A Net profit?

A Net profit?Electronic component distributors consider that the benefits from the Internet will be far reaching. On the face of it, use of the Internet for business to business applications appears straightforward, but on closer examination, it may well present problems for distributors. Paul Gregg reports
Catalogue distributors CPC and RS Components have both put their catalogues on-line, and the opportunities linked to Internet trading appear far reaching. Apart from the immediacy offered to the customer, distributors have the opportunity of displaying their products before a wider audience.
The implementation of EDI between distributors and their customers was slow to take off. Now it appears to have been overtaken by the Internet. For EDI to work successfully, there had to be close co-operation between the distributor and the customer. It calls for willingness on the part of the customer to install the software that converts orders and invoices into EDI format.
In addition, the installation and running of an ISDN link to help speed up documentation, remains expensive for many smaller customers, at a start-up price of ?99 plus ?130 per quarter. RS on the Web
RS Components’ Web site, which was launched in February, allows purchase managers and engineers to order products for same-day dispatch. The Web site not only provides the usual datasheet data base and product search engines, but also on-line ordering from the RScatalogue of 100,000 products. According to parent company Electrocomponents, it is the result of a seven figure investment in Internet services and indicates the firm’s commitment to develop the on-line ordering side of its traditional catalogue and telephone based business.
A catalogue on a CD-ROM cuts the cost of printing and postage from the distributors’ point of view, but once the CD-ROM has been issued, further product information and price changes can only be added when a new disk is produced.
With an interactive catalogue on the net, the customer has immediate access to the latest products as they become available, and it costs them virtually nothing to establish a link with the distributor. Rather than taking time to thumb through the pages of a hefty printed volume, the customer can enter key words to bring up product details almost instantly.
Preston-based specialist spares distributor, CPC, launches its on-line catalogue this month (www.cpc.co.uk), close on the heels of the RS Web site (rswww.com). CPC’s customers can access over 6,000 main products and 900,000 original manufacturers’ spares.
Original trials on the Internet by CPC were begun 18 months ago, in co-operation with BT and 20 key customers linked by ISDN lines. Around ?14,000 was taken over a four month period. The Internet system used today comprises a BT managed server in Cambridge with Windows NT workstations holding the catalogue database and an elaborate security firewall.
The server has a high bandwidth connection to the Internet backbone and a permanent, real-time kilostream connection to CPC’s IBM AS/400 computer at Preston. The data connection to the AS/400 is made via a multi-function firewall using 100Mbit/s Ethernet technology. It communicates the latest pricing and inventory information in real-time to the Cambridge server.
It is more cost effective for CPC to have BT provide lines for the 95 per cent of people who visit the Web site, just to browse, without making a purchase. Analysts at Forrester Research put the browse figure higher, saying that on average, only three per cent of visitors to a web shop make a purchase.
CPC’s managing director, Chris Haworth, said that a random sample of customers showed that half of them already have access to the Internet. He said that the problems that were previously associated with customer security are no longer an issue.
In the CPC system, accounting information and credit card details are protected by the use of a 40-bit encryption code. While the internet gives larger customers the up to the minute information they require, it could introduce an unexpected threat to the distributor’s business.
It comes in the form of special software known as ‘agents’ or ‘bots’. This enables big buyers to search websites looking for the best prices. In the hands of volume buyers, operating a cut-throat pricing policy, there is the possibility that many standard products could become commodities. Haworth is not worried by this possibility.
He likens his company’s position to that of Marks & Spencer. While M&S may not always be the cheapest place in which to buy food, customers return there again and again because they are sure of the quality. “Besides, if you are going to compare prices, you must also look at handling charges. These can vary as well,” he added.
People who just want to look through CPC’s on-line catalogue can do so as ‘guests’. They are invited to open an account, and once they do so, they are given a password. Account customers can track the progress of an order form the time it was received, through to despatch, and see when it is due for delivery.
Distributors hope that their customers will become familiar with accessing and ordering from their Web sites, so that they will be less inclined to go to an unfamiliar Web site. As CPC’s experience has shown, there is no constraint on the location of a cyberstore. Through networking, the database could be located wherever the distributor is offered a good deal by a telecommunications carrier.
On-line catalogues mean less paperwork all round. From the distributor’s standpoint, some of mundane and onerous keying tasks now become the responsibility of the customer.
By encouraging customers to monitor their account details, there is also the hope that they will no longer need reminders about reaching their credit limit. Whether they are going to be quicker to pay remains to be seen.

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