Independent distributors' Web business grows
By James Carbone -- Purchasing, 4/22/1999
Web sites of independent distributors are becoming important resources for electronics buyers. Non-franchised distributors not only allow buyers to purchase parts online, but provide pricing and availability information that is useful even if purchasers don't buy any parts.Independent resellers know that the more buyers visit their site, the more likely they will eventually buy parts, whether they buy them online or through more traditional methods. In fact, the overwhelming majority of buyers who buy from independent resellers insist on talking to the distributor before buying. Non-franchised distributors also believe that when the current oversupplied semiconductor market turns and shortages pop up, buyers will be flocking to their sites looking for parts.
"The Internet is becoming an incredibly important part of the business," says Aric Hooverson, communications manager for Smith and Associates in Houston, Texas. "A lot of buyers and suppliers are moving to the Web to check availability and inventories, to buy using a credit card, or to submit a requirement." He says buyers are increasingly becoming more comfortable with the notion of electronic commerce and buying online. However, most of Smith and Associates business involves negotiation over the phone.
Hooverson says distributors need to provide all the different ways to buy, "be it the phone or over the Internet." At Smith and Associates Web site, buyers can check stock and pricing and submit their requirements and order parts using a credit card.
Looking for data
Many buyers visit Smith and Associates' site to check out pricing information for drams and microprocessors. "We have some OEM customers who visit our Web site every day. When they feel that the market is trending a certain way, they will call up and place an order," says Hooverson.
That's also the case at American IC Exchange in Aliso Viejo, Calif. "People like to use the site to gauge what's out there," says Jim Binford, director of sales and marketing. "When you're making a decision on whether to buy or sell, it's important to know the volume out in the market."
Binford says less than 5% of American IC Exchange sales occur via the Internet, but that percentage will grow over the next several years. "It's all over the board. We have had a $100,000 order. Overall aice's average order is $25,000. While less than 5% of buyers purchase online, a very high percentage visit the site regularly."
There are different types of buyers who use the Internet. "Some are inclined to do more over the Internet, some in the more traditional way," says Binford. He says it often depends on the commodity and the dollar volume. Obviously the larger the volume, the more likely the buyer is going to want to talk to somebody rather than just order the parts online.
Negotiating online
Eventually, buyers will be able to negotiate online in real time, and the Web will be the preferred means of processing transactions in the electronics market.
"Ideally, buyers will be able to check availability, submit a bid, and it would be accepted or rejected immediately," says Hooverson. While some online buying sites offer electronic auctions, those auctions often take a long time to consummate. Often when a buyer decides to use an independent distributor, he or she needs a quick delivery to meet a production deadline and can't wait several days for a bid to be accepted or rejected.
But most purchasers have not yet reached a comfort level to do large-scale online negotiation and purchasing, says Elan Bair, director of strategic business development for necx in Peabody, Mass. He says that while the Internet, in a short period of time, has become an important information tool for purchasers, most still are reluctant to trade online. "Our Web site allows them to search for parts and look at availability, but we are not yet executing transactions completely automatically online," says Bair. "We are waiting for the market to catch up in terms of comfort level."
What has happened, though, is that OEMs and contract manufacturers are using the Internet in conjunction with contractual agreements. Once an OEM and contract manufacturer have agreed on volumes and a price, they place their orders against the contract online. "The next step is to negotiate a transaction online for those parts not covered by your regular contracts," says Bair.
"necx is bullish about the use of the Internet and is trying to position itself as a central market exchange for the industry. The challenge for us in using the Internet is to represent online total market availability, both supply and demand," adds Bair.
While many purchasers check out an independent distributor's Web site with the idea of buying parts, others are looking to sell parts to the resellers. "A lot of people visit our site, look at our excess stock, and submit their excess to us," says Hooverson. "We have a lot of consignment inventory that we take from OEMs and contract manufacturers. We put that product online," says Hooverson.
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