Bridging the gap
Using the Internet to cross international borders
By Sara Procknow -- Industrial Distribution, 3/1/1999
What do German industrial giant Siemens, the Internet bookstore Amazon.com and Texas-based pneumatic components distributor United Automation all have in common? They are all using the Web to stretch their market reach into the international marketplace.These companies, like many other industrial distributors and manufacturers, are using their Web presence to seek customers, and ultimately orders, from around the world. While the Siemens and Amazon sites sport multi-language versions, smaller-in-size United Automation documents several thousand dollars of Internet-generated sales going into Mexico.
And, Arthur Andersen's recent "Facing The Forces of Change" report devotes an entire chapter to the topic of globalization in the distribution channel -- from imports and exports, to e-commerce and International sourcing of product. Rick Prohammer of Arthur Andersen says distributors have an opportunity to be the ambassadors of foreign product -- sourcing using the Internet.
It's all part of globalization, according to Michael Ferro, CEO of e-commerce developer Click Interactive. And manufacturers and distributors are not stopping at just international orders. "Ordering is just one piece of business taking place internationally," Ferro says. "There is everything from account status, credit line checks, warranty, claims, service, repair status -- to some really costly things."
In Europe, Asia and elsewhere around the globe, 800 numbers for customer service calls can cost companies $1 or more per minute. If international customers can get information and receive customer service via the Web, company savings add up, according to Ferro.
Further, distributors and suppliers who ship marketing and promotion materials can build their own tear sheets online, allowing the customer to print out brochures, thus alleviating shipping costs.
"It's millions of dollars worth of savings," Ferro says. "If a company invests in an international Web presence, they'll usually make their return on investment in six months."
Territory issues
Besides the cost-savings benefits of having a Web site and being able to communicate with customers all over the world 24/7, what's it like day-in and day-out to be servicing international customers? Just ask Rick McGuinness of United Automation. As regional sales manager and Webmaster for www.automation-dfw.com he, too, was worried about borders and territory issues, especially when it came to manufacturer relations.
But he has found a way around the exclusive-territory issue by partnering with exporters who specialize in supplying the Maquiladoras, Mexico, and South America. "Borders tend to become a dicey issue for distributors on the Internet. Manufacturers don't always look kindly at selling outside your territory," he says.
Since the exporters are located in Texas, United Automation can ship and bill within their territory. And guess how the exporters found out about United Automation? The Internet, of course.
McGuinness explains: "These companies act as "gophers" for the Maquiladoras. They source the components and resell them across the border. The company who we forward our Central and South American leads to is located 15 miles from our office."
Generally, the parts going into Mexico are MRO items, such as replacement valves, cylinders and sensors for production equipment.
About 90 percent of the e-mail responses United Automation receives are for literature requests. McGuinness estimates that half of those are from outside the United States. Of the actual requests for quotation received, two-thirds are for nonstandard or obsolete products for MRO users (one's & two's). The balance of quote requests is OEM application questions, such as, "I'm trying to accomplish this, this, and that. Which valve should I use?"
United Automation is part of a growing and popular trend of distributors discovering the value of the Internet. McGuinness estimates that United Automation's 1998 Internet-generated sales are $55,000, which is expected to grow to over $100,000 in 1999. Approximately 10 percent of those sales are to Mexico, a figure McGuiness says will double in 1999.
As for Web requests from customers in Europe, Asia, Australia and elsewhere? For now, McGuinness forwards them to the appropriate manufacturer.
"It's funny. Some manufacturers say they don't want you to sell Internet business out of territory and others encourage it," he adds. "It really comes down to asking yourself 'Am I really doing the customer a service by selling to him?' The problem also becomes one of how do you service an account hundreds or thousands of miles away?"
International presence
So, how does a distributor or manufacturer make a traditional Web site international? Craig DeNoce, of e-commerce provider Isadra, says: "The key to extending your business to foreign markets is to 'normalize' your classification of products and services, so a foreigner can understand what you're offering. Cut through the marketing lingo, and present the functional, differentiating factors."
Click's Ferro, besides recommending multi-languages to a Web site, also recommends that manufacturers keep their distributor partners in the loop, whether foreign or domestic. "When you order a product or parts and accessories for it online, the order shouldn't go direct to the manufacturer. The customer should be able to enter a zip code, and pick a local distributor. You cannot cut out distributors -- there is a reason they exist. You need to build a system that helps all your partners do business better."
The fear of manufacturers selling direct has always been a hot button for distributors, with many distributors cautious about the Internet's ability to assist manufacturers in doing so.
Ferro doesn't see it happening any time soon -- at least not in the industrial distribution industry. "Selling direct works great if you have simple products, like jeans, software or books; and it works if you don't have an existing distribution network, [or], most importantly, no service or after-market needs, like warranties, repairs, questions or issues. When you go buy a power tool, there is life after that -- repair, warranties, accessories -- where the distributor has the expertise."
Taxation and privacy
With all the interest in the Internet and e-commerce, there are several important legal and international policy initiatives underway by a variety of international business and government associations. Two key areas of concern which are magnified by an international supply chain are: taxation and electronic commerce; and privacy, security and international data exchange.
Many of these groups have a World Wide Web presence. For more information on these policies and position statements, search the Internet for international trade issues. Internet resources for international trade include:
* United States Council for International Business (www.uscib.org) has an entire section of its site devoted to e-commerce.
* The United States Trade Representative Officials' (www.ustr.gov) Web site features a comprehensive sampling of trade policy, plus a list of links to similar government sites.
* U.S. Department of Commerce International Trade Administration (www.ita.doc.gov) has information on its Web site about exports and imports, including an entire section devoted to the Year 2000 issue.
* World Trade Organization (www.wto.org) features statistics, an online bookstore and versions in French and Spanish.
* United Nations Conference on Trade and Development (www.unctad.org) also features English, French and Spanish options as well as a complete list of Web links.
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