|
If you thought Amazon Supply could be a threat to electrical
distributors, "you ain’t seen nothing yet." Amazon Supply
(AS) was set up to essentially be a distributor, stocking
most of the items it sells. As of June, 2013, AS sells very
few products that electrical distributors do. But, Google
Shopping for Suppliers (GSS), set up in February, 2013,
enables manufacturers around the world to sell directly to
end users around the world. No distributors need be
involved, although distributors can register as suppliers.
As of June, 2013, the GSS web site lists many products sold
by electrical distributors (along with electronic supplies
that are not sold by typical electrical distributors, and
test & measurement devices, few of which are sold by
electrical distributors). And the GSS’ website clearly
states that more categories will be added – just as AS has
been adding. Because B2B end users are leery of buying from
unknown sources, GSS has set up a way for sellers to be
"verified" so that buyers would be inclined to trust them.
And to increase the level of trust, GSS enables suppliers to
post a copy of GSS-verified certificates (such as ISO-9001
certification that many manufacturers have obtained to vouch
for quality control in production).
This Is Not A New Threat
"Disintermediation" was a term created in the early days of
e-commerce to describe how e-commerce can eliminate
distributors from the process of manufacturers selling to
end-users. GSS is not the first website to threaten
disintermediation. Independent trading sites have been
around for several years, and some manufacturers who sell
through distributors have also set up alias web sites to
sell directly to end users. It is almost impossible to
determine the ownership of such around-the-distributor alias
sites. With its billions in cash, GSS is the largest and
most threatening trading site to come on the scene.
Story
continues below ↓
advertisement
| your ad here
Its Easy To
Find A Product Through GSS
Examples of categories of electrical supplies within which
products can now be listed on GSS include transformers,
electrical wire, voltage meters and LED lighting. These
categories may not seem to represent many items, but go to
http://www.google.com/shopping/suppliers, and
notice that there are 141 categories (now limited to
Electronics and Electrical), sub-categories (e.g.,
Electrical Devices), sub-sub categories (e.g., Electrical
Connectors and Terminals), and 3rd level sub-categories
(e.g., Electrical Connectors). Within each 3rd level
sub-category, dozens or hundreds of items can be listed by
each verified supplier.
For example,
take THHN solid, insulated, single-conductor electrical
copper wire. If manufacturers or suppliers list 10 different
AWGs, with five available in seven different insulation
colors, that’s 40 unique products. THWN adds 40 more;
stranded adds 40 more; un-insulated copper adds 10 more;
aluminum adds about 40 more; TFN, TFFN and XHHN add even
more. Various reel and spool sizes add more unique products.
And on and on. Its easy for a manufacturer/supplier to list
more than 200 unique electrical wire products on the GSS
website. And there can be listings from several competing
manufacturers/suppliers, which may seem to make it difficult
for an end user to find a needed product and buy it.
A search on the GSS web site is as simple as keying a
partial product description onto the search box, then
scrolling through each supplier’s product name, full
description, attached picture and contact information (and a
supplier-optional link to the supplier’s product-web page,
and/or an optional spec sheet). GSS also allows a search by
optional part number and/or optional product attributes
(e.g., 20 amp) but as of this writing, few product listings
contain a product number or attribute. Surprisingly, pricing
information is optional (as is minimum order size, whether
the product is customizable, lead time, model number,
dimensions and operating characteristics).
As of this writing, the GSS trading site does not contain
many commodity electrical products. For example, a search
for "solid copper wire" did not result in a display of
information for wire that can be pulled (through conduit or
pipe); nor did a search for "copper wire." However, a search
for "circuit breaker" resulted in a display of information
for many products, including breakers that can be used in
service panels. Surprisingly, a search for "20 amp circuit
breaker" did not display information for circuit breakers.
Over time GSS will recruit more suppliers, and more products
will be added, with attributes.
Google Verified Supplier
Let’s look at how a supplier registers and gets verified,
and the importance of verification. The first step is for a
supplier to provide Google-requested information and
documents that show that the supplier is registered for
business (including, where applicable, company name in
"local language", "factory office name or address", and
"China customs registration number"); and is in good
financial standing (via credit information). The required
information varies according to the region of the supplier:
US, Taiwan, Hong Kong or China. The required information is
sent to a 3rd party verification company, which attempts to
verify the accuracy of the general company information, the
authorization of specific people, and the supplier’s credit
information. If a supplier cannot be verified, it is allowed
to reapply two more times within a 12 month period. Step two
is to pay the annual verification fee: $1000 USD; $ 6000
Canadian; $7500 Hong Kong. (Clearly, Google is trying to
sign up Asian manufacturers/suppliers.) The GSS website
states that Verified Suppliers may in the future pay a
per-transaction fee; e.g., for every view of its
information, and/or for every sale made through GSS.
(Suppliers with good credit can pay after being verified).
Step three involves uploading product information into the
GSS web site, including defining the product’s category,
sub-category, etc., as described earlier. A copy of each
Certification document can also be uploaded, in which case
the 3rd party verifier attempts to validate each. Suppliers
can efficiently uploaded information about similar products
by using a copy and edit feature provided by Google.
Note that the verification process is repeated every 12
months, and a new fee is due at that time. This policy by
Google helps maintain the level of credibility that
verification implies.
Information from Verified Suppliers appears on the regular
Google (search) web site as well as in the Sponsored Results
section of the GSS web site, ahead of information from
unverified suppliers. Information for Verified Suppliers
also contains a colored badge, signifying verification, and
contains information that unverified suppliers are not
allowed to provide to Google. Non-verified suppliers’
products information also appears after a GSS search, but
well below the information of verified suppliers.
Is GSS Really A Threat To Electrical Distributors?
Yes. Do not dismiss GSS as it is now. Remember that Amazon
started by selling only books, and its web site did not
contain the features that today make it easy for buyers to
find and buy something. Then Amazon established Amazon
Supply, which claims to sell 750,000 products, and drew upon
the best features of its consumer web site to create a B2B
web site that is considered one of the easiest and fastest
to use. Think of GSS today as the original,
primitive-website Amazon but selling only three types of
books. As Amazon did, GSS will undoubtedly expand its
product categories and evolve its web site and business
practices to make it easier for sellers and end users to do
business. It isn’t the breadth of GSS’ products or the
specifics of its web site that pose the threat to electrical
distributors, its GSS’ deep pockets and commitment to
evolving the disintermediation model. When GSS becomes very
successful, how long will it be before some manufacturers of
electrical products stop using electrical distributors to
convey their products to end users?
Electrical distributors should determine which non-stock
products that are bought for customers as special orders
really don’t need the services of a distributor; especially
products that are usually shipped directly from a
manufacturer to a job site. These products are likely
candidates for listings on GSS or other trading sites. Next,
identify products that are stocked but usually not delivered
until a few days after a sales order is taken. Thanks to
advances in logistics, such as FedEx ground and UPS, these
other products could also appear on GSS. Then, at the risk
of giving manufacturers ideas, it may be time for a heart to
heart chat with the manufacturers of these products about
their plans for by-passing distributors. Some electrical
distributors may then want to terminate their representation
of some manufacturers, and no longer stock some of the
products in question. Its also a good idea for electrical
distributors to determine if their web sites are easy for
customers to use to buy products, especially products that
are not stocked or are usually shipped direct to job sites.
A recent study showed that the vast majority of procurement
specialists prefer suppliers who offer e-commerce, even if
orders are placed by phone or FAX or email.
------
For more than 30 years, Dick Friedman has worked with
electrical distributors and electrical contractors to
develop long range plans and acquire technology. He is a
Certified Management Consultant and is objective and
unbiased. He has Bachelor of Engineering and MBA degrees,
and can be reached at 847 256-1410 for a FREE consultation.
Or visit
www.GenBusCon.com for more information or to send
e-mail.
### |
