Online strategies
A shift in customer buying habits and the rise of Internet commerce are the driving forces behind pthousedirect.com
By Victoria Fraza -- Industrial Distribution, 1/1/2000
While many distributors are struggling to develop an e-commerce strategy, other companies are already hard at work selling industrial products online. Some are traditional distributors using a Web presence as an additional service offering, while others are Internet startups -- companies without a brick and mortar foundationusing the Internet as their main vehicle for customer contact. Pthousedirect.com is one of the startups.
Simply put, pthousedirect.com is an online source for power transmission products. Founders Scott Mincher and Scott Wolf decided about a year ago to take their industry knowledge -- both have worked for various motor manufacturers over the years -- and form an Internet-based business. There would be no headquarters building with a warehouse out back, and there would be a minimum number of employees. Launched last July, pthousedirect.com is run out of home-based offices in Upstate New York and Milwaukee, with a total of four employees and a small warehouse on the West Coast. Mincher and Wolf expect to close out their first year in business this July with $1 million in sales.
While pthousedirect.com is still too young to be judged a failure or success, the company is a prime example of how the Internet and e-commerce is affecting the industrial channel. The company is already selling to do-it-yourselfers, industrial and commercial accounts, and colleges and universities -- and its territory is, well, the world. Low overhead costs allow the company to sell for less than many traditional distributors, say the owners -- a factor that attracts many price shoppers.
With industry knowledge, a target market and some start-up cash, it seems that just about anyone can develop an Internet-based business. While the survivors in this new marketplace are yet to be determined, Mincher and Wolf believe they have a good chance of making their Internet dreams a reality.
Pthousedirect.com started out as a reseller of imported motors and other PT equipment, but now offers domestically manufactured products, as well. Such origins place the firm even further outside the realm of traditional distribution. And, as is the case with many Internet startups, the owners aren't quite sure how to categorize themselves. In some cases, pthousedirect.com acts as a competitor to distributors, in some cases as a supplier to them, and in still other cases as a customer.
Two factors served as the catalyst for pthousedirect.com: the rise of Internet commerce, and what Mincher and Wolf say is a fundamental change in the way customers buy PT products.
"Over the years, what used to be considered very highly technical products in nature had actually become what you would call usables or commodity-type items," notes Mincher, pointing to products like AC and DC motors. "There was no more great technical mystery to the standard products in the market."
So, pthousedirect began by targeting customers who knew exactly what they needed and were looking to shop around for the right price. The strategy shifted a bit when, early in the game, Mincher received a call from a potential customer looking for a very specific product -- a motor that could be used in a hazardous environment. The customer had tried four or five other sources before finding pthousedirect on the Web. After a bit of research, Mincher found a product that would work for the customer and sold it to him. The incident made it clear to Mincher and his associates that selling PT products over the 'Net would involve more than just a point and click. As a result, pthousedirect.com is trying to be a hybrid, of sorts -- providing the convenience of the Internet along with a personalized service option.
"About half our business is with people who know exactly what they want," says Mincher. "The other thing that happens is, people call up out of desperation. They've gone to several different places and don't know where else to go. That's the research end of the business, the application engineering. We need to find them the product they need."
Pthousedirect's technical support number is displayed throughout its Web site, encouraging customers to call for assistance. That's exactly what Bill Herring, head of maintenance for Industrial Steel in Mims, Fla., did before he went ahead and ordered the motors and speed controls he needed for a project. "If I couldn't have talked to them on the phone, I probably wouldn't have ordered anything," says Herring. "But the service was very good. When I called, they knew exactly what they were talking about."
The project Herring was working on involved bridge cranes used throughout the Industrial Steel plant; managers at the plant wanted them to run faster and at variable speeds. After receiving an estimate of $6,000 per crane, the plant owner asked Herring to do a little research and come up with a better price. Herring says he knew little about the products needed for the project, but got a quick education when he found pthousedirect.com.
After following up with a few technical questions via telephone, Herring says he was able to order everything he needed for half the price of the original estimate. He adds that the convenience of the Internet combined with the service option made the overall experience of ordering online a positive one.
Providing service over the phone or via e-mail is one thing, but often customers need one-on-one assistance that requires a site visit. That's why pthousedirect.com hopes to develop a network of field technicians who can make service calls as needed. Mincher says he hopes to partner with local distributors for that capability.
In search of partners
That companies like pthousedirect.com can launch a Web site and start selling online reveals the power of the Internet. And it's still early in the game for Mincher and Wolf. They are in the process of developing software that will allow them to conduct "true e-commerce," in which orders entered via the Web go directly into the company's computer system. Right now, orders are received via e-mail or over the phone, entered into the system, and then confirmed back to the customer. Mincher says the e-commerce software should be up and running by spring.
While that kind of technology is key, it's not the most important factor for Pete Barry, regional sales manager for Weg Motors & Drives, a Brazilian manufacturer that has been selling through pthousedirect.com since July. Barry works out of Weg's U.S. headquarters in Rochester, N.Y., and believes that a presence on the Internet is important to his company's growth in this country. He also notes that service will always be a factor in the PT industry, which is why Weg was looking to partner with an online source that could provide the technical assistance customers need. In addition to the service Mincher and Wolf provide, Weg offers service to pthousedirect customers through its network of inside salespeople. While Barry says it's too soon to judge the success of Weg's partnership with pthousedirect, he says things have been running smoothly so far.
"We are going to continue to work with them," says Barry, noting that pthousedirect buys both directly from Weg and from Weg distributors. "Right now, we're kind of working on what the best way is to structure [our Internet strategy] and go forward with it.
"We look at online sales as something that's going to be growing in the future and we want to have some presence in that. We didn't want to wait until the last minute to explore our options."
Neither did Mincher and Wolf, which is why they worked hard to launch the company last year. One of pthousedirect's goals is to add a new product line each month. The company now offers motors, drives, gear reducers and transformers, among others. Mincher planned to add a line of in-line gear reducers and shaft mount gear reducers in December, and stepper motors and servo controllers this month. Mincher adds that he and Wolf are constantly looking for new manufacturers to partner with. The ultimate goal, of course, is to provide quality products at the best possible prices.
"We're probably not buying at the level their distributors are," says Mincher, referring to his suppliers, "but we don't have the overhead, so we can keep our operating costs low -- that's a wonderful side of this business."
Mincher and Wolf expect to be able to do $5 million in sales with the addition of just one more person, which would bring the employee count to five.
"With Internet trade," explains Mincher," things just go up exponentially."
Internet procurement vendors & MRO portals for buying and selling
Ariba: www.ariba.com
Aspect Development:
www.aspectdv.com
Clarus: www.claruscorp.com
Commerce One:
www.commerceone.com
Datastream: www.dstm.com,
www.BizSurplus.com
Digital Market:
www.digitalmarket.com
Distributor Exchange:
www.distex.com
eBricks.com: www.eBricks.com
Eventory: www.eventory.com
Free Markets:
www.freemarkets.com
GEIS: www.geis.com
Harbinger: www.harbinger.com
Intelisys: www.intelisys.com
Oracle: www.oracle.com
ProcureNet: www.procurenet.com
PSDi: www.psdi.com, www.mro.com
PurchasingCenter.com:
www.PurchasingCenter.com
PurchasePro:
www.purchasepro.com
Requisite Technology:
www.requisite.com
RightWorks: www.rightworks.com
SAP: www.sapphire.grainger.com
Sterling Commerce:
www.sterlingcommerce.com
SupplyFORCE: www.supplyforce.com
SupplierMarket.com:
www.SupplierMarket.com
SupplyWorks:
www.supplyworks.com
TPN Register: www.tpnregister.com
TRADEX: www.tradex.com
Tradeout: www.tradeout.com
VerticalNet: www.verticalnet.com
WIZnet: www.wiznet.com
1stoptools.com:
www.1stoptools.com
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