E – Commerce — Friend or Foe to Wholesale Distribution

Many of you in the distribution industry are still wondering how much more change and future technology will impact your company. Will major producers, large chains and group alliances use the net as a weapon to replace you, the small to medium size manufacturer? Will you become road kill consumed by the vultures of platform roll-ups? Or perhaps the Internet will administer a slow, withering death, painful and extended.

Forget it. Banish that thought. When the dust settles you will still be around. The magic of the Internet is not really magic. Emerging technologies behind e-commerce are not going to kill your company tomorrow or the next day, or the next day after that. But, they are also not going to go away. However, E-commerce with regard to wholesale distribution has predominantly been hype and it is overrated, which is the case with most great technological revolutions. The impact of E-commerce has been overrated in the short-term and will probably be underestimated in the long run.

Undoubtedly technology has changed the way we think. The Internet has created a new channel to market but consider the failure of dot coms. The e-tailers of the world have suffered dramatic stock downgrades in spite of overall unprecedented growth rates. One of the major enlightenments realized by many dot.com companies who no longer exist (besides having a poor business model) is the fact that they lacked distribution experience

Don’t fear E-commerce

Fundamentally, the emerging technologies supporting it are nothing more than tools that have the potential to improve your business processes. You have to learn to use them to your advantage. Get in the game and E-commerce will no longer look like a threat. Industry experts proclaim that various instruments of E-commerce represent a broad paradigm shift. The reality is that a large number of complex systems must be implemented successfully to fulfill even a portion of their grand vision. This doesn’t mean that new technologies adopted by E-commerce can’t have a revolutionary effect on your business, but this effect will be limited by how much improvement evolves in the basic business process.

People still like to do business with people

That won’t change in our lifetime and it may never change. Learn to deal with it. The way to deal with it is to broaden your understanding of E-business and use technology to your advantage. As a wholesale distributor with the level of margins available in your industry, you can’t afford to be on “the bleeding edge of technology;” however, you are going to have to be in the game. An E-business strategy is actually a subset, or subordinate to, the company business strategy.

Don’t make the mistake of confusing E-commerce with E-business

E-commerce is selling product via the Internet as many of the dot coms have done; E-business is utilizing the technology of the Internet to improve your processes and take costs out of the supply chain. Many distributors don’t really have an E-business strategy. Their value propositions to their customers and suppliers are unclear with little or no hard data. Most are limited to talking about the quality of their people (unqualified) and promoting service (unmeasured externally) mistakenly as a core competency.

From an E-business perspective it is critical that distributors have facts and data to answer the following questions. If you are going to build an E-business strategy out of fear, based on long standing perceptions and opinions, the market will expose these assumptions in an expensive or painful fashion.

o What are your key value propositions to your customers?

o What do your customers think of you as a supplier, compared to their competitive alternatives?

o What are the key sources of pain or frustration for your customers?

With answers to the above questions, combined with a real business strategy, an E-business strategy can be completed.

So – have no fear

Customers will continue to choose you in the future if it is to their advantage, just like in the past. Today, however, a lot more thought goes into deciding whether or not what you provide is to their advantage. Are you taking away their pain and frustration? How do you compare to their competitive alternatives? In spite of what many of your salesmen tell you, price is clearly NOT the only determinant of advantage.

Most of the distributor salesmen have some fear of the Internet:

“Will my role stay the same based on new technology and the web?”

” Will I be replaced or become obsolete?”

“Will E-commerce replace the need for distributors?”

“Should I buy an orange grove and move to Florida?”

The answer to all those questions, except, perhaps, the last one, is NO! There is no doubt that market dynamics will change. However, the most resilient will survive. E-business technology will replace or improve transaction activities currently performed by sales representatives. Sale force automation, customer management packages and new communications tools will allow sales representatives to be much more effective in their pursuit of new business.

These technologies are not a threat to you!

They are your weapons, your defense used to battle E-commerce. They will assist you in maintaining competitive advantage. The new E-business sales rep will focus on growth and new business prospecting and penetrating existing accounts in a different fashion than they did in the past. Analytical tools will become commonplace used to assess potential and targeting based on ideal customer criteria. Laptops and palm pilots will become standard equipment. E-business technology is the way to manage multiple customer complexity, multiple product complexity and provide value by reducing cost in the supply chain. Use the technology tools available as a sales representative.

E-Commerce is not the threat it’s perceived to be and E-business is your ally

Silver bullet—knowledge management

What’s coming next will be presented as if it were magic, the “silver bullet” to solve all your organizational problems. In a few years E-commerce will be old news and some distributors will have wasted hundreds of thousands of dollars while others will have gained significant benefits from e-business technology as the industry goes through major change.

“Knowledge Management will be the next wave of why you need to spend money now.” For all you “Trekkies” out there, think back to the old Star Trek TV series. Captain Kirk could ask the Enterprise computer anything and he would get exactly the right answer.”

“This new millennium “Silver Bullet” will capture all of the wisdom and experience of your employees. Your customers, vendors and employees all benefit from having the right information at their fingertips making the right decision.”

IBM, Oracle, Microsoft, Sun and a host of others have been making huge investments in knowledge management over the past few years. The announcement last year on the Microsoft digital dashboard represents the first of a series of new product. Over the next year many new solutions will appear on the market.

Like E-commerce and most emerging technology, the short-term hype will be much larger than the reality.

The blood leeching level of transition

If you compare where we are today on ‘Knowledge Management’ to medicine, you would conclude that we are at the blood-leeching solution level.

It will be many years before there is anything to go buy that will provide that silver bullet. Having said all that, knowledge management will become very powerful and real world impacts can be achieved now for a lot less money than the cost of an E-commerce catalog. It is not really a technology availability issue; it is a work design issue. The technology requirement is minimal and many organizations have at least part in place now. It requires some kind of Intranet or Extranet on a client server network with employees’ station PCs that provide high-speed access to the web. Basically all technology tools can be purchased at Staples or Office Depot.

So, how does this relate to the threat of E-commerce to distribution? The bottom line is that you can circumvent any threat (real or imagined) imposed by E-commerce by using E-business strategy to your advantage.

Don’t panic

The secret of E-business is actually pretty easy. It lies in the fact that you will always feel somewhat overwhelmed by new technology, feel behind and be unsure as to your next step. If you sit there and do nothing, you, in fact, have made a decision; a decision that paralyzes you into total inaction. It’s also just as deadly to overreact and get on the “bleeding edge of the technology revolution.” Many technology service providers sell a promise that if you spend “tons of money” and put their package in, then you will be caught up overnight and hit a home run. This is not a cosmic truth. The fact is you will never be “caught up.” As soon as your solution is in, a better one will come along.

A more balanced approach is recognizing that you need an E-business strategy that complements and integrates into your overall business plan. The very first and most important requirement for E-business evolution is effective involvement and leadership. Now is not the time to whine about E-commerce, multiple channels and eroding margins. Now is the time to act and use E-business as a resource and asset.

Become a Web Head Evangelist

Create competitive advantage with E-business strategy and your fear of E-commerce will subside. Any senior executive who offloads his E-business strategy to an IT (Information Technology) department is making a mistake and will not achieve the desired objectives. You must come to the critical understanding that this is a process, or a journey and not a destination. This process must be led from the front line where the senior executive understands and develops the strategy to the point that he qualifies himself as a “Web Head Evangelist.”

The bottom line

The bottom line is that E-business technology will continue to progress at a rate that is almost unbelievable. Each advance eclipses the one preceding it. As microprocessors become more powerful and less expensive, they become more commonplace in day-to-day use. You need to grow your business with an E-business strategy that takes advantage of these advancements, gaining abilities in time and scale. The world is creating a technological edge that has no boundaries.

You cannot be afraid of it!

You cannot ignore it!

You must be a part of it.

You must use it to your advantage to retain or create competitive advantage.

Dr. Rick Johnson (rick@ceostrategist.com) is the founder of CEO Strategist LLC. an experienced based firm specializing in leadership. CEO Strategist LLC. works in an advisory capacity with company executives in board representation, executive coaching, team coaching and education and training to make the changes necessary to create or maintain competitive advantage. You can contact them by calling 352-750-0868, or visit http://www.ceostrategist.com for more information.

Rick received an MBA from Keller Graduate School in Chicago, Illinois and a Bachelor’s degree in Operations Management from Capital University, Columbus Ohio. Rick recently completed his dissertation on Strategic Leadership and received his Ph.D. He’s also a published book author with four titles to his credit: “The Toolkit for Improved Business Performance in Wholesale Distribution,” the NWFA & NAFCD “Roadmap”, Lone Wolf-Lead Wolf—The Evolution of Sales” and a fiction novel – “Shattered Innocence.” Rick’s next book due to be published in November is titled; Lone Wolf – Lead Wolf, The Evolution of Leadership.

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