"This is a good business to be in and the world is moving our way.”
That is how Ian Mason, chief executive of Electrocomponents, owner of RS Components, views the online and catalogue distribution business.
He points to a fragmentation of the design community and the way in which the internet has changed the way engineers access technical information and then buy products.
“We are on the way to seeing half the business through the web in some shape or form,” says Mason.
“Eventually 70-80% of business could be via the web, it is already over 70% in Japan. The aim is that customers’ experience on the web is so good they do not want to use print.”
According to Mason, customers want a multi-channel approach. The products are data-rich and there is increasing need for technical support. A distributor can use the web to provide that. “We are all managing the transition,” he says.
But Mason adds that there is no likelihood that he can stop producing print catalogues anytime soon.
“The print catalogue will still be here in five years,” he says.
Changing business
The internet has changed the way Mason thinks about the catalogue distribution business.
“Historically, where we were transaction-focused, now we are moving up the chain into awareness,” he says. That means increasing the amount and quality of information the distributor can offer.
“There is no limit on the web,” says Mason.
The internet offers the means of providing higher levels of design support through reference designs and social media. It is also good at helping to find the next generation of design engineer, wherever they may be situated.
“If you consider the Asian design phenomenon, engineers are coming out of universities in China and no one knows who or where they are,” says Mason. “How do you reach them?”
One way, perhaps the only way, is through a catalogue and online distribution model.
“We sell reach,” says Mason. “We have more than 1.6 million customers around the world and our suppliers want access to them.”
Social media
One new way companies are using the internet to widen their online audience is through social media, such as Facebook and other online communities.
“If you can get them, they are very valuable, but they are very rare,” says Mason.
He believes that the best way to approach social networking is not to create your own community, but to find ways of supporting the thousands of engineering communities already out there.
The web has also opened up opportunities for new competitors, even allowing the suppliers themselves to sell through online stores.
“People originally thought that the web would allow suppliers to go around us. But it has not happened in a real sense,” says Mason.
The reason is the enormous investment the catalogue distributor puts into the back-end – the business of delivering products anywhere in the world on a fast and reliable turnaround.
“The web has not changed the economics of small order fulfilment, manufacturers are not geared to supply just one part, we are,” says Mason. “The internet has not changed the fulfilment side of the business.”
Mason sees big potential to grow the online distribution business, and he is not that worried about new competitors.
“The big four catalogue companies probably have about 10-15% of the total US distribution market, and in Asia it is a 1% share. There is big potential to grow the online business,” he says.