Buyers unsure of online benefits
By Staff -- Industrial Distribution, 2/1/1998
Newton, Mass.--A large number of companies expect to buy their MRO supplies on the Internet this year, but many firms do not see the benefits of ordering online yet, a new study concludes.One quarter of 593 companies say they plan to institute or increase their use of the Internet for purchasing, according to a survey of purchasing managers by W.W. Grainger, Inc. The survey, which was completed late last year, suggests Internet purchasing would satisfy many customers' preferences to lower MRO management costs, assure timely delivery and ordering-billing accuracy, but many companies remain unconvinced those benefits exist.
Seven percent, or about 42 of the businesses contacted, were doing their purchasing online as of August.
Six in ten respondents in small and mid-sized companies say they either don't know what advantages would be gained from ordering on the Internet or believe there are none. However, about half of all respondents also say they either don't know what the drawbacks are or indicate they see none. The survey contacted nearly 150 firms.
Grainger also reports many of its customers already use the Web to access the company's account-specific pricing and to find local product availability. Grainger began taking online orders in June of 1996 and now offers 78,000 products that way. Its Internet sales volume has steadily doubled each quarter since and just over half of all new Internet orders are being placed between 5 p.m. and 8 a.m. The latter shows small customers in particular enjoy the convenience of ordering at any hour, says Barbara Chilson, vice president and general manager of Internet commerce.
"We hear it's the technology itself that is the time saver. It's so much easier and quicker to do an Internet transaction and product choosing than to thumb through a catalog," she says. The combination of account- specific pricing and localized inventory lists "consistently say to our customers, 'This is a way to save time and money.'"
While just under one percent of Grainger's total sales were made on the Internet in 1997, the company has high expectations for this year. "I think 100 percent in 1998 over 1997 would be a robustly conservative figure," says Don Bielinski, a Grainger group president.
The survey also sheds new light on growing competition from retail outlets for MRO supplies. Seventy-six percent indicate retail shopping is a common practice and many, particularly small companies, believe their MRO needs are too limited to require services from a business-to-business vendor. Yet the majority of purchasing managers believe traditional distributors provide superior customer service (84 percent agree), higher quality products (62 percent) and better cost effectiveness (72 percent). Most also prefer ordering by phone.
Bielinski says those findings show that few industrial distributors cater to small customers, whom he believes represent a huge market opportunity for flexible firms.
For example, some distributors may be reluctant to service a small company that buys electrical equipment for its shop. "The path of least resistance for him may be going to a home improvement store, versus for us that is the welcome customer.'' I
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