Do you know your competitors?
Industrial distributors have three new competitors on the Web
By Sara Procknow -- Industrial Distribution, 9/1/1999
LOOK OVER YOUR SHOULDER AND THEN LOOK AGAIN. Did you notice there is a whole new breed of competitors chasing down this road called the supply chain? And they're using the Web to move in on your customers.Thanks to the ease of the Internet, the newest types of competitors may not be the traditional brick-and-mortar counterparts from up the street. Where a typical distributor had a few direct competitors yesterday, a new group of quasi-distributors is launching e-commerce sites and selling MRO products faster than you can say, "me too."
And you were worried about Grainger and MSC? Small potatoes when you look deeper at these latest competitors poised on the horizon.
The way I see it, industrial distributors have three new competitors on the Web:
1. E-commerce players, start-ups especially. Be watchful of this group because they have the technology, and the cash flow, to move quickly and throw a portal up on the Web to represent any distributor or manufacturer.
2. Manufacturers selling direct. If one or two manufacturers begin selling direct online, others are sure to follow. Will this be like the days when Home Depot first came to town and many manufacturers promised, then reneged, that their products wouldn't be sold there?
3. Specialty distributors. These distributors are now going beyond their core product group and selling everything under the sun, from bearings to bathroom tissue.
It's the last group, the specialty distributors, that has the advantage. The other two groups don't really know distribution the way an industrial distributor does. Plus, the other two groups don't really have any end-user customers, or at least the relationships -- yet.
The Internet is certainly changing the face of distribution competition and the reasons are relatively simple. This is a billion-dollar industry. If you're a specialty distributor with a Web site, and you've figured out how to put your electrical supplies catalog online, why not add safety? Welding? Fasteners? Janitorial? The Web makes it really easy to add a new product line to your current catalog with a click of the mouse. There are no real territory issues on the Web. Distributors can advertise to the whole state, the whole country, the whole world and let everyone browse their catalog for minimal investment dollars.
Don't believe they're a threat? Several electronics distributors in the last six months have become direct competitors to MRO distribution. Richardson, Newark, Pioneer-Standard, and others have all launched online catalogs that include traditional MRO supplies. And, with Applied Industrial Technologies' latest e-commerce push, I'll bet we'll be hearing that they aren't only selling motion control supplies.
I read somewhere that e-commerce will increase competition the likes of which this industry has never seen. However, the caveat to that statement is this: The industry, and most importantly the customer, will only reward the most efficiently run companies. In other words, if your company isn't running efficiently now, how will you run a Web site with e-commerce any better?
Get your house in order before you try running a Web site and e-commerce. Otherwise, integrators, e-commerce players, manufacturers and specialty distributors may just leave you in the dust.
Send your comments to sprocknow@cahners.com, or call (617) 558-4289.
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