E-volving. E-merging. Un-E-scapable.
Yes, we're talking e-commerce, a tool many people believe will become e-ssential (OK, enough already) for conducting business during the next decade.
"I think e-commerce is the real thing," says Tim Koenigs, president of Koenigs Forms & Graphics Inc., a distributorship in Waukesha, Wis. "And we haven't seen anything yet. This is going to grow, and we need to be a part of it. If you think e-commerce is a fad, you're wrong. You have to get your head out of the sand."
In spite of the hype-or perhaps, because of it-some business people regard e-commerce as more land mine than gold mine. Why? Well, there is fear of the unknown. And concerns about the time and money needed to invest in effective e-commerce systems. And finally, there is the nagging perception that profits from e-commerce are still e-lusive (sorry). Skeptics often point out that Amazon.com, arguably the best-known e-commerce pioneer, has yet to make money in this new frontier.
Still, Koenigs and plenty of others believe there is little benefit to taking a wait-and-see approach to e-commerce. "I don't see any reason to wait," Koenigs says. "I'm not saying you're going to make a bunch of money immediately. But if you start now, in five years you probably will be in that position."
On the following pages, FORM takes a look at five distributorships that aren't sitting on their heels. They share their strategies, their successes and, yes, their frustrations with e-commerce-the business world's biggest buzzword.
Distributorship: Koenigs Forms & Graphics Inc.
Location: Waukesha, Wis.
President: Tim Koenigs
E-commerce Outlook: "Our industry is ahead of some and behind others when it comes to e-commerce. But Wal-Mart is struggling to sell using e-commerce. I don't think we have to feel bad for struggling."
When did Tim Koenigs start investigating e-commerce solutions? "When I saw my continuous forms business go down 25 percent in one year," he answers. His distributorship already had a graphic designer with Web site design capabilities in-house. But Koenigs wanted his company to offer more than Web design. "We wanted to have a total solution," he says.
Koenigs Forms & Graphics began by launching its own Internet site. Koenigs' customers can use the e-commerce system to buy the distributorship's proprietary products, including envelopes, statements and HCFA forms for the health care industry, and tax forms.
The distributorship then took that experience and told clients it could develop online company stores for them. This includes designing the sites' navigation, handling text and taking pictures of products displayed in the online stores. Koenigs Forms & Graphics also fulfills orders placed on clients' Web sites, including printing (or embroidering), warehousing and distribution. The distributorship even provides clients with reports on the popularity of each item in their online stores.
So far, Koenigs Forms & Graphics has provided two clients with in-house company stores that offer their employees, agents and partners promotional products, binders, business documents and marketing materials. For an e-commerce site to work, Koenigs says, "It has to be a fairly large account with multiple locations or agents selling around the country."
Koenigs wants to take his company's e-commerce capabilities a step farther. The distributorship is working on a password-protected system that will allow customers to make withdrawals from inventory, check order history and place custom orders via the Internet.
Many distributors have misconceptions that their companies must be large to get involved with e-commerce, says Koenigs, whose distributorship has fewer than 10 employees. "In fact," he says, "offering e-commerce makes me look bigger than I am." His in-house designer handles Web page creation and navigation, and the distributorship partners with another firm that builds databases for e-commerce systems.
Even with the right help, establishing solid footing in the shifting sands of e-commerce doesn't happen overnight. "It's a transition we continue to make," Koenigs says. "The big thing is trying to figure out how to make money selling on the Web."
Customers aren't using Koenigs Forms & Graphics' Web site to buy the proprietary products as much as Koenigs would like. "How do you reach customers that haven't seen your Web site before?" he asks. "We're still struggling with that." Web marketing efforts often go on the back burner, Koenigs admits, partly because his small distributorship's resources get stretched thin. "It's just one more thing to think about," he says. "We're still distributors, and we still have to go out and sell things."
Koenigs realizes that involvement with e-commerce requires a large dose of patience. "Don't expect instant results," he says. "The payback is going to be a little long. But the sooner you get at it, the better position you're going to be in. Even if it's not a profitable attempt, you're going to learn some things." He also thinks a trial-and-error approach is better than doing nothing at all. "I guess in the case of e-commerce," he says, "I'm doing, 'Fire, ready, aim.'"
Distributorship: Cortan Industries Inc.
Location: Redmond, Wash.
President: Roger Courson
E-commerce Outlook: "Keeping up with the latest technology lets our customers know we're at the cutting edge instead of just selling a commodity product."
Ask Roger Courson about his distributorship's entry into
e-commerce, and he answers honestly, "It was pretty gut-wrenching. We developed our system from scratch, and it was an educational process."
Cortan Industries is located outside of Seattle in a market loaded with high-tech companies. "There are a lot of dot-coms flocking here," Courson says. When an electrical supply client with 50 retail locations throughout the Pacific Northwest expressed an interest in e-commerce offerings approximately two years ago, Courson knew it was time to take the plunge. "That triggered us into investigating how to put up an e-commerce site," he says.
Today, dozens of companies such as Collabria Inc. and Noosh Inc. offer to build business-to-business e-commerce sites for small companies. But at the time of his client's request, Courson says the e-commerce landscape for document management companies was virtually bare. Courson approached Internet service providers for help, but found the asking price of $35,000 to $55,000 to set up an e-commerce site exorbitant. Plus, Courson points out, Cortan would have been at the ISP's mercy whenever the distributorship wanted to make site changes.
Courson decided Cortan Industries could build its own e-commerce system, even though, at that time, the distributorship didn't even have a Web site. One of Cortan's in-house graphics people took the lead in learning about the requirements to develop the system in-house. The distributorship had digitized its graphics department in the late '80s in a Macintosh environment. To prevent problems with cross-platforming and to eliminate the need to redesign digitized files, Cortan Industries also found a Mac-based Web hosting service.
Today, approximately 40 of Cortan's clients use the distributorship's e-commerce system.
The system contains "shells" of products such as envelopes and stationery. Clients enter variable data they want printed on the items, proof the items and view items released from inventory, all online. Normally, Courson says, 100 to 200 orders are placed on the system each month.
Cortan Industries beta tested the system before offering it to clients on a large scale. Even now, the service is not made available to every customer. Clients are brought on board only if their volumes dictate it. "A good customer for this is anybody who was a good forms management client," Courson says.
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Analysts predict U.S. business-to-business sales via the Internet will grow from approximately $17 billion in 1998 to $183 billion in 2001. By 2002, that number is expected to grow to $327 billion and account for 90 percent of online transactions.*
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Cortan Industries' total sales volume is less than $500,000, which belies the belief that small companies can't be players in the e-commerce marketplace. "I've had a fairly high number of inquiries from large distributorships trying to do the same thing," Courson says. "They're surprised we did this in-house." For a fee, Courson has offered the services of his graphics coordinator to distributors interested in setting up e-commerce systems, but he does not actively pursue system development sales. However, he is happy to work with other distributors and openly encourages them to take action. "I think [distributors] better get into e-commerce pretty fast if they want to expand their shrinking marketplace," he says.
Why are many distributors hesitating to embrace e-commerce? "I don't think fear is the factor," Courson says. "Money is the factor. It's not going to be totally inexpensive. But their competitors are eventually going to have it." Courson realizes many distributors may not become e-commerce converts until profits are directly linked to the related services. But they're running the risk of falling far behind the curve, he says. "It's like putting in a computer system," he says. "How long does it take to cost-justify the system?"
Courson also expresses frustration that more manufacturers aren't getting onboard the e-commerce bandwagon. He has talked with manufacturers in the form, label and stationery industries, but has come up empty. "There are a lot of manufacturers saying they are going to do it," he says, "but so far, it's just talk."
Distributorship: ProForma
Location: Cleveland
Chief Franchising Officer: John H. Campbell
E-commerce Outlook: "History shows there's no one thing that is a lottery ticket in this industry. Our franchise owners are taking [e-commerce] in stride. But if they don't have Internet solutions, they could lose out on larger opportunities."
Each company in the document management industry faces hard questions and tough choices when it comes to involvement with e-commerce. But what do you do if you're providing support services to a network of approximately 460 independent franchise owners?
ProForma investigated e-commerce options available to distributors and then chose a separate company, inaQuest.com, to pioneer its efforts. Located in Cleveland, inaQuest.com's founder and CEO is also ProForma's founder and CEO-Greg Muzzillo. ProForma franchise owners can get their own free home pages through inaQuest.com. The company also designs Web pages, designs templates and scans in items displayed in franchise owners' online stores. "This way," John H. Campbell says, "our franchise owners can get into the technology without skinning their knees all the way."
While ProForma franchise owners are steered toward inaQuest.com as a preferred provider of e-commerce solutions, inaQuest.com does not cater exclusively to ProForma franchises. Its services are available to all distributors and manufacturers. "You will need significant e-commerce solutions to survive and thrive in the future," Muzzillo says. "Where EDI didn't work, the Internet and e-procurement absolutely will change the way our customers do business."
Currently, a dozen ProForma franchises have online store sites up and running, Campbell says, and approximately two-thirds of the remaining franchises are discussing site development. The online stores allow customers and prospects to view and buy imprinted products such as forms, business cards, letterhead and promotional products, including wearables. Clients access the sites either through a ProForma distributor's home page or the franchise network's informational Web site.
Campbell is especially excited about the prospects of selling promotional products via the Internet. Promotional products are ProForma's fastest growing product segment, he says, making up approximately 30 percent of total sales. Franchise owners' online stores offer clients quick and easy access to a wide range of ad specialty ideas. But for the foreseeable future, Campbell says, some products don't fit so neatly into the e-commerce landscape. "I think very few buyers of high-end commercial printing are going to be comfortable pointing and clicking through that process," he says.
While Campbell is a big believer in the opportunities afforded by the Internet and e-commerce, he does not propose them as distributors' be-all, end-all solutions. "The Internet is just one tool that is part of our kit," he says. "I think we have to be a progressive company overall."
Part of being progressive is encouraging ProForma distributors to take the offensive in probing for clients' online needs. When asking these questions, Campbell says, distributors may not deal with the contacts they normally do. In all likelihood, he says, they will encounter young people, for whom pointing, clicking and buying over the Internet aren't such foreign concepts.
But Campbell realizes many distributors are neglecting or frightened by e-commerce themselves. Many owners of document management companies have been entrenched in the industry for a long time, he says, and change is hard for them. "It's not until you start losing business that you start sticking your head above ground and say, 'What's going on?'" he says.
Campbell believes more business printing companies will invest in e-commerce as a new generation establishes itself in the industry. He points to the many ProForma franchise owners facing succession issues. "Dad will kind of sit there and roll his eyes when we talk about e-commerce," Campbell says, "but the kids will really perk up. The second generation [of owners] is very excited about the Internet."
Muzzillo thinks companies willing to embrace change will be well-positioned for the future. "We are very lucky to be in the industry we are in," he says. "[Industry companies] need to get technology, and they need to get it quickly. But there has never been a better time to grow market share and your level of success."
Distributorship: F & E Business Graphics
Location: Dallas
President: Bob Jent, CFC
E-commerce Outlook: "Technology is changing so quickly. In 18 months, I think the vision and the vehicle will have changed again. The days of being able to remain static are pretty much gone."
In an industry whose members are constantly seeking to diversify, providing business cards seems elementary. But Bob Jent, CFC, never lost sight of the fact that those 31Ž2 x 2-inch cards are elemental to how many people conduct business. And as a business printing distributor, Jent doesn't overlook their worth in getting him in the door with clients. "Sometimes," he says, "you need to do the business cards to get to the good stuff."
F&E Business Graphics was doing a small amount of business with a client in the manufacturing industry. The client offered F & E more business-provided the distributorship could set up an online business card ordering system for the manufacturing company's 170 locations nationwide. "That got the ball rolling," Jent says. "It's evolving a little slower than I might like, but I'm glad we did it."
F & E partnered with a manufacturer that overwrote the program and made it appear as if orders were going directly to the distributorship. The online system allows the customer to do its own typesetting and proofing for business cards, letterhead and envelopes. The system holds business card printing jobs in a queue until 12 employees have placed orders, at which time the order is automatically released to the manufacturer for production.
If there are less than a dozen employee names in the queue after a week, the print order is released for production anyway. But, Jent says, the customer normally places enough orders to print business cards two to three times per week. Eliminating the need to fax in orders and call in proof approvals has reduced the production cycle by roughly five days, he says. The only time the distributorship gets directly involved, Jent says, is when the client needs to cancel an order or has problems receiving an order.
F & E debuted it's online ordering system in April 1999, but recently, the distributorship also joined Collabria's PrintCommerce system. The PrintCommerce system can link F & E to a network of suppliers instead of a single manufacturer. The distributorship's clients are set up with online custom print catalogs containing only their items. They can order printing, approve proofs, track orders and complete other tasks online. "I think there is going to be a place for both [e-commerce systems] in our operations," Jent says. F & E Business Graphics will use PrintCommerce for customers with multiple products or for customers who want online tracking.
The system that sends business card orders to their manufacturer partner is free to F & E, based on the total volume they do with the manufacturer. The Collabria system has several charges involved, including a sign-up fee and fees charged per customer and per transaction. "In the grand scheme of things, the fee is not a big deal if you have the right customer," Jent says. "Plus, this was the path of least resistance. I don't have to worry about programmers and development costs. If you wait to do it yourself, it usually doesn't happen."
Taking a wait-and-see attitude has put the business printing industry behind the curve for e-commerce, Jent says. "Our industry still has a lot of the original forms guys that don't like to change quickly for the most part," he says. "They're dragging their feet. And we might still be like that if it wasn't for our customer."
Jent also realizes many distributorships will think e-commerce is a bust if it doesn't generate profits for them overnight. He is determined to remain patient. His distributorship's e-commerce services aren't big money-makers yet, he says, but they do save F & E time and manpower. "I never really looked at e-commerce as a profit center," he says, "but as a way to gain more business and to shore up the business I have."
Jent also rebuts another common argument. "If you're a distributor," he says, "you don't need to be big to get involved. You just have to find the right third party to work with. If you're not on the Internet, you're going to be like the old forms guy who says, 'Boy, I wish I would have done commercial printing.' If you're not changing, you're in trouble. If you're not changing on your own, something is going to come in and change it for you. If it's not e-commerce, it will be something else."
Distributorship: Computer Applications International (CAI)
Location: Alpharetta, Ga.
Owner: Randy Podhouser
E-commerce Outlook: "I think we'll find that we've entered a new era. E-commerce is going to grow and grow. One day, everybody will be tied together with the Internet."
CAI isn't a traditional forms distributorship. Upon opening, its main business was computer maintenance and installation. But because of its constant exposure to networking and office environments, the company branched out into business forms products and Web site design. Today, CAI has divisions focusing on all three segments. "It was a transition of need," Randy Podhouser says. "When you're around an office, you try to fill all the needs of that office."
CAI is also taking a different approach to e-commerce than many distributors. Instead of setting up an e-commerce system that feeds print orders to the distributorship, CAI helps clients mold their own online strategies. For instance, the distributorship provides Web site design and Web hosting services to approximately 20 clients. Recently, it developed a secure online retail store for a supplier of wholesale new and used restaurant equipment. "There's a very broad segment of services you can provide related to the Internet," Podhouser says. "Developing e-commerce sites is a step up."
The distributorship's Web design clients cover a broad spectrum, from a pizza company to a company that organizes dolphin tours. Each client wants its Web site to convey a different attitude, Podhouser says, and CAI's goal is to develop suitable design styles for each. When CAI is working on a project, it surveys people the Web site will be aimed at to gather feedback on what they like and dislike. "You have to make a Web site appealing to its target audience," Podhouser says.
For instance, when a school that trains personnel for medical and dental professions asked CAI to develop its Web site, the distributorship held educational sessions about the Internet at three high schools. Because the training school wanted to appeal to young people, CAI used a completed prototype of the school's Web site and asked the high school students for opinions.
Some of the students' preferences were incorporated into the Web site, including some animation and moving features. "The students wanted [the site] to be active," Podhouser says. The Web site has already surpassed the training school's telemarketing department in generating interested leads.
The distributorship continues to evolve its Internet-related services. It plans to offer Internet provider services through a third party in the near future. But CAI is not trying to become a giant in its field, at least not size-wise. "Staying small is the best thing we ever did," Podhouser says. "And we try to stay with small businesses." This approach allows the distributorship to remain focused while offering a full range of services, he says. Mainly, the distributorship targets businesses that can't afford their own management information systems (MIS) departments. "We become that for them," Podhouser says.
One way to get started with Internet-related services is to pick a customer whose business you know well and develop an online marketing plan for them, Podhouser says. "I don't think there's any reason to hesitate to get involved," he says, "because every company's objective is to grow its business. The Web can really make things happen for companies because it gives them a presence. Thanks to the Internet, you now have the ability to pick up business you would never have been able to get before. Your client base is the world."
Jonathan Rollins is a contributing writer to FORM Magazine.
*Source: Facing the Forces of Change, published by the Distribution Research & Education Foundation
