Masters of marketing

By By Sheri Qualters, Associate Editor -- Industrial Distribution, 9/1/2000

Many Web sites have become as comfortable, and in some case as frustrating or boring, as a department store. The sales signs may change from week to week, but everything is basically in the same place when you surf around. Finding the right product can mean wandering through many "aisles" or pages.

General line distributor Alamo Iron Works wants to alter the digital universe by remodeling its virtual store for each visitor, in some cases offering special deals to close the sale. The technique is common in the retail Internet world, but still somewhat eye-popping in the online distribution universe. A partnership between San Antonio-based Alamo and software company Exterprise, Inc., which is headquartered in Austin, spawned the industry-specific SupplyConnect (www.supply-connect.com) product.

E-commerce solutions for distributors have proliferated over the past few years, ranging from distributor consortia that set up electronic marketplaces for online catalogs, to auction sites to dot-com vendors. SupplyConnect is cutting edge for the distribution world because it incorporates both online and traditional marketing concepts into the software design, which enables distribution companies to use the Web site as a sales tool.

Manufacturers have also jumped into the fray by developing their own Web sites, so Alamo and Exterprise designed SupplyConnect with the aim of preventing disintermediation by preserving the distribution channel. The product allows distributors and vendors to set up co-branded, online showrooms to stage joint marketing campaigns. Although vendors will be able to use the system to market products, the distribution company will complete the transaction.

Alamo's journey to the software solution began when executives considered that although both online and paper catalogs help a company increase incremental sales, production costs are often prohibitive. Jim Savoie, Alamo's director of technology and imarketing, explains that Alamo wanted more than just an online catalog in order to avoid dollar swapping, or simply shifting purchases from one medium to another. Rudy Fuselier, Alamo's executive vice president, points out that with a traditional catalog, the data isn't available for distributors to manipulate because it's stored only on ink and paper.

By storing the content from the paper catalog in a digital format, Alamo can use the data for anything from e-mail campaigns to flyer and catalog mailings. Rudy Fuselier, Alamo's executive vice president, believes the forward thinking approach will boost revenues and reduce redundant content management costs.

"[Now we can keep] track of every visitor, every product they look at and the time they spend on the site," Fuselier says. "For example, we know which customers have shown an interest in certain classes of power tools."

According to Fuselier, the software enables the company to develop a marketing strategy in sync with its e-commerce presence and its vendors' e-commerce initiatives.

"Now we can actually treat each customer as a market segment of one," Fuselier says. "Historically, it was difficult to get that much information on one account. Now with Web-enabled technology we can gather that information and do a better job."

The odd couple?

Although Exterprise's core competency is helping bricks-and-mortar and dot-com companies build an Internet marketplace, the software company's home base is Fortune 1,000 companies. Dan Garrison, Exterprise's advertising and sales promotion manager, says the firm didn't initially comprehend the wealth of opportunity or need in the industrial supply sector.

Yet after reviewing Alamo's proposal, the high-powered, high-tech firm realized that the 125-year-old distributorship that posted about $77 million in sales last year was a good fit for its products and services. Several months into the partnership, Garrison calls it a perfect case solution that combines Alamo's leading-edge thinkers with its software developers.

"It's not a market we were focused on, but we realized that with Alamo's assistance, we could deliver a truly comprehensive solution-one with more functionality than anything else available in the market," Garrison says.

Alamo, which didn't have a Web site just three years ago, decided last year that it wanted a first-rate site and online catalog. But the company soon realized that partnering with a top-notch information technology firm could be expensive. So Alamo made a human capital investment and offered Exterprise the industry knowledge and database it needed to develop a product for distributors and manufacturers. Exterprise is now selling and marketing the product, but Alamo continues to develop functionality to improve it.

The deal was a win-win for both parties, says Colin Gillies, Exterprise's director of professional services, because it would have cost Exterprise too much money to create the software on its own.

"We're using the expertise of Alamo to make sure the product fits the industry," Gillies says. "They've identified the specific issues that distributors typically deal with."

A good fit

The resulting software product made a splash at the I.D. One and the ASMMA/IDA conferences and Cliff Cheatwood, president and CEO of Arkansas Mill Supply Co., Inc., is an early customer. Headquartered in Pine Bluff, Ark. with three other Arkansas branches, the general line industrial supplier sold about $18 million worth of products throughout the state last year. Cheatwood said Arkansas Mill has a lot of small customers that wanted to buy products through the company's own Web site, rather than through an online exchange.

"Our business model is that we're involved with several other B2B Web sites, but there are a lot of customers that wouldn't want to go through a dot-com," Cheatwood says.

Alamo's involvement in the product development was a strong selling point for Cheatwood because Arkansas Mill needed a specialized product.

"Distributors are not the same as Amazon selling books or clothing," Cheatwood says. "It's a different animal."

When Cheatwood first learned of SupplyConnect, Arkansas Mill was also involved in what he describes as the "laborious, time-consuming and expensive" process of creating its own online catalog. He says having a full online catalog with the ability to print flyers using the same information-all at a lower cost-was more than Cheatwood expected.

"We needed some way for people to search the database," Cheatwood says. "We needed a way for them to order from it and we needed a way to look at current open orders and back orders. We had been looking at developing our own [solution], but these folks came up with it and more."

Cheatwood plans to use the software to set up his company's Web site so customers can easily re-order their standard items. But because customer needs can change, the full catalog will always be available at the click of a mouse. Orders will be printed and checked then sent to the warehouse for overnight picking, packing and shipping.

"We've got a lot of smaller customers that, just due to the economics, we can't call on them anymore," Cheatwood says. "During the day, some of the bigger customers can also go there and buy without using our inside sales people."

Nuts and bolts

The interactive nature of SupplyConnect gives Alamo the means to keep mailing lists current and get marketing campaigns into the right hands.

"From a practical standpoint we were mailing flyers to people who no longer worked for the company," Savoie says. "We were building a mailing list out of a contact list for accounting. We now have verified marketing contacts who can influence purchases."

An individualized market for each customer means the Web pages can be tailored for each customer based on factors like prior purchasing and browsing activity. Customers can also segment themselves through their personal profile.

Since different types of customers may shop for the same power tool, the software can store three types of descriptions for each product: a short, shopping-cart description, marketing prose, and a detailed explanation of product specifications for technical folks. Having different types of text in the system simplifies the task of creating mailing campaigns.

"It offers the ability to take the information out of the database and flow it to a page," Fuselier says.

The main goals of the program are to increase marketing effectiveness and provide customer value. Salespeople can use it to launch e-campaigns and calculate the return on investment. However, the system is also specialized enough to generate reports for each sales person and measure the success of marketing programs in terms of reach, awareness, influence and effectiveness.

Alamo executives tout SupplyConnect's bells and whistles because they can help companies track profits and cut marketing costs. Yet the bottom line for Alamo is that SupplyConnect provides the weapons to fight the battle for online customers.

"We knew that we had no choice but to embrace e-commerce because the 'Net enables manufacturers to sell [products] directly," Fuselier says. "Our business is changing significantly to embrace the e-commerce model."