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Wholesalers cautious about e-commerce

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electronic commerce

I-lpresent building material wholesalers and manufacturers with an opportunity or a threat?

A survey of North American Wholesale Lumber Association members reveals some hesitation, some anticipation, and a lot of agitation.

While retailers are being assisted into the waters of online sales by their buying groups (see May, p. 9), their suppliers have been. more or less. on their own. The new survey, presented at NAWLA's recent annual meeting (see event coverage, p. 34-15), indicated that at least 61Vo of wholesalers and 387o of manufacturers didn't even operate a Web site. Those without an online presence tend to be smaller (75Vo are wholesalers with less than $50 million in sales).

The majority of sites offer general information about the company and its products, but few accommodate electronic sales. Fourteen percent of manufacturers as well as 147o of wholesalers identified their company's Web site as an independent selling channel capable of handling e-commerce. They tended to be larger companies (over 250 employees, over $100 million in annual sales). Yet, even those capable of ecommerce weren't necessarily mak- ing many online sales.

Few are currently involved in an online trading community (197o of manufacturer respondents, 87o of wholesalers). Among those not yet affiliated, 46Vo of wholesalers are considering joining and l9%o are leaning toward not joining. For manufacturers, 267o expect to join, while l77o anticipate not joining.

Those not currently part of an online trading community cited assessing the quality of trading partners as the most significant barrier joining, followed by no rules of engagement. They ranked the remaining options. in order of significance, as lack of policing, security, product handling, product movement, and lack of technical capabilities.

Several respondents added other barriers to the list, including no demand or customer need, lack of personal contact/relationship with customer. no clear benefit. added or uncertain costs, not within current business plan and/or strategy, and lack of management interest.

Only 2l%o of the response base said their organization is budgeting this year for e-commerce spending. Most of those will spend less than l7o of net, pre-tax profit on e-commerce (56% wholes alers, 9l7o manufacturers), although 16%o of wholesalers (but no manufacturers) plan to spend over 5Vo. Those without a formal ecommerce budget, however, mostly explain that e-commerce dollars are buried in overall estimates for technology spending.

In software selection, 287o give great weight to e-commerce functionality. Still, I 97o assigned little weight, 37Va some weight, and l'|Vo

Wholesalers and manufacturers surveyed simply do not see e-commerce as one of the most significant threats to the long-run viability of their company or the industry in general. It registered minimal concern when compared to other hot buttons such as environmental efforts, growth of home centers, and consolidation.

Respondents believe that the real impact of e-commerce is still years away, and more see it as an opportunity rather than a threat.

While the majority of companies currently receive less than 57o of their sales via e-commerce, two-fifths strongly opposed. Most in favor were wholesalers with annual revenues of less than $100 million, predominately those with fewer than 25 employees. dize NAWLA's role as an advocate for wholesalers and its association status. "NAWLA must serve its members, not become a competitor," expect to be handling 67o to l57o of their orders electronically by 2001. By 20O4, nearly a third anticipates 6Vo to l5%o of their sales will be electronic, and a third forecasts l6Vo to257o.

Wholesalers believe end-users will gain the greatest cost savings from e-commerce, followed by retailers and then distributors. Manufacturers think retailers will benefit the most, followed by end-users, distributors and infomediaries. Both agree that it is unlikely manufacturers will reap the greatest benefits.

Most respondents wanted NAWLA to serve some part in transitioning to e-commerce, with the edge going to a more passive rather than an active role. NAWLA setting standards and rules for engagement was envisioned by l6Vo, facilitating/ introducing trading partners by 197o, assisting with technical decisions by 28Vo, solely providing information by 257o, and playing no role by 77o.

As far as NAWLA serving as an e-commerce intermediary, l57o werc strongly in favor,l3%o slightly in favor, 4l7o neutral, l9%o slightly opposed, and l2%o

Most against were larger manufacturers and a cross segment of wholesalers.

Their concerns centered on fairness issues, any venture's "for profit" nature, and risk that it might jeopar- said one respondent.

In the meantime, NAWLA is planning its first annual Building Materials Technology Marketplace, to get together all the channel partners (manufacturers, wholesalers, retailers, cooperatives, original equipment manufacturers and other related trade groups). Primary objectives include education, information, networking and, in time, development of cooperative systems and process standards for the purpose of improving channel efficiencies and service levels.

Even those capable of e-commerce weren't necessarily making many online sales.

A central activity of the first meeting will be presentations by technology experts and service providers focusing on the IBM e-discovery program. Programs will include tracks for chief executive officers, sales managers, chief financial officers and IT managers.

NAWLA's ad-hoc ECommerce Committee has been converted to a standing committee, and the group also will hire a technology journalist to serve as resident expert and regularly write technology issues facing NAWLA members, including both e-commerce and management software.