting. In fact, quite a few local colleges are using the site to see what certain products look like."
Visual images also help inside sales staff when taking phone orders, he adds.
The cross-reference feature gives a customer the means to search the site with a manufacturer's part number or his own number. And by the end of the year, customers will be able to search Hill Supplies' site in eight languages.
"Wholesalers must invest in technology today to survive in the future," Perry says. "Technology allows you to do more with less, and that makes you more competitive."