Tackling new technology

Abrasives distributors weigh their e-commerce options and look for growth in 2001

Bridget McCrea , Contributing Editor -- Industrial Distribution, 1/1/2001

For San Antonio, Tex.-based Alamo Iron Works, the prospect of doing business in a seamless fashion via the Internet is an exciting one. As a distributor of abrasives, cutting tools and a variety of other products, the company is simply "excited" about e-commerce.

"We see e-commerce as a great opportunity," says Alamo's vice president of product sales, Richard Ochoa. "We believe it will help us perform at a higher level so we're not only embracing it, but we're also initiating some of our own strategies in the marketplace." For example, Ochoa says Alamo has developed its own proprietary software system to automate data publishing and integrate marketing processes.

Alamo is certainly not alone in its great expectations about e-commerce, which is a hot topic right now across all sectors of industrial distribution. But all the news surrounding e-commerce isn't positive for distributors. According to Ochoa, there is concern over margin compression and the possibility that abrasives products might be turned into commodities.

"If it becomes a price issue, then name recognition and performance will go down the tubes," he says, adding that it will be up to distributors to "un-commoditize" the products by showing end users the unique features and benefits of both the product and the value-added services provided by the distributors.

Another abrasives distributor who sees technology as both friend and foe is Jim Jaques, president of Massasoit Tool in Warwick, R.I. He says his company recently spent time and money upgrading its Web site and developing an e-store, only to see "very little immediate benefits" as a result. Regardless, the company is pushing on with its e-commerce efforts. "We do feel it is imperative to go forward, though, in order to be ready for the eventual acceptance by our customers," adds Jaques.

At Georgino Industrial Supply, Inc. in Penfield, Pa., general manager Ron Hetrick says his company is "taking the time to develop an understanding of exactly what's happening in the electronic marketplace," then determining where the distributor fits in. "Do we sign up with an online marketplace, do we develop our own e-catalog where customers can order online, or do we combine both in some way?" he queries. "Distributors really don't know whether to give the Internet a big bear hug or just cuddle with it."

From the manufacturer's perspective, Bob Gardiner, director of marketing and distribution for Norton Abrasives in Worcester, Mass. , calls the Internet a "tremendous opportunity for distributors and manufacturers" alike. For distributors, he says the Internet serves to modernize businesses in terms of the speed of information transfer and cost efficiency. And because the distribution business is so information-intensive, he says competency in information technology will be a requirement for servicing customers in the future.

"It will also be a point of distinguishing competitive advantage," adds Gardiner. "Those without the capability to utilize the most up-to-date information technology platforms via the Internet will be at a distinct disadvantage."

Whether they're actually embracing the Internet or not, abrasives distributors across the nation are posting impressive gains-a trend that's expected to continue well into the new year. "In general," says Jaques, "the market for abrasives continues to be very strong. Right now we're running 22 percent ahead of last year and we don't see that ending."

In fact, Jaques projects even better sales for 2001-an increase that can be attributed to the new product developments in super abrasives from Massasoit's primary suppliers. "We've also decided to represent new manufacturers to complement our existing lines," adds Jaques. "This has given us the ability to be a complete specialty abrasive distributor and increase our sales."

According to Hetrick, one particular issue of interest to distributors of abrasives and other products is the ongoing consolidation between distributors of different geographic regions. This, he says, can lead to crossing of territorial boundaries and vendor lines-two issues that would rub any independent distributor the wrong way.

And Gardiner adds that overall, responding to emerging and evolving customer priorities is a hot issue right now for abrasives distributors. End users, he says, are designing unique service packages and supply chain relationships-two factors that have a tremendous effect on the role of the manufacturer and the distributor. He adds: "Understanding the needs of the customer and responding in a manner that satisfies them-that's the real challenge."