Online sales increase almost 3%, but HSN’s total sales dip by the same amount.
B2b companies beef up their web sites, borrowing from b2c retailers and breaking new ground.
Five years ago online sales accounted for about 9% of revenue at Allied Electronics, a distributor of electronic components. Today that's 41%.
"We wouldn't be successful in this business if we didn't have an e-commerce site," says Dan Stewart, director of e-commerce. "We wouldn't be in the game at all."
It's an increasingly common refrain at companies whose customers are not consumers, but other businesses or government agencies. Business-to-business e-commerce is growing rapidly, especially among wholesalers and distributors like Allied Electronics that stock many goods and have many customers. A well-designed web site lets those customers quickly find what they need and buy it, taking advantage of prices the buying organization has negotiated.
Among wholesalers, the category of electronic transactions that includes sales through web sites grew at 34% per year from 2000 to 2009, the U.S. Commerce Department says (see story on page 34.) And b2b executives are well aware of the power of the web: In a survey of 160 b2b e-business professionals last year, 93% called the web channel the number one tool customers use to make decisions, says Endeca Technologies, a provider of site search and navigation technology that sponsored the study. Endeca is a part of Oracle Corp., which acquired it late last year. Recognizing that their customers are using the web more, both in their professional and personal lives, more b2b companies are investing in making their web sites as appealing and easy to use as the retail sites purchasing agents peruse when shopping for themselves.
"We're seeing the b2c-ifying of b2b," says Andy Hoar, a Forrester Research Inc. analyst who covers b2b e-commerce. He says b2b sites can benefit by improving their site navigation and search, merchandising and checkout. "Not everything from b2c will work," he says, "but a good chunk of it will."
But giving b2b Amazon-like appeal is just part of the job: b2b commerce sites must offer features not found on b2c sites—and often that requires custom development.
E&T Plastics, for example, is in the midst of developing its first e-commerce site to sell plastic sheets, rods and tubes, and finding little it can use off the shelf. "Almost every feature we're putting in is a customization for us," says Pam Aungst, the e-commerce director E&T hired last year from DIYControls, an e-retailer that serves both homeowners and businesses. Among the features being designed for E&T by site developer Commerce Generation are showing availability by warehouse so customers can know how quickly they can obtain products, a price calculator that includes the cost of cutting pieces of plastic, and providing the name and phone number of the customer's sales rep.
E&T, a privately held company with annual revenue in the range of $50-$75 million, expects to be able to build its site for under $100,000 and complete the project in six months. But Aungst expects it will cost at least another $50,000 to integrate the e-commerce site with its aging Visual AccountMate accounting and inventory software from AccountMate Software Corp.
That's still modest compared to the challenge facing big wholesalers and distributors that sell to customers in scores of countries, adding complexities of language, culture and payment methods. Those projects can take years to roll out and cost millions of dollars.
But many b2b companies have recognized that purchasing agents also are consumers who are used to shopping online and expect to be able to shop the web at work, even if they're buying coils of metal or tubs of solvents. Here is a sample of some recent b2b e-commerce projects:
- Punch Taverns, a supplier to some 5,000 pubs in the United Kingdom, says 1,600 pubs are now ordering from its b2b web portal launched in spring 2010 and developed by Snow Valley, which has since been acquired by Micros-Fidelio UK Ltd., which is a subsidiary of store and web commerce technology provider Micros Systems Inc. The web portal now accounts for 21% of the company's business.
- Office supplies chain Staples Inc. launched a redesigned version of its b2b web site in November. The company's b2b division, Staples Advantage, generates more than 90% of its business online.
- Kennametal Inc., a manufacturer of metalworking equipment with plants in 60 countries and annual sales of $2.4 billion, is redesigning its web portal, working with consulting firm Acquity Group, aiming for a March 2012 launch.
- Ingram Micro Inc., which distributes software on behalf of 1,400 suppliers to corporations and 185,000 resellers in 150 countries, has moved $5 billion of its $35 billion in annual sales to the web, as it gradually roles out e-commerce in markets around the world over several years.
One thing all these projects have in common, it is that they have complex requirements that, as in the case of E&T Plastics, go beyond the demands of e-retail sites, requiring extensive custom development and careful testing with customers.
Take Allied Electronics, which sells 1.7 million SKUs through its e-commerce site, AlliedElec.com. Each of those SKUs must be defined precisely so a customer can be sure of ordering the right component the first time. "If I have a sensor on my factory floor and it's broken, I need that sensor to keep producing the goods I produce," says Allied's Stewart, explaining the pressure on a typical client.
To accomplish that, Allied defines its components by as many as 15 parameters so a customer searching for a high-voltage power relay will see only products that meet his needs. By contrast, a piece of apparel on a recent site might require just a handful of filters—such as size, color, material, brand and price—to enable a shopper to find the item she wants.
Allied worked with Endeca to develop that site search and navigation system, which launched in April 2006. The system also allows Allied to merchandise new or higher-margin products, by showing those items high up in search results. That merchandising capability has increased the average order value at AlliedElec.com by about 10% since the distributor introduced the Endeca system, Stewart says.