Buyers try out e-commerce with catalog distributors
By James Carbone -- Purchasing, 4/22/1999
When it comes to buying electronics over the Internet, most original equipment manufacturer (OEM) purchasers are just starting to get their feet wet. A recent Purchasing Magazine survey finds that 59% of electronics buyers have purchased electronic components over the Internet and 23% buy parts on the Web regularly. While that's music to the ears of Internet boosters, the dollar amount of the orders is small, often less than $300.Many of those online orders are to catalog distributors whose business generally involves small orders. Most catalog resellers have their catalogs online and allow online purchases. They say the percentage of orders they are receiving via the Internet is growing while the percentage of telephone orders is stagnant or declining. One reason for that growth is the relative ease of use of the distributors Web sites.
Catalog distributors list the part numbers and have shopping carts in which a buyer needs only a credit card to make online purchases. Leigh Townley, assistant vice president and general manager of Newark Electronics, says Newark's Web site is attracting new customers. She says 32% of Newark's Web site business is incremental business while the rest is "transferred" business--customers who previously were faxing or using the telephone to buy parts.
Despite the small orders, Newark's Web business is growing rapidly. To ride that growth, Newark has put a Web browser on its cd-rom catalog to make it easier for buyers to order parts on the Internet.
Newark also runs its Connect inventory management program on the Internet. Connect is a parts replenishment program. When a customer's parts inventory hits a certain level, parts are shipped.
Newark also is using the Internet to handle orders for suppliers such as Hewlett-Packard and National Semiconductor. A buyer visits those suppliers' Web site and looks for parts. When he wants to buy, he clicks the shopping cart icon. The purchase, however, is handled by Newark for the component manufacturer.
Small volume, big growth
Catalog distributors say their Internet business is growing, but it is still a small percentage of their overall business. "About 4% of our sales are on the Internet; we expect that to grow," says Steve Tsukichi, vice president of marketing for DigiKey in Thief River Falls, Minn. "I don't know how much business was incremental. Some of it was, but a lot of it was transferred," he says. The percentage of DigiKey's mail orders and phone orders are decreasing while Internet and fax orders are rising.
"Customers want to use electronic communication more," says Tsukichi. "We view our Internet site as another way for our customers to communicate with us."
He says that most online orders are smaller than DigiKey's average orders. "I don't believe the purchasing community is comfortable with placing a larger order via the Internet," he says. It could be because on a large order the sales cycle is longer than on a small order. "We can take an engineering order in three minutes on our inbound side. With larger production orders, the sales cycle is measured in weeks, rather than minutes," says Tsukichi.
Larger orders require some discussion or negotiations with purchasing, which is difficult to do on an Internet site. "You're quoting something on a delivery schedule, or you have stock and you want the customer to know that. There are a number of things on a large buy that need to be communicated back and forth," says Tsukichi. "It's more difficult to do that through e-mail as opposed to picking up the phone or getting in a car and sitting face to face with the purchaser."
He adds that how much the Internet is used for electronic commerce depends on the individual buyer. But, he says that 50% of DigiKey's business may go over the Internet eventually. Because of that, DigiKey is trying to improve its Web site to make it easier to find information, especially about parts. "We are looking to increase the friendliness of our system and talk to buyers who are frequent users or often tour the site's ordering system," says Tsukichi.
Easy to find parts
Vince Manfredini, vice president of Plus, TTI's catalog division, is also bullish about the Net. Plus recently began offering online purchasing at its site. "A lot of what's on our site is geared toward the part search. There's a lot of detail with datasheets spec, availability, and price as well as a shopping cart," Manfredini says.
Plus also is building cross-reference capability into its site, so a buyer can type in a part number of one component manufacturer and find equivalent parts from other manufacturers.
Manfredini expects 10% of Plus business will be over the Internet within the first several months, but expects orders to be small at first. Within five years that percentage should grow to 50%.
He says large volumes will eventually transition over the Internet as the comfort level of using the Internet increases.
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