Taking stock of e-distribution

The time is fast approaching to assess which dot-coms deliver

By -- Industrial Distribution, 7/1/2000

As the second half of 2000 unfolds, it's a good time to assess events in the e-distribution world so far this year.

Just the addition of the "e" prefix reflects the state of change. The forecasts-if not actual usage-of electronic commerce have become so prevalent that the "e" has been rapidly added to our everyday language.

For certain, it's been one frenetic pace for digital distribution. It's worth trying to sort out the hooey from the nuggets.

During the first quarter, the euphoria about doing business-to-business transactions on the 'Net crested and hit the MRO market. Announcements of new exchanges rolled in like a flood surge. While some of these marketplaces hadn't even been tested yet among distributors, suppliers and buyers, it seemed someone offered a new "solution" every week or so.

Industrial distributors witnessed another wave during the winter. Many alliances were announced among software vendors and online exchanges and portals in the MRO and construction materials arenas. Firms like PSDI, owners of the MRO.com marketplace, bought a content management, tools and catalog service provider owned by Strategic Distribution, Inc., while supplyFORCE.com, an Internet company that Affiliated Distributors began, invested in software vendors and other e-commerce partnerships, for example.

Since March, however, the hype about doing business over the 'Net has definitely subsided. If they weren't already, more companies appear to be cautiously exploring their alternatives and doing their due diligence when it comes to selecting e-commerce vendors.

Some of this is due to the NASDAQ's volatility and general concerns that many dot-coms were grossly over-valued. There's been a creeping realization among investors that yes, earnings do matter.

Still, much of this pullback is probably just due to individual smarts: why jump on the bandwagon until you know the driver's track record and are shown a legible map?

While the hype slackened, e-distribution activity continued to pick up during the spring. That means more distributors, and many manufacturers, began to develop an e-commerce strategy and decide which partnerships would work for them. I emphasize more than one, because many companies-and not just those in the $100 million and above crowd-indicate they will work with multiple exchanges or a combination of consortia, e-catalog providers and online marketplaces to keep their flanks covered.

ID's Annual Survey of Distributor Operations reveals that, as of mid-winter, about 14 percent of distributors had signed on with a dot-com provider. Today, nearly 90 percent of respondents have access to an online service - compared to our survey seven years ago, when only two thirds of firms even used computers. [For more highlights of the survey of more than 900 distributors, see pg. 60.]

Another notable trend during the first six months of 2000 was the opening of new exchanges and the launches of electronic catalogs by some of North America's largest distributors. Two examples of the former are W.W. Grainger's superstore, TotalMRO.com, and IndustrialAmerica, an online exchange created partly by MSC Industrial Direct.

Looking ahead, it will be worth tracking the various online exchanges and portals to see whether they deliver value. This should be possible by the year's end as distributors' report on their sales and experiences.

Ken Brack is the Web Manager of ID Online. Your comments are welcome at kbrack@cahners.com.