*NEWS*EUROPEAN DLRS:HARD ON USA’S TAIL
*NEWS*EUROPEAN DLRS:HARD ON USA’S TAIL
2003-11-16 at 10:28:00 am #8499
Headline: European Dealers: Hard On USA’s Tail
Businesses worldwide are struggling to keep up with the internet, a competitive marketplace in which content and features are out-of-date the second they are published on-line. It is a tough task for those companies already behind in the dot.com world.
The USA is regarded as the absolute global leader where e-commerce is concerned. Europe has been somewhat slower to catch the wave, but it will not be long before more Europeans have access to the ‘net than Americans. In fact, it’s expected to happen by… next year!
In the first article in this two-part series, OPI focused on the e-com fortunes of US-based independent dealers (see June OPI, pg 99). Now, we turn the spotlight on European dealers’ efforts to learn from the e-com experience in the USA.
European e-commerce capabilities are, as a whole, lagging behind those of the USA, and not just in the office products industry. “The internet as a whole has had more time to mature in the USA than it has in Europe, and this is directly reflected in the user adoption rates, which in turn drive demand for new features and technology,” explains Lillian Veri, Director of International Business Development at e-commerce solutions provider ECI2.
Demand For Technology
“American dealers have always had access to more sophisticated e-commerce technology until now,” Veri continues. “However, this is changing as European dealers embrace the internet. Europeans can influence this change themselves by demanding state-of-the-art solutions from their e-commerce providers.”
Germany-based on-line solutions provider PBS Network has developed an industry-wide B2B e-commerce solution named PBSeasy Online. It presently handles over DM150K ($73.5K) in sales each day, generated by over 200 dealer customers. It offers an on-line exchange marketplace and also assists dealers in connecting to major customers’ e-procurement solutions. PBSeasy’s partners provide on-line shops and interfaces to dealers’ business systems.
Claus Meister is PBS Network’s Managing Director. He believes that although European dealers are playing catch-up, they won’t be behind for long. Meister: “US independent dealer web sites still have an advantage over their European counterparts. In the USA, customer interest, and even pressure, to buy-on-line is much higher.
“However, we’re picking up speed in Europe,” he adds. “Direct access to US sites and the extensive media coverage should help European dealers to study best practice in this area and to level the playing field.”
Indeed, European dealer group euro buro is one organisation which is currently undertaking detailed research into the e-commerce activities of its dealer group members. Elsewhere in Europe, French contract stationer Guilbert has an agreement with US-based e-tailer bigtree.com, enabling Guilbert to establish e-com web sites accessible by its institutional and individual European customers.
It may appear that because the USA has set the benchmark for e-commerce development, European dealers’ e-com development should be easier, with dealers able to avoid any mistakes made in the USA. The reality is very different.
Europe contains 45 countries and numerous cultures. The number of internet users differs not just between countries, but between regions. Countries have differing infrastructures and Europeans speak many different languages. The issues faced by European dealers are altogether more complex than those tackled by US companies.
“I believe that the northern European market is more structured than in southern Europe, and that internet penetration is higher,” states George Gerardos, Managing Director of Greece-based computer accessories and office products dealer/ retailer/mail order operator Plaisio Computers.
“We believe that the gap between northern and southern Europe will close. It’s just a matter of time. The transition period starting from when a user begins to become interested in the internet to the same user constantly making on-line purchases has been measured in the USA as 18 months,” he explains.
The transition to e-commerce has been relatively straightforward for Gerardos’ company, due to its multi-channel strategy. “Plaisio does business in four channels: retail stores; catalogues; B2B and e-commerce,” Gerardos points out. “There is a great synergy between them. We also have high brand awareness, having been in business since 1969. People know us and trust us. That’s why they are prepared to enter our electronic store and order from us.”
Gerardos believes that Plaisio Computers was not only the office products e-commerce pioneer in Greece, launching its on-line store in May 1999, but that the company was also the leader of nationwide e-com development. Its web site has attracted 500,000 visitors since launch. “Nowadays, there are one or two other Greek companies that are selling on-line, but they sell mainly computers and telephony products, not office products,” he adds. “In Greece, e-commerce is still at a very infant stage.”
Making Up Ground
The gap between countries such as Greece and those that have a more developed internet culture will not close overnight. But even in more technologically-advanced countries such as Germany, independent dealers’ web solutions have been less than forthcoming. “Germans are said to be more critical and less enthusiastic in adopting new technologies,” Meister claims. “Germans are looking for 100% solutions. They may not always be first to develop them, but they try to be the best.
“Real commitment to providing on-line ordering services has been lacking until recently,” he comments. “However, during the last few months, almost every major industrial customer has either announced the implementation of an in-house e-procurement system or plans to participate in an internet exchange.
“All major German contract stationers have been forced to speed up their own on-line activities in order not to lose their customers,” Meister continues. “For smaller dealers, dealer groups like Branion and Büroring have set up web ‘farms’ to host a multitude of web shops. This has given more than 500 dealers in Germany the potential to sell on-line.”
Nearly 30% of Germany-based Branion’s members currently operate one of its two web shops. Branion’s closed, password-protected Web Shop provides an ordering system for the dealer group’s major clients, enabling the individual arrangement of product lines, prices, access rights and further service components between the specialised office dealer and its customers.
The open Web Shop, meanwhile, is geared towards Branion’s small to medium-sized commercial clients or SOHO customers. “The open Web Shop is an ideal tool for identifying those customers with whom a more intensive relationship is evolving,” explains Wolfgang Römer, Spokesman for Senior Management at Branion.
“By adding these customers to our closed shop, we ensure their loyalty,” he claims. “The concept is adapted to the marketing, product range and layout of the Branion merchandise. All activities, whether marketing, sales or payment, are dealt with by the specialised dealer or his web address.”
Slow To React?
Aside from the logistical and technological obstacles that European companies can face, it seems that some European dealers have been content to ponder on their on-line fate rather than take action to secure it. “During the last few months, almost all major German banks have started on-line exchanges for office supplies, backed by nationwide stationers like Kaut Bullinger and Corporate Express,” Meister notes.
“Due to their funding and the customer base accessible to the banks’ salesforces, this represents a major challenge for the independent dealers,” he adds. “And it should have stimulated independent dealers’ efforts.
“But, instead, some dealers show either paralysis or wishful thinking, believing that the banks don’t know the business so they will not succeed. Independent dealers will only survive by convincing their customers that they can provide the same easy on-line access combined with their traditional strengths – additional services and extra customer care.”
These scenarios are becoming rarer, however. “Many European dealers have been hard-pressed to see the value of creating an on-line presence,” admits ECI2′s Veri. “Because user adoption rates were low, the internet represented more risk than reward. That is now changing rapidly and dramatically throughout Europe.
“As more users come on-line, they will demand the instant access and ease-of-use that e-commerce provides,” she continues. “The internet is now starting to represent more reward than risk. Not only does it potentially open new markets to dealers, but it can also lower their operating costs.”
Three Dealer Options
Veri believes that European independents have three options in developing their on-line presence: a) to develop their site in-house; b) to go to an e-com development company; or c) to purchase a package supplied by one of the members in the industry chain.
“If a dealer develops its site on its own, the downside is that it will lack e-commerce experience and expertise,” Veri notes. “More importantly, the dealer may also detract from its primary focus – running a successful OP business.
“However, there are large costs involved in going to an external e-com company which may not be optimised for the OP industry. Turning to another company in the supply chain will provide cost economies and the site will be optimised for the industry, but it could limit the dealer in terms of options: a wholesaler’s package, for example, may only allow the dealer to order through that one wholesaler.”
UK-based dealer group Officeteam is one company that has recognised the importance of e-commerce in its future plans. Its Managing Director, Jonathan Straker, was so impressed with ECI2 President/CEO Paula Jagemann’s presentation at OPI’s Cannes ’99 conference, he appointed ECI2 as Officeteam’s e-com solutions provider.
The new service, representing Officeteam’s investment of £400K ($604K) over the next three years, was launched last month, with 15 dealer members signed up even before cost prices were finalised.
“The content of Paula Jagemann’s presentation was far more sophisticated than anything I’d ever seen before,” Straker recalls. “I was also anxious to find a solution for the Oyez Straker group and Officeteam members that could be applied quickly.
“We reviewed all the offerings that were available within the industry at the time. ECI2 has substantial funding and a pretty sophisticated on-line trading company in the USA on which it bases its experience.
“Our faith was greatly justified. We gave the go-ahead in October 1999 and had a fully-operational test site in December,” Straker comments. “It’s continued to progress rapidly since then.”
The Officeteam agreement marks ECI2′s first foray into the European market. Now that the site is fully operational, ECI2 is looking to broaden its horizons, expanding its global presence over time by working with major buying groups in other countries. The technology that was developed in the USA has been modified to suit the specific requirements of the European market.
“The Officeteam/ ECI2 partnership is a good one because it avoids all the disadvantages of those three options,” summarises Veri. “We shared the application development and optimised it for the OP industry, which is ECI2′s only focus.
“Officeteam and all the users of the system are not married to any one supply chain partner. That gives the independent dealer great flexibility.”
Under the terms of the alliance, ECI2 claims that Officeteam is now able to offer its members a turnkey, state-of-the-art web storefront at a significant saving over what it would cost for the company to develop the same web presence on its own.
The fact that e-commerce in general is so far advanced in the USA encouraged Officeteam to choose a US-based solutions provider. “ECI2′s success in the USA was important to Officeteam,” Veri explains. “It allowed Officeteam to offer a robust, proven platform to its dealers, thereby reducing the risk while enhancing its speed to market.”
Although he stresses that Officeteam is not experiencing difficulty in attracting interest, Straker claims that the level of activity in e-commerce amongst UK independent dealers is low. “We surveyed over 200 people around the UK – of them, 55% said that they weren’t in the slightest bit interested in trading office supplies on the web. 44% said they were tremendously interested – only 3% were already on-line in one way or another.
“I think that the UK independent dealers’ attitude is that they know they need to supply an on-line solution and quickly,” he continues. “Any reluctance that there has been has mainly been down to ignorance and to the complications of on-line trading.
“Officeteam has spent a lot of time and effort educating our members that e-commerce is a way of driving down their operating costs, which they’re going to have to do in a business with shrinking margins,” adds Straker. “I consider the move to on-line business not so much as a transition but as an additional advantage that independent dealers can offer and through it, compete adequately with the power channel, using packages like ours.”
The Wholesale Approach
As Europe’s leading wholesaler, Spicers has placed a large emphasis on its e-commerce capabilities. Its Office Supplies Control And Reordering Solution (Oscarnet) is now available to its customers in the UK, Ireland, France and Germany.
The CD version of Oscar has been widely used by dealers over the past five years, but the internet-based catalogue and ordering system, Oscarnet, has been created by software developer Sparza.
“We chose to work with Sparza because of its existing expertise in internet software development,” explains Bill Armstrong, Chief Executive at Spicers.
“The same logic that drove Spicers to move into electronic trading with our dealer customers in the 1980s will drive e-commerce between dealer and consumer,” he continues. “Large volumes of low-value orders are ripe for conversion to electronic processing.”
At present, 120 dealers are now trading on-line through Oscarnet. Whilst that figure is small representative to the total number of dealer accounts, the system has only been operational for six months.
“Only the largest dealers will be able to fund sophisticated internet-based ordering systems,” notes Armstrong. “Most will use solutions created by their wholesalers, dealer groups or systems suppliers.
“We are beginning to see end-user contracts being offered to dealers specifying that an internet ordering tool is a prerequisite for tendering,” he adds. “As this trend grows, more and more dealers will take up Oscarnet and other systems being made available to them.”
“The largest dealer using Oscarnet has annual sales of £10M ($15.1M),” Armstrong reveals. “Over 50% of its business is now placed via Oscarnet. That dealer is competing head-to-head with the major US and European contract stationers and believes the functionality of Oscarnet is at least equal, and in some cases better, than that being offered by global players.
“Ordering systems need constant investment if they are to exploit technological advances,” Armstrong points out. “Spicers is determined to keep Oscarnet at the forefront of e-commerce tools available to independent dealers across Europe.”