Distributors pushed on to the web

The rise of business-to-business ecommerce, coupled with the growing role of the internet, has forced many US distributors to web-enable many aspects of their organisations.

Against a climate of ever-decreasing margins and increased competition from direct vendors and online trading hubs, many US distributors have been steadily rolling out ecommerce strategies with resellers in an attempt to maximise efficiency, streamline supply chains and reduce costs.

But unlike the US, the European channel has been enjoying a period of bumper demand for hardware, software and services, according to analyst IDC. In its latest report, 'From Traditional IT Distribution Channels to eChannels in Western Europe 1999-2000', IDC estimates that the channel dealt with about 45 per cent of the $239bn (£149.4bn) spending on computer hardware, software and services last year.

The analyst attributed this demand mostly to year 2000 remediation and euro currency conversion, which has kept the market buoyant since the middle of 1998. But Brian Pearce, analyst and author of the report, says the "outlook for 2000 and beyond is not entirely rosy".

The net effect
He says increased pressure on hardware margins and the emergence of an internet channel will be the major issues affecting the channel in the next few years. His found that increased competition on price, plus declining margins and vendors shifting marketing budgets for direct sales and marketing, have decimated the already razor-thin margins in the cut-throat PC distribution business.

If distributors do not change and web-enable their organisations they could go out of business, according to industry watchers.In the US, there are already casualties caused by the shift to internet-based distribution. Traditional distributor MicroAge confirmed last week that it had filed for Chapter 11 bankruptcy protection, saying that it had struggled in the transition to become part of the ebusiness economy.

The company said the move was made to help protect a restructuring programme intended to help it become a business-to-business technology solutions provider.Jeffrey McKeever, chairman of MicroAge, said in a statement: "The actions, as painful as they are, will allow us to accelerate the transformation of the company to effectively compete in the digital market."

This news came just a week after CHS Electronics also filed for Chapter 11 to avoid bankruptcy.

Fit and able
Computer 2000 (C2000), the UK arm of US-based distributor Tech Data, is one distribution company that has realised the need to web-enable its business and resellers to remain competitive.

Last week, Andy Dow, marketing general manager at C2000, unveiled the distributor's ecommerce strategy that it hopes will increase online sales by a quarter this year and reduce costs. Currently, it takes 15 per cent of orders online, while in the US, Tech Data takes 35 per cent this way. "C2000 will roll out a number of ecommerce initiatives over the next few months to e-enable its channel, drive efficiency and create demand," says Dow.

He said C2000 will launch a beefed-up version of its Intouch 2000 online ordering system, called Intouch Anywhere. The company will also create a service for building websites, called Web Store, for its resellers; provide online credit histories, statements and copies of invoices; and will introduce an online returned merchandise authorisation, or RMA, system.

Adding to its current system, Intouch Anywhere offers C2000's resellers the ability to compare pricing and availability of a selected product with any vendor's or distributor's website. An improved Intouch products online service, which will offer the ability to save searches, browse by product area and provide online quotes, is also planned.

C2000's Web Store building service will offer resellers a package to set up an online store based around C2000's product data. "The Web store will attract resellers that want electronic data interchange [EDI] but not the cost," says Dow. "We are offering several rungs of entry to our resellers, from a 'toe-in-the-water' package right up to a fully automated system, because one solution size does not fit all."

But Dow also said resellers that want to use the telephone to do business still can. He believes both systems can sit side by side, with the web being used to more effectively manage accounts.

According to IDC, the bulk of the transactions between vendors, channel partners and customers is still done over the telephone or by EDI. But it estimates that organisations and end-users are increasingly using the internet to buy goods and services.

In its report, IDC estimates that less than 1.5 per cent of the total IT spend in Europe last year was made over the web. But the analyst said online sales have tripled over the past two years, with ecommerce expected to account for 12.5 per cent of IT spending in western Europe by 2003.